Friday, March 4, 2011

Silver rules! Gold is the victor, but Silver takes the spoils!

By Jim Willie:

Silver rules! Gold is the victor, but Silver takes the spoils! The little sister shines! Central banks own no silver, nor do governments anymore. Industry requires and consumes silver, but not gold. Mint coin sales have exploded to record levels, and now struggle to continue amidst grotesque shortages. So on a supply basis and on a demand basis, silver is the dominant metal. In the last several months, Silver has shown its power and exerted its strong dominance. It has led the precious metals move, an explosive one. Gold has confirmed. Excuse the outline format, but the message is clear, offered without the burden of details. In this case, at this time, the important message is the firestorm of positive factors leading to a silver price explosion. The Jackass is on a brief vacation in Central America where the sun never stops shining. Apologies in last weekly article where mention was made of a negative real rate of inflation. The error was blatant in a slip of fingers. Given the price inflation of 8% in the USEconomy and near 0% rate of short-term interest, the inflation adjusted real rate of interest is negative. It is in the minus 7% to minus 9% range. That is a primary jet fuel accelerant for the gold bull market, a factor overlooked by the clueless cast of economist hacks!!


  • prepare for an explosive upward price move toward $40 this spring/summer
  • a bullish silver hammer was shown last week, with open & close at the weekly high
  • year end price target is $50 per oz should be easy to achieve
  • a flag pennant pause pattern has been completed at the 28-31 range
  • usually it signals a half-way mark, so get ready for a move to 40 in next runup
  • gains in silver have tripled the gains of gold, as Jackass forecasted late last summer
  • do not be surprised if in 2 to 3 years, the silver price exceeds $100 per oz
  • latest noontime reading was 34.90 per oz for silver, in breakout


  • it was bound to happen, and finally it did, confirming the silver breakout
  • a rectangular pattern was evident throughout the consolidation period
  • gold has shown a very different price pattern behavior consistently
  • the entire global monetary system is in ultra slow motion breakdown mode
  • latest noontime reading was 1440 per oz for gold, in breakout


  • strong industrial silver demand (not true of gold)
  • absent depleted USGovt stockpile from 1905 created by Teddy Roosevelt
  • fully 6 billion ounces of silver in stockpile has been exhausted for five years
  • numerous government mints around the world have announced no silver supply
  • evident in the futures contracts, in backwardation of varying degree
  • expect arbitrage in full force to continue to make backward price extreme


  • monetary metals, industrial metals, energy, foodstuffs all rising fast in price
  • silver being accepted as monetary reserve, even as asset reserve
  • Chinese Govt announced plans to diversify reserves into silver
  • India is the first nation to begin a silver monetization plan
  • early stage of hyper price inflation in the global economic price structure
  • inflation adjusted real rate of interest is minus 7%, a primary gold market fuel
  • denials by USFed Chairman Bernanke is its confirmation !!!
  • Ben has a nearly perfect track record of wrong analysis and conclusions


  • demands for delivery have been heavy since September
  • secret supply bailouts come from BIS and even the Holy See
  • some sort of March delivery climax event might be in progress
  • China has targeted the COMEX for delivery raids
  • demand staved off by COMEX cash delivery with 25% bribe (contract fraud)
  • metals markets have no silver !!


  • China is angry at a broken secret treaty over Favored Nation Status grant
  • the USGovt sold the leased metal and cannot return it to China
  • China honored its side of the agreement by purchasing USTreasury Bonds
  • China is angry over the unilateral QE programs on US$ devaluation
  • the devaluation of the USDollar was done unilaterally without agreement
  • China is angry over charges of currency manipulation by the USGovt
  • the grand currency manipulator in gross violation is the USGovt & USFed
  • China senses an exposed jugular vein, and is using Sun Tzu war tactics


  • January coin sales were more than 2x the demand in previous months
  • mint coin sales are setting records not seen in 20 years
  • the USMint is purchasing silver from the open market


  • the fund required over three months to secure the entire supply of bullion
  • its manager reports of extremely tight silver market, no loose supply
  • James Turk echoes the shortage claim, from his GoldMoney vantage point


  • the mining firms are not given a fair price by the metals exchanges
  • they are selling to the more honest investment funds, as metal source
  • the funds might strangle the official corrupted COMEX on supply cutoff


  • SLV stock shares used to offset naked shorts of futures contracts
  • back door to fraud written in their fund prospectus, in careful language
  • 129 million oz originally came from Warren Buffett, the great deception
  • prepare for a gigantic lawsuit from defrauded investors in late 2011 or 2012
  • penalty in negative 2% SLV price premium, which is heading to minus 25%
  • in time, the SLV fund will own zero metal.
Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at . For personal questions about subscriptions, contact him at

Emperor Nakedly Monetizing, Desperately Seeking Stability

Brilliant post from Jesse......

