Extreme Gold/Silver Manipulation And Potential Financial Collapse

Doc from Silver Doctors invited me back on to his weekly market wrap to discuss the extreme manipulation in the precious metals market.  In addition to the massive imbalance between paper gold/silver and the above ground available for supply for delivery should a lot more  paper longs demand delivery, the potential exists for the mother of all short squeezes in gold  and silver.

We also discuss India’s current  demand, which is misunderstood and subjected to highly misleading media reporting by the likes of Reuters, Bloomberg and the World Gold Council.  I explain why this is the case and why India gold demand is significantly higher than is currently reported.

Other topics include the why Glencore could potential an OTC derivatives catastrophe and potential black swan events that could appear before the end of 2015:

5 thoughts on “Extreme Gold/Silver Manipulation And Potential Financial Collapse

  1. Current paper gold ounces in the world versus physical gold stands at;

    309:1 Three hundred and nine owners of the same ounce!

    What could go wrong? Right?

  2. Nice interview indeed. Thanks! One thing, the debt ceiling should be renamed the debt target (smile). Always new tartgets there!

    Regards, Hugo

  3. If things were good why would they even work on this:

    Breaking Through the Zero Lower Bound
    Prepared by Ruchir Agarwal and Miles Kimball
    Authorized for distribution by Annalisa Fedelino
    October 2015
    There has been much discussion about eliminating the “zero lower bound” by eliminating paper
    currency. But such a radical and difficult approach as eliminating paper currency is not necessary. Much as during the Great Depression—when countries were able to revive their economies by going off the gold standard—all that is needed to empower monetary policy to cut interest rates as much as needed for economic stimulus now is to change from a paper standard to an electronic money standard, and to be willing to have paper currency go away from par. This paper develops the idea further and shows how such a mechanism can be implemented in a minimalist way by using a time-varying paper currency deposit fee between private banks and the central bank. This allows the central bank to create a crawling-peg exchange rate between paper currency and electronic money; the paper currency interest rate can be either lowered below zero or raised above zero. Such an ability to vary the paper currency interest rate along with other key interest rates, makes it possible to stimulate investment and net exports as much as needed to revive the economy, even when inflation, interest rates, and economic activity are quite low, as they are currently in many countries. The paper also examines different options available to the central bank to return to par when negative interest rates are no longer needed, and the associated implications for the financial sector and debt contracts. Finally, the paper discusses various legal, political, and economic challenges of putting in place such a framework and how policymakers could address them.

    Eliminating the zero lower bound has some costs, but those costs should be weighed against
    the benefits: not only ending recessions, but also ending inflation. The key analytical point is
    that by and large the costs of inflation are costs of inflation relative to the unit of account.
     if electronic money provides the unit of account (including the unit of account for price and wage setting),
     and inflation is close to zero in terms of the electronic unit of account,
     then one can have inflation relative to paper currency without serious costs,
     as long as the central bank keeps the spread between the paper currency interest rate and the checking account interest rate small.
    As a way to eliminate the zero lower bound, a time-varying paper currency deposit fee has
    the great advantage that it can be implemented solely by action at the cash window of the
    central bank. There are many other complementary policies that would be useful in
    conjunction with this central mechanism (detailed in Appendix I), but it is the effective
    exchange rate between paper currency and electronic money at the cash window of the
    central bank that makes the paper currency interest rate an easily controlled policy variable of
    the central bank. Such an ability to vary the paper currency interest rate along with other key
    interest rates (which can be modified by standard means, even in negative territory), makes it
    possible to stimulate investment and net exports as much as needed to revive the economy,
    even when inflation, interest rates, and economic activity are quite low, as they are currently
    in many countries.

