By Adrian Douglas
The “bombshell” that GATA dropped at the CFTC Public Hearing on Precious
Metals, March 25, 2010 was stunning. The video of Bill Murphy, Chairman of
GATA, revealing a whistleblower source who has warned the CFTC Enforcement
Division of market manipulation by JPMorganChase in advance of it happening
and witnessed JPM traders bragging of their exploits can be viewed here.
Murphy explained that despite the Enforcement Division receiving detailed
information in December 2009 the manipulation continues unabated as can be
seen by the way gold was taken down this week to rob holders of April gold call
options in the strike range of $1100-$1150 as the hammering made them expire
worthless.
GATA believes that this new evidence and “smoking gun” will be a watershed
event in liberating the gold market from its shackles of price suppression.
As dramatic as this revelation was at the CFTC hearing there was another
“bombshell” exposure during the hearing. This was the testimony that GATA
Board member, Adrian Douglas, was able to deliver during the hearing while
assisting Harvey Organ with his testimony. Adrian was able to introduce
arguments that the London Bullion Market Association (LBMA) OTC gold market
is nothing but a massive “paper gold” Ponzi scheme. What was then astonishing
is that the bullion bank apologist, Jeffery Christian, of CPM Group, who has
always been staunchly against GATA endorsed Adrian’s comments as being
“exactly right” and went on to confirm that the LBMA trades over 100 times the
amount of gold it actually has to back the trades.
There were lots of almost as equally explosive admissions so I have taken the
time to make a transcript of the relevant section of the webcast. I have posted the
two short video clips. FULL POST HERE
Extracted from Transcripts of Federal Committee Hearing:
A DOUGLAS: I would just like to make a comment. We are talking about the
futures market hedging the physical market. But if we look at the physical market,
the LBMA, it trades 20 million ozs of gold per day on a net basis which is 22
billion dollars. That’s 5.4 Trillion dollars per year. That is half the size of the US
economy. If you take the gross amount it is about one and a half times the US
economy; that is not trading 100% backed metal; it’s trading on a fractional
reserve basis. And you can tell that from the LBMA’s website because they trade
in “unallocated” accounts. And if you look at their definition of an “unallocated
account” they say that you are an “unsecured creditor”. Well, if it’s “unallocated”
and you buy one hundred tonnes of gold even if you don’t have the serial
numbers you should still have one hundred tonnes of gold, so how can you be an
unsecured creditor? Well, that’s because its fractional reserve accounting, and
you can’t trade that much gold, it doesn’t exist in the world. So the people who
are hedging these positions on the LBMA, it’s essentially paper hedging paper.
Bart Chilton uses the expression “Stop the Ponzimonium” and this is a Ponzi
Scheme. Because gold is a unique commodity and people have mentioned this,
it is left in the vaults and it is not consumed. So this means that most people trust
the bullion banks to hold their gold and they trade it on a ledger entry. So one of
the issues we have got to address here is the size of the LBMA and the OTC
markets because of the positions which are supposedly backing these positions
which are hedges, but it is essentially paper backing paper.
Afterwhich there was a pregnant pause, and from my reading, no one was even really listening. Next comment?
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