The Fed is monetizing debt, colloquially known as 'printing money.'

At this point you either understand this or you do not, and if not it is probably because you will not.

But it is the reality, and presents fairly volatile conditions for the world financial system. And the limits to the monetization are the value of the US bonds, and the American dollar which are notes of zero in full

Eric Sprott - Silver going to $100

Revolution Ripples: Libya & Co. chaos mapped out

From: RussiaToday | Mar 3, 2011
The Libyan crisis is showing no signs of dying down and is now being felt far beyond its borders. Thousands of immigrants have already fleed to neighbouring countries, while the unrest has seen the price of oil skyrocket. RT's Irina Galushko maps out the situation.

Max Keiser from Cairo Egypt: Revolutions Work

S&P warns of downgrades on Portugal and Greece

LONDON (AP) — Leading credit rating agency Standard & Poor's has warned that it could further downgrade both Portugal and Greece's debt in the coming two months, depending on the outcome of a crucial European leaders' summit later this month.

The agency said in a report Wednesday that it is maintaining its A- rating on Portugal and its BB+ rating on Greece but has kept both countries on so-called "CreditWatch with negative implications."

Heavily indebted Greece accepted a bailout last year, as did Ireland, and ailing Portugal is widely expected to follow suit even though it managed to raise another euro1 billion ($1.38 billion) on Wednesday

S&P said it could lower the ratings on both countries within the next two months after analyzing an expected new European bailout mechanism. EU policymakers are set to decide later this month on the key features of the European Stability Mechanism, which is due to replace the current European Financial Stability Facility from 2013.

It said it was unlikely that either rating would be cut by more than two notches. Even if Portugal was downgraded two notches it would still be investment grade, while Greece's debt is junk status already.

Eurozone governments have said that private creditors may be included in future financial rescue packages. However, there is still a high degree of uncertainty about how and at what point private creditors might be forced to take losses.

Greece accepted a euro110 billion bailout from its partners in the EU and the International Monetary Fund last May and has some breathing room before it needs to tap bond markets for more cash.

However, Greece needs to see its market borrowing costs fall if it is to tap investors for cash in the months and years to come — investors continue to demand a high premium to lend to it.

Earlier Wednesday, the yield on Greece's ten-year bond spiked over 12 percent once again. That took the spread with benchmark German bunds to over 9 percent — a staggering difference for two countries that use the same currency.

Portugal's financing needs are more immediate as it tries to roll over debts at the same time as the government slashes spending and raises taxes to get public finances into shape. Portuguese Prime Minister Jose Socrates and German Chancellor Angela Merkel are meeting Wednesday in Berlin and the debt crisis is likely to be the main topic of discussion.

The demands are so high that many people think the country will follow both Greece and Ireland in requiring an international financial rescue. That's most evident in the bond markets, where the yield on Portugal's ten-year bonds have remained stubbornly above 7 percent for 19 straight trading days — that's considered potentially unsustainable in the long term.

"The ongoing CreditWatch placement reflects our view that Portugal remains a potential recipient of funding," said Eileen X. Zhang, a credit analyst at S&P.

S&P said Portugal faces a number of financial difficulties at a time when the country is expected to slip back into recession — its external financing needs are still well above 200 percent of its current account receipts for 2011, its banks are heavily dependent on handouts from the European Central Bank and many government-owned businesses face big liquidity pressures.

The agency said the Portuguese government would need to approach its European partners for a bailout this year if it continues to face difficulties raising the financing it needs, partly to avoid an even more severe economic contraction than already on

Korea - Mass withdrawals made at savings banks despite government’s assurances

This is a follow up to the Korean Bank run story posted earlier here.

