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A Few Questions; One Answer

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June 15, 2012 - 9:09am

Please read this article carefully because I’m disclosing for the first time that the U.S. government has given JPMorgan the green light to manipulate the silver market. This fact explains the shenanigans in the silver market. It answers all the questions and exposes this tawdry affair for all to see.

The scandal recently became more outrageous. The June Bank Participation Report, as of Tuesday, June 5, along with the COT confirmed that JPMorgan’s silver short position has increased by at least 5,000 contracts in the past two reporting weeks. That is the equivalent of 25 million ounces of silver, truly an enormous amount in a two week period and about equal to all the silver produced and consumed in the world in the same period. I calculate JPMorgan’s net short position in COMEX silver futures to be between 16,000 and 17,000 contracts. JPMorgan has been the sole net commercial silver short seller over the past two weeks. That is the clearest proof yet of manipulation. A market dominated by one buyer or seller is the ultimate definition of manipulation.

Had JPMorgan not sold short 5,000 or more net additional contracts in COMEX silver over the past two weeks, the price of silver would have climbed even higher. Why? Because without JPMorgan selling, someone else would have had to sell in their place. Those sellers would have demanded a higher price. Furthermore, JPM’s short position alone equals the entire 16,500 contract total net commercial short position in COMEX silver. In other words, if JPMorgan did not hold a 16,000 to 17,000 contact net short position, there would be no commercial net short position at all. The additional proof of silver manipulation includes the two massive price takedowns of last year, when the silver price fell more than 30% in a matter of days, benefitting JPMorgan more than any other trader.

How can I continue to get away with accusing JPMorgan, arguably the most powerful bank in the US, of the most serious market crime possible and get no reaction from them? An objective reading of the past four years, since the time I first publicly identified JPMorgan as the big silver short, has resulted in the bank being universally recognized on the Internet as the big silver crook. The reputation of a systemically important financial institution is always of prime concern from the board of director and senior management level on down. Why have I never been threatened by them?

The same question comes to mind when applied to the CME Group, owner and operator of the COMEX, where the silver manipulation is centered. The allegations that the CME is aiding and abetting in the silver manipulation are serious because the CME has been officially designated as a self-regulatory organization (SRO), meaning they have a legal obligation to prevent any attempt at manipulation in their markets. Like JPM, the CME is tough as nails and, presumably, could step on me should they choose to. (Yes, I send everything I write to JPM, the CME and the CFTC).

Unlike JPMorgan and the CME, the Commodity Futures Trading Commission (CFTC) has not remained completely silent. The agency has initiated a number of reviews and investigations into allegations of manipulation in silver over the years (at my prodding), including a current Enforcement Division investigation, now approaching the four-year mark. The allegations of a silver manipulation were always credible, since they were based upon data from the agency itself and compared to how the Commission reacted strongly to past instances of concentration. The CFTC had to at least go through the motions of pretending to care. After all, many thousands of silver investors have consistently petitioned the agency on this matter over the years.

It’s been all talk and no action from the Commission when it comes to the silver manipulation. I can’t tell you how many times I have asked myself after I have just explained another undeniable proof of silver manipulation, “why can’t these regulators see this?” Why is the Commission conducting an expensive and formal silver investigation in the first place, when all it has to do is explain why a US bank holding a silver short position equal to 25% to 30% of both the paper and physical total world market wouldn’t be manipulative to the price (in and of itself)?

To this day, I have been baffled by how CFTC chairman Gary Gensler can preach the Holy Gospel of true regulatory reform of transparency, position limits and no concentration, while ignoring the clear evidence of manipulation in silver. I think what has caused his and the agency’s failure to terminate a highly-visible silver manipulation has nothing to do with a lack of understanding of the silver manipulation. It took me a while to figure it out, but better late than never.

The answer to all the above questions lies with the President’s Working Group on Financial Markets. Largely in response to the great stock market crash in October, 1987, President Ronald Reagan signed an Executive Order in 1988 creating the Working Group to prevent a recurrence of a market crash. http://www.archives.gov/federal-register/codification/executive-order/12631.html

There are four members in the Working Group; the Federal Reserve Chairman, the Treasury Secretary, the Chairman of the Securities and Exchange Commission and the Chairman of the CFTC. The Treasury Secretary is the Chairman of the Working Group. The purpose of the group is to promote market stability and prevent disorderliness by working with the exchanges and major market participants in times of stress.

Such a time for the financial markets existed in March 2008, when the investment bank Bear Stearns failed and, undoubtedly, the Working Group was heavily involved. The Group, along with exchanges and major market participants, oversaw the transfer of Bear Stearns’ giant short positions to JPMorgan, in the process indemnifying JPM from any concerns of dominance and overt control of silver and gold prices. As a result, JPMorgan orchestrated (and was the biggest beneficiary) the more than 50 % decline in silver prices into late 2008 with the Working Group’s permission.

Things then quieted down in silver until the fall of 2010, when prices started to make an historic move into the late-April 2011 price high near $50. At that point, JPMorgan’s giant short position began to hurt and it moved to cover some of the silver shorts into the very top. At that point, it looked like JPMorgan would get crushed by the physical silver shortage and the growing losses on their short positions. Instead, JPM appealed to the Working Group for relief and, working with them and the CME, JPM caused the silver market to crash, starting on Sunday night, May 1. Later, the Working Group teamed with JPMorgan and the CME to smash prices by 35% in 3 days in late September 2011.

The President’s Working Group on Financial Markets answers all my questions. It explains why JPMorgan and the CME remain silent about allegations of manipulation. They have been given legal cover by the Working Group. This also explains why the CFTC says they are conscientiously investigating silver when it is clear they are not. The agency can’t come out and disclose silver was smashed with the full knowledge of the Working Group, so it pretends to go through the motions of investigating. What is going through Gary Gensler’s mind? Is he not tormented by the blatant silver manipulation which runs contrary to all his public utterances? Commodity law is being broken.

If my analysis is correct, what does this mean for silver from here? It will prove to be wildly bullish for the price; maybe not immediately, but on a long term basis. It sets the stage for the really big move in silver. This overt government interference in the silver market will boomerang at some point, just as every attempt at artificial price setting has failed. Just let the word start to spread about Working Group involvement in causing the price of silver to fall and the natural reaction by the world’s investors will be to take advantage of the bargain created.

This is an attempt by the government to influence the price of silver lower by favoring the paper short sellers and not by dumping physical silver on the market. That’s because neither the US Government, nor any other world government has any physical silver to dump. All the Working Group can do is aid the paper silver short sellers by permitting vicious price sell-offs designed to scare existing holders. There is an easy way around that scam and that is buying real silver, not the junk represented by COMEX paper contracts. If, as and when the role of the Working Group in the silver manipulation becomes known, the best reason yet for buying silver will come into focus.

I know that many have long suspected that some type of government involvement was present in gold and silver. But rarely have those suspicions been as clearly documented as they are now in silver. Questions about a silver investigation that never ends, or price moves beyond reason or historical precedent, or why the nation’s most important bank and exchange are up to their eyeballs in the silver manipulation have been explained by the Working Group. Too bad the Working Group took the side of a few short manipulators and not the many silver investors and producers of the world. No doubt someone has sold a bill of goods to the regulators, falsely convincing them that terrible things will happen financially should silver explode to its true market value. Well guess what? The rotten state of world finances has nothing to do with the price of silver currently, nor will it in the future.

Ted Butler

June 15, 2012

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About Theodore Butler / Commentary Author

After publishing unique precious metals commentary on the Internet since 1996, I have decided to offer a subscription service. The main reason for the change is that I felt somewhat restricted by my weekly format.

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