Tag Archives: fiat money bubble

Will The New Bitcoin CME Futures Contract Benefit Gold?

The Chicago Mercantile Exchange (CME) announced a plan to launch Bitcoin futures by the end of the year. The price of Bitcoin surged to a new record in response to the announcement.  It was reminiscent of the dot.com era, when a dot.com stock would jump 10% if Maria Bartiromo merely whispered the name of the company on CNBC.

Ironically, the cheers for this new contract from the Bitcoin faithful could turn out to be analogous to chickens in the barnyard cheering at the appearance of Colonel Sanders.

GATA released an article about the new Bitcoin futures contract titled “So Long Cryptos.” I’m sure that editorial stance puzzled most Bitcoin price-momentum chasers.  Crypto aficionados, for now, overlook the fact that CME futures are used aggressively to push around the dollar-based Comex gold and silver futures contracts.

As GATA points out, the ability to manipulate precious metals futures contracts by the official entities motivated to suppress the price of gold is reinforced by the volume trading discounts given from the CME to Governments and Central Banks who trade on the CME.

If there any reason to assume that the same volume discounts will not be extended to the Bitcoin contract?  Another curious feature of the Bitcoin contract is that it will be settled in cash.  I would point out the original intent behind futures contracts was to enable producers and users to agree ahead of time on a price that would be paid for the delivery of the underlying commodity associated with the futures contract.  Futures were a financing tool intended to facilitate the production and distribution of the underlying commodity product.

The Bitcoin futures contract is settled only in cash – U.S. dollars.  To wit, does this not theoretically sabotage the intended purpose of Bitcoin, which is to provide an alternative to fiat currencies?  Why would you want to receive fiat dollars rather than delivery of the underlying?

Technically this is not a bona fide futures contract. It’s a derivative of the “index” price of Bitcoin but it does not facilitate the production and distribution of Bitcoin.  As such, it’s an instrument of pure speculation. By definition, this opens the door to manipulation by the entities who might be motivated to control the price of Bitcoin. Oh, by the way, those entities can buy and sell the contracts at a price advantage to the speculators by virtue of the volume discounts.

At least with gold and silver contracts, the contract enables the contract owner to take delivery of the actual physical commodity connected to the contract. To a limited extent, this mechanism serves to prevent the complete unfettered manipulation of gold and silver via the Comex futures contract.

With the Bitcoin futures contract, the contract owner is paid cash.  The absence of a requirement to deliver actual Bitcoins enables the issuance of an unlimited number of fiat dollar-based paper Bitcoin contracts which can be used to drive the price lower by increasing the supply of the contract relative to the demand.  So much for the idea that Bitcoin supply issuance is firmly capped. This could  actually be quite entertaining to observe

It’s also quite possible that Bitcoin futures could divert hedge fund trading volume away from gold and silver futures. This would be a blessing in disguise if this occurs.  The price-momentum chasing hedge fund algo trading enables the Comex bank manipulation of Comex futures contracts.  Remove this source of volume and it will remove to some degree the ability of the banks to push the price around by exploiting the hedge fund algos.

If the percentage of open interest in gold and silver Comex futures contracts becomes skewed toward the users of these contracts who actually take bona fide delivery of the underlying physical gold/silver bars because the non-delivery-taking users move over to Bitcoin futures, it could  mitigate the ability of the banks to price-cap the price of gold/silver.  

In this regard, investors who prefer to keep their wealth stored in physical gold and silver rather than fiat dollars or fiat Bitcoins will indeed welcome the new Bitcoin futures product.

Comex Paper Gold Open Interest Continues Its Vertical Ascent

 From sublime to ridiculousness there is only one step.  – Napoleon

The Fed is nothing but a mafia organization that took control of the United States starting in 1913 (Rory Hall, The Daily Coin).  In sheer defiance of all free market principles, the paper gold open interest on the Comex continues to move inversely to the price.

Yesterday the open interest in fraudulent paper gold futures open interest spiked up another 8,056 contracts to 470,720 contracts.   This added another 800,560 – 25.1 tonnes – ounces of paper gold to the Comex open interest, while the amount of gold “received” into Comex vaults increased by only 35,107 ozs.

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COMEXGOLDRecall that Germany is trying to get back just 300 tonnes of gold from the Fed but has to wait seven years for this to happen.  But the Fed, through its agent bullion banks, can create more than 300 tonnes of paper gold in just one week (remember Bernanke’s magical electronic printing press).  Why won’t Germany just agree to hold paper gold?  Based on the business activity of the Comex, paper gold is perfect substitute for real gold.  Angela? Wolfgang?  Jens (Weidmann, head of the Bundesbank)?

The amount of fraudulent paper gold created by the banks yesterday is 165% of the total amount of gold that is being reported as “registered,” or available to be delivered.  No other commodity in the history of the world is allowed to operate with kind of paper to physical ratio.

The entire U.S. financial and economic system is nothing but one enormous fraudulent Ponzi scheme enabled by the complete takeover of the U.S. Government by corporate and banking interests  (see this podcast with John Titus on the Shadow of Truth for direct proof of my assertion).   The Comex is ultimate symbol of complete fraud and corruption that has completely engulfed the system.

Historically the level of open interest in gold and the price of gold have been highly correlated.  The last time the paper gold futures interest was as high as it is now was November 27, 2012.  The price of gold was $1741 per ounce.

The only conclusion that can be drawn is that the Federal Reserve, likely on orders from the BIS, is going to try and suffocate the price of gold.  The unintended consequence is the enormous drainage of gold from western vaults into the eastern hemisphere.  I suspect the bullion banks themselves are on the receiving end of that gold.

At some point the Comex itself will suffocate under the weight of paper gold.  The elitists will conjure some event of force majeure and the Comex will exercise its right to settle the paper with more paper, i.e. U.S. dollars.  At that point they may as well use drachmas…

Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’  – “Ayn Rand, Atlas Shrugged”