As fear trumps politics, the stampede will commence.
Derivative defaults will spread blot out the financial landscape like a murder of crows.
In a brief moment, precious metals prices will pass through their fundamental price equilibria on their way to unimagined levels, while re-asserting themselves as the ultimate value measuring sticks.
In the acute aftermath of the United Kingdom’s vote to leave the European Union, we saw a figment of this ‘return to real money’ (ironically) via the mad rush to all things US dollar-denominated.
Precious metals - across the fiat landscape - were bid as the shockwaves made there way through markets.
Source: Wealth For Layman
Part and parcel with each and every rise of fiat madness- or legal tender by force — there must always be some mechanism (by accident, or by plan) for veiling the true value of monetary assets.
The fight to obscure value in a ‘developed’ world where information technology and propaganda combine to makes the job of obfuscation and the manipulation of consensus (and price levels) that much easier.
It’s no wonder that barely 1% of global wealth is allocated to precious metals.
However, it is still very much a temporary veiling and will crumble as always — and very likely with a great deal of panic and irreparable damage.
Commercial banks were incentivized - and enabled by lack of regulation or enforcement to become the digital market makers and for the silver market the sellers of last resort.
Once in place, there need not be any elaborate conspiracy.
It is simply a system that is guided by the whims of the controlling elite, blinded by their own inexhaustible seeking of power and wealth at any cost and despite any obstacle.
With that said, we left of in Part 3 with the idea that JPM could be ready in the wings to corner the long side of COMEX silver futures in order to squeeze the market higher and make windfalls in the process.
A we promised to discuss the consequences, with a few questions from subscribers to get there…
But first… one note regarding JPM’s physical silver long..
Yes, it’s true that the best arguments for surging physical silver demand in the face of horrible price action over the last five years ‘must be institutional’ or ‘Chinese’ and couldn’t be JPM… is a fascinating concession.
Why is it so hard to believe JPM could be the big buyer of American Silver Eagles, and Canadian Maples Leaf coins?
I think in part, it is aligned with the cognitive dissonance many still suffer as we realize how US-centric financial corruption happens to be…
Of course the most sophisticated among us hate to find out that we’ve been wrong for so long.
Therefore, you see the hysterical rejection of the clear case of price manipulation from within the so-called hard-money camp.
Apparently, conspiracy facts don’t sell.
And while many love to personally attack the Ted Butler for his claim that JPM has accumulated upwards of 150 million ounces of silver in the form of silver eagles and silver maple leafs, it is astounding that the same voices who also beg us to look at Shanghai and the 60 million ounces of silver there - rather than the clearly visible COMEX inventory movements adding up to much more (weekly turnovers of 17 million or more) or the (10 Million ounces) JPM (one bank) has taken into it’s own vaults… in one month!
Aside from the fact that the JPM holds open contracts short to the tune of 100,000,000 (paper) ounces.
I will take it one step further and let the history of futures manipulation - and it’s chronic enforcement impotence - spin the narrative that JPM would think it best to leave it’s coin-hoard in tact - not melting it down — and thereby ‘burying the corpse’ and clearing the way to an unfettered price rise.
See Part 3 here.
Some questions from readers…
“Jeff, that’s a fascinating analysis of JPM's schemes. I don't recall reading this elsewhere. Did you come up with this idea?”
History served up this scenario. It’s been done before, it will be done again.
Part of the reason the Hunts loaded up on a debt as they cornered silver was that they had already tested the waters in soy beans a few years before.
They got a wrist-slap and most likely considered that a green light for positioning ahead of the great silver accident.
"So just to recap and make sure I get this, JPM has a huge silver short position now, but they are accumulating massive amounts of silver outside the COMEX system."
Yes, outside the system - but also within the warehouse system itself.
And they’ve been doing it without causing the prices to rise… because, well.. they control the price with their huge concentrated short.
And again, Butler has made enough of his content free, that you should have no problem sourcing and digesting his reasoning.
“At some point, they plan to exit their shorts, buy massive silver longs, then watch the other 8 banks all encumbered with their own silver shorts (presumably the flip side of the newly purchased JPM's longs), implode into dust while the silver price goes to the moon, and JPM gets away filthy rich. Is that it?”
Yes, but they don’t need to buy massive longs — just enough to eclipse the registered inventory and cause a default…
(Yes, I said default - which many assume will never or could never happen - again. And yes, it has happened before).
"So, are the other banks too asleep at the wheel to catch on to this trick? Are they completely oblivious?"
They are not oblivious. They are jealous. JPM beat them to the punch - and learned a very special lesson as silver rose to 49 between August 2010 and April 2011.
It’s ultimately a game of chicken. These banks hate each other, and would do each other in given the chance. It’s just a matter of who pulls the trigger first.
"And when it does happen, do you think they'll cry foul to the CFTC and SEC and try to pin concentration fraud on JPM?"
That’s interesting. Perhaps there will be complaints.
After all Deutsche Bank, as part of its recent Silver Fixing settlements agreed to provide evidence (emails, phone calls, etc) that could put it’s counterparts at risk of exposure.
The Murder of Crows
"Will the government let JPM get away with it and force the other banks into default?"
The government will come in only after the fact. There could be decades-long investigations in the aftermath. By that time, silver futures will have gone to the way of Maine Potatoes or Onions - never to return.
The government, or the FED - if anything - would naturally be called in to bail out the entities on the receiving end of margin calls. The defaults, or insolvencies, therefore, would be triggered by market forces.
"How would this affect the financial system?"
"Would JPM be able to hold up the system if these other 8 banks go belly up?"
"How does this not trigger a massive derivatives implosion?"
Believe it or not and despite the powers of the ESF, Treasury, or the FED to conjure liquidity from nothing, we can easily turn to history to find the limits of how that plays out.
A massive derivative event and a liquidity freeze would cause massive irreparable damage to the world financial system.
Reflating won’t be an option. But they will try and print more.
At the point, the whole monetary complex will be the last source of liquidity keeping a ballooning government deficit alive. While the rate of interest demanded for holding US debt finally surges beyond anyone’s wildest imagination.
From, there we hit the point of no return, money velocity surges as the devaluing dollars are forced through government channels and hyperinflation finally commences.
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