From The Korean Times:
By Kang Seung-woo

A total of 490 billion won was withdrawn from 98 savings banks Monday, despite the financial regulator’s assurance that there will be no more shutdowns of such institutions.

The amount is up 60 billion won compared with Friday, when the Financial Services Commission (FSC) suspended operations of four savings banks. Regulators are looking to see whether the mass withdrawals will continue today.

The withdrawals came after the FSC confirmed that it will avoid suspending operations of additional savings banks unless in an emergency, such as a bank run.

FSC Chairman Kim Seok-dong made the remarks Monday during his visit to Busan to hold a meeting with related agencies to devise measures to deal with ailing savings banks.

“The shutdown of savings banks would be limited to some troubled lenders and the government will try its best to protect the depositors of the distressed small-sized banks.”

His remark came after the FSC suspended operations of seven savings banks last week while putting four more on the alert list.

It shut down Busan Savings Bank, the foremost player in terms of assets, and its affiliate Daejeon Mutual Savings Bank for six months due to capital shortages. They failed to meet regulatory capital requirements.

Two days later, it suspended four more savings banks including three subsidiaries of Busan Saving Bank along with Bohae Bank for half a year each, citing concerns over liquidity problems.

The steps raised speculation that the additional suspension of savings banks in which the Bank for International Settlements (BIS) ratio is below 5 percent. According to the FSC, there are four savings banks - Domin, Woolee Savings, Saenuri Savings and Yes Savings - which cannot meet the benchmark capital adequacy ratio.

However, the chairman seemingly has tried to stop such drastic measures from generating financial woes among clients of those banks.

“Unnecessary withdrawals spurred by excessive concerns over the possible suspension of more savings banks may hurt the remaining sound savings banks,’’ he said.

In addition to his assurance, Kim presented policies to bolster the financially healthy savings banks and their clients.

The FSC said that the government will expand the supply of liquidity to the industry by easing regulations on the fund supply and extending maturity for already-provided liquidity.

It added the government will seek to buy non-performing loans extended by savings banks through public funds managed by the state debt clearer Korea Asset Management Corp. (KAMCO).

The FSC also promised to take steps to buttress savings banks to head off any associated risks.

Meanwhile, Saenuri Savings Bank, an affiliate of Hanwha Group, said it will sell 30 billion won in shares to raise its capital adequacy ratio.

The share sale is expected to bolster the ratio to 12.07 percent from the present 2.7 percent. Hanwha, the nation’s ninth-largest conglomerate, owns 100 percent of the savings bank.

In line with the government’s efforts to cope with any mass withdrawal, beleaguered savings banks are scrambling to keep their anxious customers from leaving for more stable institutions by raising interest rates.

According to the industry, a one-year deposit rate averaged 4.77 percent as of Friday at secondary banks, up 0.45 percentage points from Jan. 14, when the FSC suspended operations of Samhwa Savings Bank, the first bank of the seven.

Some lenders moved up the rates by more than 1 percentage point, offering a mid-5 percent rate to customers.

"Banks have raised their interest rates to keep existing customers whose deposits are maturing," said an industry official.

“In addition, they have revised rates to persuade customers alerted by recent suspensions of the seven savings banks by the FSC so they will not rush to retrieve their money.”

Along with the rate hike, savings banks have launched new financial products with lengthened expiration dates from 13 months to 15 months to avoid mass withdrawals.

Trading in a Pico Second World

From Zero Hedge:

As everyone knows all too well by now, High Frequency Trading is arguably among the key culprits for all that is wrong with our broken equity market, culminating naturally with the events of May 6, 2010. Therefore, it is not surprising that regulators in Europe, which now has a much more fair and efficient overall capital market than the US, "plan next year to introduce new rules to restrict the trading activities of these traders -- tech-savvy hedge funds that generate huge volumes of orders -- to prevent a repeat of last year's U.S. "flash crash"." However, since HFT is nothing but a cheap way to promote vapor-volume momentum, while frontrunning everyone in the process, it is only natural that Europe's banks would come out kicking and screaming in its defense: "Europe's top banks are warning global regulators against curbs on high-frequency trading firms (HFTs), insisting that so-called "market bandits" are vital for efficient markets...A panel of managing directors from major European investment banks told the Reuters Future Face of Finance Summit on Wednesday that punishing these traders was risky because they were a key source of liquidity that benefits all trading firms." Ah, "providing liquidity" - that universal euphemism for frontrunning, quote stuffing, inducing flash crashes and for pretty much every possible illegal activity, except for... providing liquidity. As for the fact that "market bandits" are "vital for efficient markets"... we'll just leave that one alone.

