The Lawless Manipulation
of Bullion Markets by Public Authorities
By Paul Craig Roberts and
Dave Kranzler
Note: In this
article the times given are Eastern
Standard Time. The software that
generated
the graph uses Mountain Standard
Time. Therefore, read the x-axis two
hours later than the axis indicates.
December 23, 2014 "ICH"
- The Federal Reserve and its bullion bank
agents are actively using uncovered futures
contracts to illegally manipulate the prices
of precious metals in order to keep interest
rates below the market rate. The purpose of
manipulation is to support the U.S. dollar’s
reserve status at a time when the dollar
should be in decline from the over-supply
created by QE and from trade and budget
deficits.
Historically, the role of
gold and silver has been to function as a
means of exchange and a store of wealth
during periods of economic and political
turmoil. Since the bullion bull market began
in late 2000, It rose almost non-stop until
March 2008, ahead of the Great Financial
Crisis, which started with the collapse of
Bear Stearns. When Bear Stearns collapsed,
gold was taken down over the course of the
next 7 months from $1035 to $680, or 34%;
silver from $21 to $8, or 62%. The most
violent takedown occurred as Lehman
collapsed and Goldman Sachs was about to
collapse. This takedown occurred during a
period of time when gold should have been
going parabolic in price. The price of gold
finally took off in late October 2008 from
$680 to $1900 while the Government and the
Fed were busy printing money to bail out the
banks. While the price of gold rose nearly
300% from late 2008 to September 2011, the
U.S. dollar lost over 17% of its value,
falling from 89 on the dollar index to
73.50.
The current takedown of
gold from $1900 to $1200 has occurred during
a period of time when financial and
political fraud and corruption becomes worse
and more blatant by the day. Along with
this, the intensity and openness with which
the metals are systematically beat down
seems to grow by the day.
Comex futures trade 23
hours a day via a global computerized
trading system known as Globex. The
heaviest period of trading occurs when the
actual Comex floor operations are open,
which is
8:20 a.m. to 1:30 p.m. EST.
All other times Comex futures trade
electronically via Globex. Gold and silver
are smashed primarily during the Globex-only
trading periods, when volume is often light
to non-existent.
This graph of Comex
futures trading on December 16th shows the
sudden plunge in the price of silver.
The second stage of the
sharp price drop begins at 1:30 pm eastern
time (11:30 mountain time), after the Comex
floor trading operation was closed for the
day. This is typically one of the lowest
volume trading periods, during which orders
to buy or sell can cause significant price
disruption to the market. There were no news
or events that would have triggered the
sudden selling of bullion futures, and none
of the other markets experienced unusual
movements while gold and silver were quickly
plunging in price.
To put in perspective the
9,767 silver contracts sold in 15 minutes,
the total trading volume in Comex silver for
the 23-hour global trading period for Comex
contracts ending at 5:00 p.m. on December
15th was 149,964 contracts, or an average of
6,520 contracts per hour. The only type of
market participant that would dump almost
10,000 contracts in a 15-minute period is a
seller who’s only motivation is to push the
price of silver as low as possible. One
entity that can afford to use capital like
this is the Federal Reserve, because the Fed
can create its own capital for free using
the printing press.
In the background, the
financial markets are becoming increasingly
pressured by declines in emerging market
currencies, insolvent sovereign
governments–including here in the US–and
perhaps a renewed derivatives crisis
triggered by the collapse in the price of
oil. The oil price decline could result in
derivative problems larger than the subprime
mortgage derivatives of the 2008 crisis.
The downward manipulation
of the prices of precious metals prevents
the “crisis warning transmission system”
from properly functioning. More important,
the decline in the price of gold/silver vs.
the U.S. dollar conveys the illusion that
the dollar is strong at a time when, in
fact, the dollar should be under pressure
from the over-issuance of dollars and
dollar-denominated debt.
What we have been
experiencing since the 2008 crisis is not
only the subordination of US economic policy
to the needs of banks “too big to fail,” but
also the subordination of law and the
financial regulatory agencies to the
interests of a few private banks. The
manipulation of the bullion markets is
illegal whether done by private parties or
on public authority, and so we have the
spectacle of the US government supporting a
handful of banks via illegal means. Not only
has economic accountability been set aside,
but also legal accountability.
Just as Washington places
itself above laws prohibiting torture and
naked aggression in order to conduct its
self-declared “war on terror” and above the
Constitution in order to construct a
domestic police state, Washington places
itself above the laws prohibiting market
manipulation.
Obviously, the
government’s claim to represent the rule of
law is as false as all its other claims. The
foul stench of corruption and hypocrisy that
emanates from Washington is the smell of a
dying country.
Dr. Paul Craig Roberts was
Assistant Secretary of the Treasury for
Economic Policy and associate editor of the
Wall Street Journal. He was columnist for
Business Week, Scripps Howard News Service,
and Creators Syndicate. He has had many
university appointments. His internet
columns have attracted a worldwide
following. Roberts' latest books are
The Failure of Laissez Faire Capitalism and
Economic Dissolution of the West and
How America Was Lost.
http://www.paulcraigroberts.org