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CFTC Gold And Silver Hearing Is Old News

by Trace Mayer, J.D. on March 28, 2010 · 8 comments

Reading time: 7 – 11 minutes

Starting 25 March 2010 the CFTC has been conducting an investigation into the concentrated short positions in the gold and silver markets. There has been some very interesting testimony come out of the Goldman Sachs vampire squid’s mouths that the informed gold bugs already knew. The size and scope of this Ponzi scam is beginning to be comprehended. As the idea spreads the demand for various types of ‘physical gold’ will increase and decrease.

STRAIGHT FROM THE VAMPIRE SQUID’S MOUTH

On 9 September 2008 I appeared on Adam Curry’s Daily Source Code in episode 788, which has hundreds of thousands of subscribers and has recently been reactivated, I casually remarked, “There are about 140 ounces of paper gold for every one ounce of physical gold.”  After all, I know what GATA knows.

Jeffrey Christian, formerly of Goldman Sachs and currently of CPM Group, considers himself among the world’s foremost experts on gold. Before the CFTC Christian testified:

One of the things that the people who criticize the bullion banks and talk about this undue large position don’t understand what is the nature of the long positions of the physical market and we don’t help it; the CFTC when it did its most recent report on silver used the term that we use “the physical market”. We use that term as did the CFTC in that report to talk about the OTC market in other words forwards, OTC options, physical metal and everything else. People say, and you heard it today, there is not that much physical metal out there, and there isn’t. But in the “physical market” as the market uses that term, there is much more metal than that there is a hundred times what there is.

WHAT IS PHYSICAL GOLD?

Let’s untangle some of Christian’s weak verbal jiu-jitsu. In my book The Great Credit Contraction I start off the first paragraph of the first chapter with definitions because if there is no agreement on definitions then it is impossible to analyze and conclude properly. While I focus on the terms money, money substitutes, illusions and currency we may want to shift our focus and attention towards the bottom of the liquidity pyramid and the terms ‘gold’ and ‘silver’.

Physical gold, AU 79 on the periodic table, has a density of 19.30 grams per cubic centimeter at room temprature and a liquid density at the melting point of 1,947.5°F of 17.31 grams per cubic centimeter. Physical silver has a similar definition.

Physical Fake Tungsten Gold has been demonstrated to exist and is differentiated from physical gold because of its tungsten composition.

GLD ETF gold differs from physical gold in many ways which I have examined several times. On page 11 of the prospectus it states

Neither the Trustee nor the Custodian independently confirms the fineness of the gold allocated to the Trust in connection wtih the creation of a Basket [issuances].

So for that reason and many others, in A Problem With GLD And SLV ETFs I concluded, “There is no assurance that the ‘gold’ held in the ETFs is actually the same gold as defined under the periodic table.”

I casted even more aspersions on these instruments in Another Problem With The GLD ETF where I showed from the 21st of November 10-K

“Gold held by the Custodian’s currently selected subcustodians and by subcustodians of sub-custodians may be held in vaults located in England or in other locations.” and “In addition, the Trustee has no right to visit the premises of any subcustodian for the purposes of examining the Trust’s gold or any records maintained by the sub-custodian for the purposes of examining the Trust’s gold or any records maintained by the sub-custodian, and no sub-custodian is obligated to cooperate in any review the Trustee may wish to conduct of the facilities, procedures, records or creditworthiness of such sub-custodian.”

Physical London LBMA OTC Forward gold is another interesting form of Christian’s physical gold. But I touched on the Massive Institutional Gold Market Change over six months ago.

CFTC TESTIMONY

Here are two key excerpts from the CFTC gold and silver hearings on 25-26 March 2010.

And the clip with Christian’s failed verbal jiu-jitsu which is actually a blatant admission (at 3:48) of the Ponzi scam nature of the ‘physical gold market’.

So what has Christian attempted to do? Conflate the gold as defined in the periodic table with other forms of ‘gold’ such as GLD ETF gold, London LBMA OTC gold, Comex futures gold, etc. under the term ‘physical gold market’. Of course, such contorted logic is absurd. The ability of a piece of paper with the letters ‘G-O-L-D’ written on it, that can become worthless, is no more efficacious at providing protection of value than a piece of cardboard with ‘C-O-W’ written on it is efficacious at providing a gallon of milk.

CONCLUSION

The knowledge that there are at least a hundred pieces of paper masquerading as physical gold in the physical gold market for every ounce of gold as defined on the periodic table is old news. What is breaking news is that one of the vampire squids would testify before government officials that this is the case.

So, if possession is 9/10ths of the law and if there are 100+ claims on an ounce of gold for every actual physical ounce and if there is a demand by the market for those actual physical ounces, because The Great Credit Contraction continues and capital seeks safety and liquidity by moving down the liquidity pyramid, then what happens to the value of the gold ounce in one’s hand or trust third-party service? For comparison there is about $7,000,000 of capital, real and fictional, for each ounce of physical gold.

Of course, Christian would probably argue it is illogical and irrational to contemplate such events unfolding. But they already have. David Einhorn moved billions from the GLD ETF into physical gold in his own warehouse.

DISCLOSURES: Long physical gold, silver and platinum with no interest in the problematic SLV, Streettracks Gold ETF Trust Shares or the platinum ETFs.