Some more on the dominance of the "market bandits" in current markets:

These traders use super-fast computers to engage in various trades such as "shaving" -- buying and selling in nanoseconds to chase tiny margins -- and often collect a rebate from the exchange for creating liquidity as they go.

More traditional investors worry such speedy traders are effectively engaging in a legal, computerized version of front running -- where firms glean information about rivals trading plans.

The regulators are considering rules to slow them down and impose extra risk management requirements on them.

High frequency traders have hit the headlines in the past year after being partly blamed by U.S. regulators for the "flash crash" on May 6, when the Dow Jones Industrial Average plummeted 700 points before rebounding in a matter of minutes.

A single, computer-driven sale worth $4.1 billion by U.S. money manager Waddell & Reed Financial Inc sparked a sell-off that was exaggerated and accelerated by the high frequency traders.

A panel of U.S. regulatory experts last month proposed a raft of rule changes, which included imposing extra fees on HFTs -- a suggestion the top U.S. securities regulator, the Securities and Exchange Commission (SEC), acknowledged on Tuesday.

"The idea of a fee on cancellations is one that we have been very informally talking about internally with certainly no proposal to look at or contemplate," SEC Chairman Mary Schapiro told the Reuters Future Face of Finance Summit in Washington.

And while regulators debate, the "market bandits" have moved a stap function lower, and instead of nano seconds, are now dealing in pico seconds.

A second is a long time in cash equities trading. Four or five years ago, trading firms started to talk of trading speeds in terms of milliseconds.

A millisecond is one thousandth of a second or, put another way, 200 times faster than the average speed of thought. In the time it took your brain to tell your hand to click on this article, a broker or market-making firm trading in milliseconds could fill hundreds of orders on an exchange.

Milliseconds, however, are now ancient history. In the past two or three years, trading speeds have been shaved down to inconceivably tiny increments: from milliseconds to microseconds, and more recently to nanoseconds.

But in recent weeks trading geeks have started to talk about picoseconds in what is a truly mind-boggling concept: a picosecond is one trillionth of a second. Put another way, a picosecond is to one second what one second is to 31,700 years.

Speaking at a London conference on Tuesday, Donal Byrne, chief executive of Corvil, a high-speed trading technology company, caused a ripple of audible incredulity throughout the room when he suggested that trading speeds would likely be reduced to picoseconds in the not too distant future.

Why the need for picosecond trading? Why to frontrunning you better of course.

The answer is simple. Firms that trade super fast effectively put themselves at the front of the trading queue and have priority over other orders. This position gives them better information on the trading behaviour of other investors and allows them to react on

Keiser Report: Taste of Freedom

From: RussiaToday | Mar 3, 2011

This time Max Keiser and co-host, Stacy Herbert, report from Beirut on oil prices, a sectarian regime, the geo-politics of Saudi oil and the Benghazi dance. In the second half of the show, Max talks to two time Pulitzer prize winner, Anthony Shadid of the New York Times, about the revolutions sweeping the Arab world.

USA is losing the Information War

Note Clinton says she has seen RT in a few countries (but not in the US), well as I reported on this blog in Dec 2010 (here) non-US/UK media is the main way the Middle East and Asia gets its international news. The US is not just losing the infowar amongst the most populous and economically vibrant areas of the world, it has already lost it.

Wall St to Main St - "Let them eat cake"

Silver: An Important History

Silver Outweighs Gold

By Peter Schiff:

In the world of precious metals, silver spends a lot of time in the shadow of its big brother gold.

Gold, with its high price-to-weight and distinctive yellow tint, has always occupied a special place in the human psyche. To many people across many ages, gold is simply the ultimate form of money - and, as a long-term, stable store of value for one's personal wealth, I agree it's hard to beat.

However, rare circumstances are aligning today that I believe will make silver the true champion of this bull run.

What's Driving Precious Metals?

Gold and silver are both benefitting from a perfect storm in the sector.

Dollar devaluation means that much of the 'gains' we see are really just losses by people holding dollars. In other words, if your dollars lose 50% of their value, it's going to take twice as many of them to buy the same ounce of gold.

