Richard Daughty

Thanks to Bill Murphy and the Gold Anti-Trust Action (GATA) committee, the slimy, market-manipulating goings-on in the short-selling of gold futures and silver futures to suppress their prices at the CFTC have pretty well been exposed, and about time, too.

Tyler Durden at zerohedge.com calls it “one of the largest frauds in commodity markets history”, to which I can only add “I can’t think of one bigger!” although I admit that I am not up-to-speed on the history of frauds in the commodities markets, nor am I up-to-speed on anything, now that I mention it, which probably explains why I am such a failure, but which is another sad story for another time.

And you would have to be as stupid as my boss thinks I am, and my family thinks I am, and all the neighbors think I am, if it didn’t occur to you that a long-term suppression of prices is, using a metaphor I read somewhere, like holding a ping-pong ball underwater, which is going to zoom up when the suppression stops, and that ping-pong ball could shoot up out of the water and hit you in the eye, and you will say, “Ouch! Me peepers!” which will be bad, not because you should have said, “Me peeper!” because only one eye was hit, but because you won’t be able to see the explosive move in gold and silver after waiting for it so long, unless, of course, you were holding TWO ping pong balls underwater, expanding the metaphor to whole new dimensions.

Oops! I seem to have gotten off on a tangent. Sorry! But apparently there is also some consternation about the gold Exchange Traded Funds (ETFs) and whether or not the gold is really there, mostly because of all those disclaimers and “nothing is my fault” stipulations in the prospectus, which, if you take a look at your brokerage agreement or any financial agreement, has all the same fine print.

Gary Tanashian of biiwii.com sums it up by writing, “There is a lot of controversy stirring up with regard to what could be the ‘largest fraud in history’, as gold available for delivery to people who think they actually own metal through paper intermediaries is being exposed as being only as safe as the entities that guarantee its delivery – in other words, not safe at all.”

And, given the latitude that the Federal Reserve, the banks, the International Monetary Fund and all the other banks have given themselves, it’s amazing that ETFs are as conservative as they are!

I mean, for instance, the IMF and the Fed agree that they can lease out their gold, even to the point of delivering the bullion to somebody so that there is nothing left but an empty vault, but yet still count it on the books as being all there and unencumbered! Hahaha!

But the obvious fraud of selling silver short at 100-to-1, or more, is not lost on Jason Hommel of silverstockreport.com, who notes that “the entire world’s annual production of silver, at about 600 million oz., at $17/oz., is barely $10 billion, which is a mere 1/20th of the amount owed in these bullion accounts, which are dominated by JP Morgan”, which he says total to an amazing and outrageous $203 billion.

The actual figures, of the what I am calling The Big Silver Futures Scam, are, according to Mr. Hommel, that these market insiders sold-short futures for “12 billion ounces of silver, which is 24 times world annual production, and perhaps 100 to 160 times the actual supply of physical silver held in London for delivery against such accounts, which may be as little as 75 million ounces or less.”

I knew that none of this would make an impact on the ordinary people of the world who are united in nothing except wanting me to shut up about the Federal Reserve creating so much excess money and credit and how they are morons for not buying gold, silver and oil, of which this futures thing is just a tiny part.

But perhaps a snappy tune would help! I don’t know why I didn’t think of this before!

Calling upon my Mogambo Musical Ability (MMA), I quickly came up with this toe-tapper about the foolishness of people who own paper promises of silver instead of buying physical bullion:

“Ya gotcher paper in your hand.
“You think that you’re so hot.
“You think that you got some silver,
“But paper’s all you got. Chump!”

The Mogambo Guru
for The Daily Reckoning

Richard Daughty

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.

  • JMR bayou bobby

    Mo, may I call you Mo?

    Mo, you are correct. And never has any one soul been more correct.

    The bounce will bring new meaning to the term ‘bounce’. And the liars and cheats, and all the other con men will moan and wail, while you and me and all the other more prescient amongst us (amongst, by the way, is a word, you can look it up). Remember too, that one can only dance in one street at a time, but we will dance joyfully in the street. A dance of incredible, undefinable joy.

  • Cool Mind

    Guru Mogam,
    You are right on target. Unlike many writers who write long fancy stories for the purpose of passing school examinations only, your points are always on the bull eyes. Financial derivatives can develop into various forms. The liars and cheats and the con men should never get away with this. They should be burned in hell fire, I mean thermo nuclear fire. Should they ?

  • Extreme IQ

    Liars, cheats and con men should be burned in hell fire. I mean thermo-nuclear fire, because the intense heat will disintegrate them in split of a second before they even feel the pain.

  • DRUNK AND DISORDERLY

    So is owning PM’s in paper form, like ETF’s and stuff, is that like unsafe sex? Reason I ask, my girlfriend is due in a coupla minutes and I need to know. I figure being screwed by the gov is expected, but personal is different. So I figure, ETF’s and even FRN’s are junk bonds on steroids. Why are the Chinese holding T-whatever securities? Why would anyone value any paper except toilet paper? I must be drunk, again…

  • The Real SMC

    I can’t see the suppression ending. Why not? Because it would indicate a total failure of a key bulwark of our actual economic system.

    My reasoning is based on my opinion that the whole thing runs on an inordinate amount of confidence – confidence that is bolstered in no small or insignificant part by low gold and silver prices.

    Rocketing gold and silver prices would profoundly shock the market – I just think that somebody would really have to drop the ball in a seriously unprecedented way to let that happen. Low Gold and Silver prices are two vital keystones of the spurious economy edifice (SEE).

    Anyone wanna swap some silver for this 2c opinion of mine?

  • Con Man Job

    Capitalist economic system has no more relevant, no more logic.
    Basically, we need healthy growth which is obtained through perfect competition.
    Are there perfect competition now? A politician may siphon a large public sum to wipe out his business rival. Or, a gambling license be issued, whereby huge sum can be produced to keep one’s business running and eliminate all genuine
    competitors. Where do you need perfect competition now? Without fundamental perfect competition, I don’t see capitalist economic is heading anyway. This can only be described as casino economic, mafia economic or the former Sicilian style.

  • http://www.taoeconomics.com Silver Affiliate

    If mining companies were smart they would hold off on selling what they produce untill all of this fraud is exposed so they can actaully get a fair price.

  • INFMAIOF

    One of my neighbors just told me I was wrong b/c Paulsen and Bernanke were the men that saved the world from within hours of collapse.

    Who knew?

    Oh my, I’m out of TP. Oh, nm… I have some Federal Reserve Notes.

  • benb

    So how long before the metal supressionists lose their grip?

  • Lost & Found

    Silver Affiliate, that would be a con job, too. And it wouldn’t be a fair price but a fixed one.

  • always right

    I bet with Obama’s new regulatory reform package being rushed into 1300 pages of law as we ponder, there will be a blip in data concerning silver and the GOVERNMENT will take over where JP and Co. left off and probably push the ping pong ball even further …while rapidly depreciating our currency to establish a 1 world currency headed up by the IMF, who will then issue a cashless supercurrency that holds the balls down from that point on… Don’t be surprised if you see rapid fluctuations in price while the slight of hand is being introduced…

  • HA65MPH

    MOGAMBO , ..I LOVE YOU – YOUR WIT-WISDOM , TAKES MY BREATH AWAY !. XOXOXO

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