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8 comments

ABOUT THE AUTHOR: Trace Mayer, J.D., author of The Great Credit Contraction holds a degree in Accounting, a law degree from California Western School of Law and studies the Austrian school of economics. He works as an entrepreneur, investor, journalist and monetary scientist. He is a strong advocate of the freedom of speech, a member of the Society of Professional Journalists and the San Diego County Bar Association. He has appeared on ABC, NBC, BNN, radio shows and presented at many investment conferences throughout the world. This is merely one article of 241 by .
Free Free Great Credit Contraction Sample

{ 7 comments… read them below or add one }

1 Brad Burch March 29, 2010 at 8:42 am

Hi Trace,
Thanks so much for the JFK speech enclosed here.
A lot to consider and I appreciate the fact that we all have to arise to inform and keep the wheat from the chaff.
Best Regards, Brad

2 William March 30, 2010 at 9:14 pm

Trace,
Amazing! …”Paper backing Paper” and “100 to 1″. Wow! Between this and the recent Andrew Maguire, whistle-blower, on JPMorgan silver manipulation—Something has got to (eventually) crack this thing wide-open! Also, I just read tonight that someone tried to run over Andrew and his wife. Luckily, they will be okay after a night in the hospital. If this was not real, it would definitely make a best-selling novel.

Thanks for continuing to provide an excellent site and articles!
Best Regards,
William

3 Trace Mayer, J.D. March 31, 2010 at 8:01 pm

William, I commented on the Maguire issue over at Seeking Alpha with my article. Violent intimidation is a common tactic. I was sitting next to Bill Murphy at a speaker’s dinner for Cambridge House and he told me about the thugs that broke his jaw back when he first started GATA. Bill played professional football you know.

But the truth of the matter is that if someone poses a serious threat to the costumed criminal gangs then ‘action is taken’ and this is now officially endorsed US policy.

Director of National Intelligence Dennis Blair, a retired four-star United States Navy Admiral, testified before Congress, “Being a U.S. citizen will not spare an American from getting assassinated by military or intelligence operatives … If we think that direct action will involve killing an American, we get specific permission to do that.”

ABC News

Huffington Post

Democracy Now Video

WND

Ron Paul’s speech in the Congressional Record on secret prisons, extraordinary rendition and assassinations.

Sure, the criminal gangs strutting around in their costumes assassinating individuals with no right to be heard and present their case, without being given the opportunity to retain counsel or have one appointed, without being confronted with the evidence or witnesses against them, no judicial review, no appellate process and in effect absolutely no due process of law have asserted that assassinations will not be carried out regarding free speech issues. But I can think of one good reason you have not heard anything on the subject.

Of course, I also made a video (starts about 4:30) about 8 months ago on this issue of explaining how gold and silver are not so much about financial concerns but essential checks and balances in the political machinery.

4 William April 2, 2010 at 1:05 pm

Trace,
I appreciate you taking the time to reply and adding the links and further intimidation information. Wow! —Amazing and scary details.

Unfortunately, given the power, corruption, and negative effect on the U.S. FRN$ if this whistleblower information proves JP Morgan (and others) guilty, I don’t think they will let it happen. “They” defined as our Government, the Fed, CFTC, JP Morgan, Goldman Sachs, and others. Still, I’m happy to see the story developing and growing on the Internet.

Then again if the price manipulation is fully exposed and gold/silver prices are allowed to adjust accordingly, the FRN$ is toast and we are equally screwed. :) Of course I say this because only a small percentage of citizens in our country have valid constitutional currency of gold and silver.

These are interesting times we live in and I look forward to seeing how all this works out long term. Thank you for your insights and numerous articles you’ve shared regarding gold, silver, and other commodities.

Best Regards,
William

5 Michael April 3, 2010 at 5:11 pm

The story seems too good to be true for us, long waiting “periodic table physical goldbug”. Is it possible that all these things are calculated to happen? Obviously,the effect is clearly dollar negative. In my wildest imagination, it seems to me that these incidents(Christian admission, whistleblower) are planned to trigger a us dollar crisis which is destined to happen structually. Is it a coincident that the Chinese Chairman Hu flied to Washington in a hurry disregarding the previous stale relationship and high profile retaliation stance taken just to discuss the Iran nuclear problem?In any event it seems to me that a us dollar crisis will happen in April in order to speed up the implementation of the world currency by the IMF. We as a race are walking closer towards the tomb digged by our fellow egocentric hidden power hidding behind the FED.

6 David April 7, 2010 at 9:10 pm

that wikileaks video is one of the most disturbing things I have seen in a long time.

7 Robert Happek April 9, 2010 at 9:31 pm

The fundamental question is: why do people buy gold? The simple truth is that 99 out of 100 investors buy gold as a financial tool in order to realize capital gains resulting from the appreciation of gold. These investors do not really care to hold physical gold. Gold is only a means to get more cash in the future. For these people it does not matter whether Comex has the gold it claims to have. It matters more whether Comex has the cash which these investors hope to gain by speculating in gold.

Of course, 1 out of 1oo investors in gold buys gold as either a means of accumulating a valuable commodity or simply as a financial insurance against the risk of a systemic failure of our fiat currency system.

Viewed from that point of view, it is perfectly rational that there are 100 paper claims on gold for every ounce of physical gold in existence. The system is in equilibrium because indeed only one in 100 investors is really interested in gold. The other 99 investors in gold are not interested in gold. These investors are more interested in Dollars than in gold.

The story is really the same as in stock market investing. Most people buying stock XYZ are not really interested in the underlying company XYZ. They are interested only in that stock because they believe that other investors might buy that stock in the future which could lead to capital gains.

This is the ultimate problem of our investing culture: We can not make money by collecting interest or dividends. Hence, we invest into things which “appreciate” hoping to achieve so called capital gains. Unfortunately, capital gains are usually a indication of a Ponzi scheme fueled by the printing press of the banking system.

In an ideal world, people would buy stocks only because they like the underlying company. Also, people would buy gold only because they like to hold physical gold.

The markets are not a place of peaceful competition. No, the market is a place of a permanent brutal war where the ultimate goal is to gain the greatest possible number of Dollars. The assets utilized (stocks, bonds commodities) are only weapons in that war.

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