But the rally is based on more than simple inflation. Precious metals are regaining their role as the ultimate reserve asset. That means many, many more people are buying and holding these metals than at any time in the last thirty years.

Another factor is the rise of emerging markets and decline of developed markets. As billions of poor Asians, Africans, and South Americans lift themselves out of poverty by embracing the free market, the US is plunging itself into poverty by rejecting it. This means there are a mind-boggling number of new customers for jewelry, savings, and industrial products that require precious metals - and that we are becoming less and less able to outbid them for these resources with our dollars.

Silver's Driving Faster

If the world were going to hell in a hand-basket, then I would expect gold to outperform silver. However, it is only the developed economies that are on the rocks - and only the US that faces true catastrophe. Thus, we have seen silver outperform gold for the last eight years.

The market is telling us that while uncertainty reigns supreme, the global economy will prosper in the years ahead. While gold most effectively insures the investor against economic devastation, silver offers both a shield against monetary turmoil and exposure to market growth.

The Key: Industrial Demand

This is because silver is both a precious metal and an industrial metal. Gold is mostly precious, copper is mostly industrial, but silver strikes a fine balance between the two. And it seems as if this moment in history is perfectly suited to this balance. We are facing not only the prospect of the collapse of the international monetary order, but also the largest industrialization process the world has ever seen.

While in a past era, wood, steel, or oil would have been the most critical commodity, today silver is used in everything we hold dear: iPhones, flat-screen TVs, batteries, solar panels, etc. Asia - the new heart of the global economy - is accumulating gold, but they're consuming silver. That makes both metals good bets, but likely gives silver the edge.

It's safe to say the future depends on a steady supply of silver. This burgeoning demand is reflected in the latest figures: global demand for silver is about 890 million ounces a year, while global mine production is about 720 million ounces a year. We're actually consuming scrap to make up the difference. And unlike gold, which tends to remain in a recoverable state as coins or jewelry, a large quantity of silver is ending up in trash dumps - where it is essentially lost forever.

As long as the emerging markets continue to trend toward freer markets, and consumers the world over continue to demand computers, electronics, and green tech, silver should only become more scarce - and thus more valuable. I think these assumptions are pretty safe to make.

Can the World Thrive Ex-US?

Of course, if everyone agreed with me, silver would already be worth hundreds of dollars an ounce and there wouldn't be any profit to be made on the trade. Fortunately, there are a couple of bogeymen in the financial media scaring the majority of investors away from silver so far.

First, some analysts still believe - bless their hearts - that the US is really going to pull through this time into a sustainable recovery. After being duped by dot-coms and then housing, they are all aboard the Treasury Express back to Bubbletown. Unfortunately, as in the previous two cases, the current low interest rate environment is merely masking an underlying economy that is vastly more rotten than it was even a decade ago. The unemployment rate is a key signal that this time, Bernanke's magic medicine won't work.

A second cohort sees that the US is doomed, but still thinks we will drag the rest of the world down with us. This is the school that holds that despite our persistent current account deficits and monumental external debt, the world economy "needs" the US consumer to drive growth. As I alluded to in my book, How An Economy Grows And Why It Crashes, this is like a plantation master claiming his slaves need him around to consume the fruits of their labor, or else they wouldn't have anything to do. Well, the results are in: after an initial panic rush into dollar-based assets, emerging markets are back at full sprint while the US is still limping along.

Silver in a Dollar Collapse

Just like a Hollywood celebrity, we in the US spent our time at the top of the world - and soon let our status get to our heads. And like a celebrity, our adoring fans the world over will be quick to forget us as we fall from the limelight and deal with our powerful addiction to partying and cheap money. To survive the next decade in America, you are going to want an asset that is in demand globally, but is also free from counterparty risk here at home.

I recently did an interview with a group that is making a film about living in America in the year 2019. The premise is that inflation is rampant, the economy is in shambles, and groups are springing up that do all their trading in silver rounds. While I think their timeline is quite generous, this is a fairly accurate picture of what lies ahead.

Not only does silver appreciate while sitting in your safe due to overseas demand, but it also comes in units that are ideal for use as a common trade unit. Two or three ounces of silver can buy you groceries for a week. By contrast, just try to eat an ounce of gold's worth of vegetables before they spoil. There are fractional gold coins and bars, but they carry very high markups.

