Central Banks Could Lose Control of Fiat Money Creation

I sincerely hope all of our readers had a wonderful Thanksgiving.  Andy and I did.  In fact, it may have been the nicest one ever.  Our whole family met at my daughter Betsy’s home.  We always do on Thanksgiving.  It was a warm and loving gathering.  And the food was GREAT.  We do have so much to be thankful for in America.  I know, I tend to highlight the problems and inequalities, but at the end of the day, there is no place I would rather be!

Why did gold and silver get hammered during the low volume trading hours leading up to Thanksgiving?  My friend, Trader David R, who is a professional trader with a view from the inside says, “The commodity funds sold gold and silver to raise capital to meet their massive margin calls on underwater positions in commodities – especially oil and copper.“

Here is Ted Butler’s take on JPMorgan – and Trader David R’s interesting comments and very different take on things…

It does remain to be seen if JPMorgan and/or the other eight largest COMEX shorts will add new short positions aggressively on the next silver price rally, but if that occurs at least we should be able to see it in future reports. Highlighting the importance of JPMorgan’s involvement in any future silver short selling, without JPM joining in, I doubt the big eight would succeed in capping prices as they have on every past occasion. And considering the swirl of negative news surrounding big banks influencing commodity prices, it’s hard for me to imagine JPMorgan not beating it out of Dodge City and quitting their manipulative control of silver to the downside. If JPMorgan (or the big eight) do cap silver prices ahead, I promise not to be anywhere near as polite as I’ve been to these crooks until now.

Aside from the radical transformation of JPMorgan from being the world’s largest silver short to possibly the largest long in history, the recent double cross of the raptors (the smaller commercials who were net long) is remarkable in its own right. The forced sale of more than 12,000 net contracts by around 8 to 10 raptors over the past few weeks has probably knocked those traders out of silver permanently considering the estimated size of their losses (over $200 million). There is no doubt these 12,000 contracts would have been sold on the next silver rally and now that is impossible. Mathematically, this greatly increases the burden on the 8 big shorts if they intend to cap the next silver rally. These 8 big shorts, with or without the collusive cooperation of JPMorgan, will have to sell many more contracts short than they would have had the raptors not been double crossed.

I admit that my reasoning could turn out to be wrong, but I believe the increased short selling burden of the Big 8 will persuade them not to even try, or alternatively, if they do try, they may fail in their manipulative intent.

-Butler Research, November 29, 2014

Trader David R disagrees with Ted Butler.  He says…

“Don’t blame JPM.  There are no traders left at JPM, so I have no clue how they could be long or short.  Most banks are just pushing through business.  Nobody takes any risk anymore, as the Dodd Frank Legislation has eliminated this.  So this is complete BS!  Unless they are holding for ETFs or Algo funds.  JPM doesn’t trade anymore.” 

“Deutsche Bank is leaving the physical business now as well as all the vaulting business.  Everything metals is going to be a ghost town soon, all run by ETFs and Algo’s.  Liquidity is awful these days and that’s why we’re getting bigger trading ranges.  There’s not much metal out there since the bullion banks are all gone.”

For those of you who wonder, “Who in the heck is Trader David R?”  In the 90s, David worked as a gold trader for several of the largest banks in Johannesburg, and then moved on to a key position with Barkleys in London heading up their gold desk.  Next, he came to New York and headed up the commodities trading department at one of the most successful privately funded hedge funds in NYC.  That’s where I met David in the mid 2000s.  He was in charge of dozens of the top commodities traders in Manhattan. They were paid on performance and it was one of the most sought after jobs in the industry.  He is friends with and personally knows many of the (former) traders at JPMorgan.  When he says they are not in the business anymore, and JPMorgan only trades their client’s accounts, I have no reason to disbelieve him.  He has no horse in the race and has no reason to mislead anyone on this issue.  That said, I will continue to publish Ted Butler’s comments.  Many of our readers love to hear his analysis and I find it interesting as well.   As usual, you can – and should think for yourself and make up your own mind on this issue.

I have posted David R’s comments in the past and he did warn that after Dodd Frank, the big banks would leave the business and liquidity would dry up and the price swings would become large and erratic.  He has been correct in his predictions.

He also is very bullish on gold – and says as long as our money supply continues to increase, which seems inevitable, gold will continue to rise.  Be patient.  The gold bull market will resume.

I thought I’d check on what one of my favorite “Old Timers” had to say about today’s gold action.  Richard Russell (Dow Theory Letters) says one final wipeout and then the bull market resumes.  He wrote, “As I write, gold is selling at 1166.8. With gold under 1200 it appears that gold is heading for a final wipeout. I think this will clear the deck of the last hold-outs and complete a base for a resumption of gold’s bull market next year.”

Late breaking news:

Swiss Voters Reject Measure Forcing SNB to Acquire More Gold – www.bloomberg.com

By Catherine Bosley Nov 30, 2014 5:59 PM CT

Swiss voters rejected a referendum requiring their central bank to hold a portion of its assets in gold, a measure its President Thomas Jordan termed an “invitation to speculators” that could have hamstrung the economy.

The “Save Our Swiss Gold” proposal stipulating the Swiss National Bank hold at least 20 percent of its 520-billion-franc ($540 billion) balance sheet in gold and never sell any bullion was voted down by 77 percent to 23 percent, the government said. Polls had forecast the initiative’s rejection. Two other initiatives on tax privileges for foreign millionaires and immigration limits also were rejected.

SNB policy makers warned repeatedly that the measure, which also required the 30 percent of central bank gold stored in Canada and the U.K. to be repatriated, would have made it harder to keep prices stable and shield the central bank’s cap on the franc of 1.20 per euro. That minimum exchange rate was set three years ago, with the SNB pledging to buy foreign currency in unlimited amounts to defend it.

“The key word is relief, but it’s not a reason to crack the champagne corks yet,” said Janwillem Acket, chief economist at Julius Baer Group Ltd. in Zurich. Due to the rejection, “the SNB has more options and fewer constraints on monetary policy,” he said.

This is the result we expected.

The SGI decision came after a massive mainstream media campaign to persuade the Swiss voters to reject the Swiss Gold Initiative, which they have duly done. They even had Jordan, SNB President, preaching from a pulpit in Uster last Sunday saying the SGI is dangerous!

This demonstrates just how frightened the central banks are that they could lose control of their monopoly of fiat money creation.  Central banks HATE gold.  It was in full view in Switzerland and should once and for all put to end the position that the central banks have little interest in gold and do not intervene to hold down the price.Similar Posts:

• The ECB (And Many Others) vs. The SNB
• He Doth Protest Too Much – The “Best” Of Thomas Jordan
• Decision of a Lifetime