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Thursday, November 27, 2014
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Morgan Stanley pays damages for Precious Metals Fraud

Articles & Blogs - Gold Commentary

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I have been warning people for several months not to confuse “bullion-ETF's” with actually owning real gold and silver (see “Bullion-ETF's: a multi-purpose scam”). In the case of silver, I've pointed out that it simply isn't possible that both the silver bullion-ETF's and the massive “short” positions at the Comex could be fully-backed since the two total more than 100% of existing inventories – with nothing left over for the other 95% of the world (see “History of Silver, Part III: inventories gone!”). What is important to note is that the bullion banks with those massive, short positions are also the custodians for most of the silver (supposedly) “owned” by the bullion-ETF's.

Now, this week we find out that one of the members of the U.S. financial crime syndicate has agreed to pay a multi-million dollar fine for pretending to buy and hold bullion on behalf of clients. This is not the first time that Wall Street banks have been caught engaging in bullion-fraud, and it won't be the last.

Despite the rising reek of corruption, we have a scenario where the bullion-ETF's claim to be fully-backed because they can produce serial numbers for the gold and silver bars they claim to own. However, since the massive short positions of the bullion-banks are NEVER audited, there is a potential shortage here of billions of dollars in bullion – and in the case of the silver bullion-ETF's, there is nothing hypothetical about it. There simply can't be enough silver to back everyone.

The question which ETF-holders must ask themselves is this: when it comes time for the Wall Street bullion-banks to have to choose between covering their own short positions, or honouring their custodial agreements, is there a single, rational individual who doesn't believe that Wall Street will protect itself first?

As the Morgan Stanley bullion-fraud demonstrates, there is no chance of any court ordering “performance” of these agreements, that is, to force the Wall Street fraudsters to go out into the open market to purchase enough bullion necessary to honour their contracts. Instead, all they get is a slap on the wrist, and a fine. And what is typical with corrupt, U.S. regulators (or in a court settlement) is that the fine handed out is only a small percentage of the profits 'earned' in the fraud – thus encouraging Wall Street to engage in fraud whenever they see the potential for profits.

Therefore, we have a scenario today where investors have poured tens of billions of dollars into bullion-ETF's to protect themselves from suffering currency-losses on their un-backed fiat currencies – and many of whom will ultimately end up getting nothing out of their “bullion-ETF” investments other than more paper.

There are a handful of reputable bullion-ETF's who do actually buy and hold their own bullion, with the CEF group of funds (in Canada) coming to mind, as one example. The legitimate bullion-ETF's invariably charge a premium for the bullion purchased by their clients, because unlike the phony, paper-bullion of GLD, SLV and others, these funds must pay for storage, security, and insurance on their holdings.

What makes the bullion-ETF's even more laughably fraudulent is that not only do they claim that all their bullion is being held on their behalf by the Wall Street fraud-factories, but they claim that these same greedy, parasitical institutions are holding billions of dollars of bullion on their behalf for free!!

In other words, to believe that the bullion-ETF's are legitimate, rather than fraudulent, empty shells, we must believe that out of the goodness of their hearts the Wall Street bullion-banks are backing bullion-ETF's as a “public service”, free of charge – simply to make it easier for small investors to hold “real bullion”.

Not only is it patently absurd to think that a Wall Street fraud-factory would do anything for free, but fostering the growth of legitimate, bullion-ETF's would be directly against their own interests – as they are huge “shorts” in the bullion market.

Thus, the bottom-line is that only about half of the total bullion/short position ever audited at all, and to believe that bullion-ETF's are legitimate you must also believe that Wall Street bullion-banks are providing critical services (bullion storage) for multi-billion dollar businesses for free – despite the fact that if the bullion-ETF's were legitimate it would be directly under-mining their own “short” positions, by providing billions of dollars more exposure on the “long side”.

Putting all the facts together, along with Wall Streets current and prior history of bullion-fraud, and not even your average naïve child could actually believe that (most) bullion-ETF's are legitimate businesses.

For those with money in one of these fraud-vehicles, dump what you are holding now and buy real bullion – either through a legitimate bullion-ETF, or through directly buying and holding your own bullion (my personal preference).

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