None of us have had to think about these things in our lifetimes, but it is not abnormal in history. Soon, understanding precious metals will be as much a survival skill as knowing how to change a car tire.

The Golden Ratio

I always say that every investor should have at least 5-10% of his portfolio in physical precious metals. Of that, the proportion allocated to gold vs. silver depends mainly on risk tolerance. Silver tends to be more volatile than gold, so silver investors must have the discipline not to liquidate their stash at the first sign of a correction.I generally advise a ratio of 2:1 gold-to-silver in the average portfolio. More aggressive investors can push it to 1.5:1 or beyond.

Year-to-date, silver is up 5 percentage points more than gold, and I expect that trend to continue. It's important to understand that in this fast-changing world, silver is no longer runner-up.

Mr. Schiff is one of the few non-biased investment advisors (not committed solely to the short side of the market) to have correctly called the current bear market before it began and to have positioned his clients accordingly. As a result of his accurate forecasts on the U.S. stock market, economy, real estate, the mortgage meltdown, credit crunch, subprime debacle, commodities, gold and the dollar, he is becoming increasingly more renowned. He has been quoted in many of the nation's leading newspapers, including The Wall Street Journal, Barron's, Investor's Business Daily, The Financial Times, The New York Times, The Los Angeles Times, The Washington Post, The Chicago Tribune, The Dallas Morning News, The Miami Herald, The San Francisco Chronicle, The Atlanta Journal-Constitution, The Arizona Republic, The Philadelphia Inquirer, and the Christian Science Monitor, and appears regularly on CNBC, CNN, Fox News, Fox Business Network, and Bloomberg T.V. His best-selling book, "Crash Proof: How to Profit from the Coming Economic Collapse" was published by Wiley & Sons in February of 2007. His second book, "The Little Book of Bull Moves in Bear Markets: How to Keep your Portfolio Up When the Market is Down" was published by Wiley & Sons in October of 2008. Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for over twenty years he joined Euro Pacific in 1996 and has served as its President since January 2000. An expert on money, economic theory, and international investing, Peter is a highly recommended broker by many leading financial newsletters and investment advisory services. He is also a contributing commentator for Newsweek International and served as an economic advisor to the 2008 Ron Paul presidential campaign. He holds FINRA Series 4,7,24,27,53,55, & 63 licenses.

A Silverbugs in joke

Courtesy of

Barrick on Hedging

Feb. 28 (Bloomberg) -- Aaron Regent, chief executive officer of Barrick Gold Corp., talks about the company's hedging strategy.

A Deep Walkthru For Silver Manipulation - Redux

From Zero Hedge:

Now that silver continues hitting nominal high after high (except of course for the record price hit during the Hunt Bros period), and there is a very distinct possibility we may see an unprecedented melt up in the price of silver to over triple digits for a variety of previously discussed factors, here is a post we produced a year earlier, courtesy of a "deep insider" which dissects with exquisite detail the nuances of silver market manipulation, which in retrospect may have been just a little early. Considering that every single trope mentioned is now in play (even the unmasking of Buffett's unbelievable PM bashing hypocrisy when he himself was one of the people who utilized blatant silver market manipulation for his own purposes when it suited him back in 1997 to send silver soaring), we believe readers should re-read this post in its entirety as it presents a walk-thru for the mechanics, and strategy, of the ongoing unprecedented move higher in the shiny metal.

From A Deep Insider's Walkthru To Silver Market Manipulation, posted originally in April 2010, when silver was lower.... way lower.

Does the MSM finally get the Silver story?

From the NY Times:

As Americans know all too well by this point, commodity prices — for corn, wheat, soybeans, crude oil, gold and even farmland — have been going through the roof for what seems like forever. There are many causes, primarily supply and demand pressures driven by fears about the unrest in the Middle East, the rise of consumerism in China and India, and the Fed’s $600 billion campaign to increase the money supply.

