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JP Morgan And Citi Are Using OTC Derivatives To Manipulate Gold And Silver – Dave Kranzler

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Financial regulators around the world have recognized an immediate and pressing need to address possible regulatory protections in the OTC derivatives market.   – Brooksley Born, 1998 as Chairman of the CFTC – LINK

(Please note:  this scheme too will blow up in their face just like Long Term Capital, Enron, Bear Stearns, Lehman, AIG/Goldman.  The taxpayers will be bailing out the banks – and now we know why Citigroup wrote the legislation that enabled banks to move their OTC derivatives positions to their FDIC insured units – but gold and silver will go parabolic)

TND Guest Contributor:  Dave Kranzler |

Back in the late 1990’s, the then head of the CFTC – Commodities and Futures Trading Commission,  the Government entity which is supposed to oversee futures and derivatives markets (enforce the laws in place to prevent criminal activity in these markets) – Brooksley Born embarked on an effort to impose oversight and regulation on the burgeoning OTC derivatives markets.  We all saw back then the dangers they impose on the system when Long Term Capital imploded and almost took down the global financial system.

I was a junk bond trader back then and vividly remember the entire affair.  In fact, Bankers Trust was the pioneer in OTC derivatives and it also had to pony up the most amount of money to bail out the system from Long Term Capital.  I also had been involved in using OTC high yield derivatives – unregulated – to hide large, risky and illiquid junk bond positions from the Bankers Trust risk management team.  We always did this right before the period in which the bank began calculating bonus pools.  In other words I know first-hand the many ways in which OTC derivatives can be used in corrupt ways to game the system and squeeze enormous profits from the markets.  “Markets” meaning, the people on the other side of your trade.

Of course, Robert Rubin,  Larry Summers and Alan Greenspan put on a full-force lobbying effort to destroy Ms. Born’s effort in Congress and the rest is history.  OTC derivatives are not only financial nuclear weapons of mass destruction, they are right now about the only source of real cash flow for the big banks.

But they are also used to inflict criminal manipulation on the gold and silver markets.  Dr. Paul Craig Roberts and I have written an article outlining the most likely way in the which the big big bullion banks – primarily JP Morgan and Citigroup – are implementing the recent massive spike up in gold and silver OTC derivatives in order to manipulate and suppress the price of gold and silver.   Bear in mind that, thanks the Rubin/Summers/Greenspan triumvirate, we have absolutely no way of knowing exactly how these securities are structured.  And yet – as we’ve seen with Long Term Capital, Enron, Bear Stearns, Lehman, AIG and Goldman – they can catastrophically effect our lives financially.

Are Big Banks Using Derivatives To Suppress Bullion Prices?

Paul Craig Roberts and Dave Kranzler

We have explained on a number of occasions how the Federal Reserves’ agents, the bullion banks (principally JPMorganChase, HSBC, and Scotia) sell uncovered shorts (“naked shorts”) on the Comex (gold futures market) in order to drive down an otherwise rising price of gold. By dumping so many uncovered short contracts into the futures market, an artificial increase in “paper gold” is created, and this increase in supply drives down the price.

This manipulation works, because the hedge funds, the main purchasers of the short contracts, do not intend to take delivery of the gold represented by the contracts, settling instead in cash. This means that the banks who sold the uncovered contracts are never at risk from their inability to cover contracts in gold. At any given time, the amount of gold represented by the paper gold contracts (“open interest’) can exceed the actual amount of physical gold available for delivery, a situation that does not occur in other futures markets.

You can read the rest of this here:   OTC Derivatives Are Used Manipulate Gold And Silver

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About Dave Kranzler:

 I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics.  Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.

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