    No need to abolish paper currency to get deep negative rates. See our IMF working paper: http://www.imf.org/external/pubs/ft/wp/2015/wp15224.pdf

  4. Normally, gold price would track Fed balance sheet + national debt. Underreporting inflation + suppression of PM prices enables deficit spending and assoc. debt monetization for a time. All markets are manipulated now. Stocks are boosted, PMs are sold short (naked, and unashamedly). The amount of financial repression is increasing in direct proportion to the national debt (next stop $20T) and the growing instability of the financial state of the US. We now live in a centrally planned, command economy; not unlike former USSR, or China. The gov’t. is now involved in healthcare, education, banking, markets, media, internet. Did I miss anything? I don’t expect the PM manipulation to end until one of the following occurs: 1) Asia owns enough gold to set the (real) price. 2) Financial system collapses again and banks lose control of the markets, as in 2008-9.

    Pay no attention to the (wo)man behind the curtain. Gold is a store of wealth and will ultimately prevail as sound money. Paper dollars are equivalent to monopoly money without the “full faith and credit” of the system that backs it. Dollar hegemony is now weakening. It’s only a matter of time…


    The problem remains for central governments and for central banks, including the Fed, that there is no way out of the ongoing economic and systemic crises. The Panic of 2008 was the day of reckoning for all the extraordinary debt and leverage excesses that had been built into the U.S. and global financial systems, but that day of reckoning still is running its course.

    Assuming that the Fed still would do everything in its power to prevent the collapse of the domestic- or global-financial system, then all the rhetoric about returning to monetary normalcy simply is rhetoric. The system is not stable, and the day of reckoning that surfaced in the Panic of 2008 still has to be faced.

    Monetary malfeasance by the Federal Reserve, as seen in central bank efforts to provide liquidity to a troubled banking system, and also to the U.S. Treasury. Despite the end of the Federal Reserve’s formal asset purchases, the U.S. central bank monetized 78% of the U.S. Treasury’s fiscal-2014 cash-based deficit (see Commentary No. 672). The quantitative easing QE3 asset purchase program effectively monetized 66% of the total net issuance of federal debt to be held by the public during the productive life of the program (beginning with the January 2013 expansion of QE3).

    The Panic of 2008 continues; it never went away. To prevent systemic collapse at the time, governments and central banks took stopgap, not corrective actions. They only pushed otherwise unresolvable issues into the future, and that future rapidly is closing in again on the system. The U.S. economy never recovered; it remains severely, structurally impaired and is turning down again. The U.S. banking system remains impaired and will face an intensifying crisis with the deteriorating economy. The federal government has no viable approach for addressing its long-term solvency issues, and the rest of the world has lost confidence in, and patience with, U.S. actions or lack of same.

    Central bank (very specifically the Federal Reserve) and Wall Street efforts, including popular financial media hype of the last several years clearly have been aimed at killing investment in the precious metals, and pushing investors increasingly into an otherwise unstable stock-market that sure looks like one of the most extraordinary, speculative bubbles of all time.

    When held for the duration, physically-owned precious metals offered, and still offer a safe-haven from all the troubles ahead. Yet, in recent years, some entity close to the central banks and Wall Street deliberately and irregularly intervened with massive selling in the gold and silver markets, in an obvious and successful effort to drive lower the prices for gold and silver. The effort here was to kill the “safe- haven” image of precious metals, to burn cautious investors and, again, to drive investors into a more- unstable and highly-dangerous domestic stock market (see the Financial Markets and Inflation section).

  5. This is a rather nasty negative feedback loop. Derivatives written by Deutsche Bank and the other European banks are solidly under water because financial repression is sky rocketing the dollar.

    Under QE the Fed buys the banks T Bills or even lower grade assets. The banks now have cash but not good collateral. The escalating dollar as a result of the QE means the banks need more collateral for their under their increasingly under the water derivatives positions on the euro, commodities in short everything not dollars. They can’t net out these positions without going insolvent. So they swap their cash for T Bills to hypothecate out on their margin accounts. QE continues and the losses on the derivatives continue to pile up. These positions have to be written forward and need even more collateral which is getting scarcer and scarcer as the Fed is buying it all back under QE. In short the OTC derivatives are slowly eating the Treasury Bill market.

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