Nonetheless, how to explain the price of silver? In the past six months, the value of the precious metal has increased nearly 80 percent, to more than $34 an ounce from around $19 an ounce. In the last month alone, its price has increased nearly 23 percent. This kind of price action in the silver market is reminiscent of the fortune-busting, roller-coaster ride enjoyed by the Hunt Brothers, Nelson Bunker and William Herbert, back in 1970s and early 1980s when they tried unsuccessfully to corner the market. When the Hunts started buying silver in 1973, the price of the metal was $1.95 an ounce. By early 1980, the brothers had driven the price up to $54 an ounce before the Federal Reserve intervened, changed the rules on speculative silver investments and the price plunged. The brothers later declared bankruptcy.

Accusations that JPMorganChase and HSBC allegedly manipulated precious metal markets are worth looking into.

The Hunts may be gone from the market, but there are still plenty of people suspicious about the trading in silver, and now they have the Web to explore and to expand their conspiracy narratives. This time around — according to bloggers and commenters on sites with names like Silverseek, 321Gold and Seeking Alpha — silver shot up in price after a whistleblower exposed an alleged conspiracy to keep the price artificially low despite the inflationary pressure of the Fed’s cheap money policy. (Some even suspect that the Fed itself was behind the effort to keep silver prices low, as a way to keep the dollar’s value artificially high.) Trying to unravel the mysterious rise in silver’s price is a conspiracy theorist’s dream, replete with powerful bankers, informants, suspicious car accidents and a now a squeeze on short sellers. Most intriguingly, however, much of the speculation seems highly plausible.

The gist goes something like this: When JPMorgan Chase bought Bear Stearns in March 2008, it inherited Bear Stearns’ large bet that the price of silver would fall. Over time, it added to that bet, and then the international bank HSBC got into the market heavily on the bear side as well. These actions “artificially depressed the price of silver dramatically downward,” according to a class-action lawsuit initiated by a Florida futures trader and filed against both banks in November in federal court in the Southern District of New York.

“The conspiracy and scheme was enormously successful, netting the defendants substantial illegal profits” in the billions of dollars between June 2008 and March 2010, according to the suit. The suit claims that JPMorgan and HSBC together “controlled over 85 percent the commercial net short positions” in silvers futures contracts at Comex, a Chicago-based exchange on which silver is traded, along with “25 percent of all open interest short positions” and a “a market share in excess of 9o percent of all precious metals derivative contracts, excluding gold.”

In the United States, trading in precious metals and other commodities is regulated and closely monitored by a federal agency, the Commodity Futures Trading Commission. In September 2008, after receiving hundreds of complaints that silver future prices were being manipulated downward by JPMorgan and HSBC, the commission’s enforcement division started an investigation. In November 2009, an informant, described in the law suit only as a former employee of Goldman Sachs and a 40-year industry veteran, approached the commission with tales of how the silver traders at JPMorgan were bragging about all the money they were making “as a result of the manipulation,” which entailed “flooding the market” with “short positions” every time the price of silver started to creep upward. The idea was that by unloading its short positions like a time-released capsule, JPMorgan’s traders were keeping the price of silver artificially low.

Soon enough, the informant was identified as Andrew Maguire, an independent precious metals trader in London. On Jan. 26, 2010, Maguire sent Bart Chilton, a member of the futures trading commission, an e-mail urging him to look into the silver trading that day. “It was a good example of how a single seller, when they hold such a concentrated position in the very small silver market can instigate a sell off at will,” Maguire wrote.

On Feb. 3, 2010, Maguire gave the futures trading commission word about an impending “manipulation event” that he said would occur two days later, when the Labor Department’s non-farm payroll numbers would be released. He then spelled out two trading scenarios about which he had been told. “Both scenarios will spell an attempt by the two main short holders” — JPMorganChase and HSBC — “to illegally drive the market down and reap very large profits,” Maguire wrote in an e-mail to a trading-commission investigator.

On Feb. 5, Maguire took a victory lap, writing in another e-mail to the trading commission that “silver manipulation was a great success and played out EXACTLY to plan as predicted.” He added, “I hope you took note of how and who added the short sales (I certainly have a copy) and I am certain you will find it is the same concentrated shorts who have been in full control since JPM took over the Bear Stearns position … I feel sorry for all those not in this loop. A serious amount of money was made and lost today and in my opinion as a result of the CFTC’s allowing by your own definition an illegal concentrated and manipulative position to continue.”

In March 2010, Maguire released his e-mails publicly, in part because he felt the trading commission’s enforcement arm was not taking swift enough action. He was also unhappy over not being invited to a commission hearing on position limits scheduled for March 25. Then came the cloak and dagger element: the day after the hearing, Maguire was involved in a bizarre car accident in London. As he was at a gas station, a car came out of a side street and barreled into his car and two others; London police, using helicopters and chase cars, eventually nabbed the hit-and-run driver. Reports that the perpetrator was given a slap on the wrist inflamed the online crowds that had become captivated by Maguire’s odd story.

In any case, the class-action lawsuit contends that between March 2010 and November 2010, JPMorgan Chase and HSBC reduced their short positions in the silver market by 30 percent, causing the metal’s price to rise dramatically, but leaving them still with a large short position. Now, with the value of silver rising nearly every day, the two banks are caught in a “massive short squeeze,” according to one market participant, that appears to be costing them the billions they made originally plus billions more. Whether these huge losses will show up on the books of JPMorgan Chase and HSBC remains to be seen. (Parsing through the publicly filed footnotes of derivative trades is no easy task.)

Nonetheless, the conspiracy-minded have claimed that the Fed must have somehow agreed to make JPMorgan and HSBC whole for any losses the banks suffered if and when the price of silver rose above the artificially maintained low levels — as in right now, for instance. (About all this, a JPMorganChase spokesman declined to comment.)

Some two-and-a-half years later, the Commodity Futures Trading Commission’s investigation is still unresolved, and at least one commissioner — Bart Chilton — thinks that after interviewing more than 32 people and reviewing more than 40,000 documents, there has been enough investigating and not enough prosecuting. “More than two years ago, the agency began an investigation into silver markets,” Chilton said at a commission hearing last October. “I have been urging the agency to say something on the matter for months … I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.”

What’s more, Chilton said in an interview last week, that “one participant” in the silver market still controlled 35 percent of the silver market as recently as a few months ago, “enough to move prices,” he said, and well above the 10 percent “position limits” the commission has proposed to comply with Dodd-Frank financial reform law. Since that law’s passage last summer, the commodities exchanges have issued waivers permitting the ownership of silver positions above the limits the C.F.T.C. has proposed, and which were supposed to be in place by January of this year. Yet the waivers remain in place, and the big traders have not been penalized, much to Chilton’s frustration And the mystery deepens: last Thursday, the price of silver fell $1.50 per ounce in less than an hour before recovering. “This was robbery at its most obvious and most vindictive,” wrote Richard Guthrie, a London-based trader, in an e-mail to Chilton. “How many investors lost money and positions to the financial benefit of an elite few?”

It’s getting harder and harder to continue to brush off Andrew Maguire’s claims as the rantings of a rogue trader with a nutty online following. The Commodities Futures Trading Commission should immediately release the files from its investigation into the supposed manipulation of the silver market so the public can determine whether JPMorganChase and HSBC did anything illegal, with or without the help of the Fed. In addition, the commission should start enforcing the 10 percent threshold on silver positions it has proposed to comply with Dodd-Frank law. Basically, the other commissioners must join with Bart Chilton to do the job they are required to do: Protecting the sanctity of the markets and preventing the sorts of manipulation we’ve seen all too often.

A Nazi's wet dream

Bank of England governor blames spending cuts on bank bailouts

From The Guardian:

Mervyn King has risked reopening the bitter argument over blame for the financial crisis by saying that government spending cuts are the fault of the City and expressing surprise there has not been more public anger.

The governor of the Bank of England said that people made unemployed and businesses bankrupted during the crisis had every reason to be resentful and voice their protest. He told the Treasury select committee that the billions spent bailing out the banks and the need for public spending cuts were the fault of the financial services sector.

"The price of this financial crisis is being borne by people who absolutely did not cause it," he said. "Now is the period when the cost is being paid, I'm surprised that the degree of public anger has not been greater than it has."

King has repeatedly pointed the finger at the City since the crisis erupted in 2007, but this was the first time he blamed bankers for the coalition's spending cuts.

It became clear during the hearing that King and his fellow members of the Bank's monetary policy committee, which sets interest rates, believe the crisis will have a lasting impact on the economy.

Asked when living standards enjoyed before the crisis would return, King said: "The research makes it clear that the impact of these crises lasts for many years. It is not like an ordinary recession, where you lose output and get it back quickly. We may not get the lost output back for very many years, if ever." on