MF Global And The Truth About Our Entire System

MF Global would not have been able to do what they did without Corzine's close relationship with CFTC Chairman Gary Gensler (see this:  LINK) - Dave in Denver

My thoughts for this blog just sort of flowed from a back and forth exchange I had earlier with long-time market colleague and GATA Chairman Bill Murphy, aka "Midas" of http://www.lemetropolecafe.com/  We had been discussing why the metals sold off today despite the fact that it's becoming more obvious by the day that both the Fed and the ECB will have to print a lot more money OR be willing to accept the consequences of system collapse.

With regard to the market in gold and silver, I said that when I woke up and saw gold down with no real news I assumed it was what Jesse says it is ("Jesse" of http://www.jessescrossroadscafe.blogspot.com/):  It's become crystal clear that the Government has absolutely no intention whatsoever to stop the illegal manipulation of the metals market. The best thing to do is keep accumulating physical on these dips and be careful with margin.

Bill pointed out that the action in the shares on Friday - unexplainably lower - forecast today's action in the metals, as the big bank manipulators - left unregulated by the regulators - usually hit the mining shares before they try to raid the metals.  I agreed with that for the most part except that the hit on silver didn't work on Friday. It's true the hit on the shares forecast this but the reason for it is to try and reduce the amount of actual Comex gold and silver deliveries they have to make, especially if the receivers (stoppers) ask for the metal to be delivered off the Comex. I think there's a real inventory stress building on the Comex. I think the advent and growth of SLV and GLD alleviated this for a few years but now more investors are understanding the difference between ETFs and real metal and the risks of leaving your metal with a questionable custodian. Just the movement of the reported inventory of metal at the Comex over the past couple of weeks tells us something unusual is going on.

And don't underestimate the stress that the Venezuela move has put on the physical market  (Venezuela President Hugo Chavez has recalled 200 tonnes of gold being stored in England, Switzerland and New York and had it shipped back to Venezuela out of justified distrust of the custodians in those countries). Chavez is no dummy. He didn't do that to try and squeeze the market, he did that because he wants to make sure Venezuela has its gold and there's no risk of an MF-type event at the big bullion custodians like HSBC and JP Morgan. Which brings me to one more point, even though the MF thing will probably be minimized by the media and the perps will walk relatively unpunished, there is no doubt in my mind that it's "raising the eyebrows" of smart, wealthy investors all over the world. This will be a problem for the fractional bullion custodians if I'm right.

Furthermore, for what it's worth, my partner and I think most of the risk of big hits on the metals has been washed out. We think we will see a significant move to the upside over the next 3-6 months and have started positioning our portfolio accordingly. There's no doubt in my mind they are working like hell to contain the risk of a possible run on Comex metal. Again, we should not be underestimating the trust/confidence factor that has been introduced by the MF situation. You would have to be absolutely brain-dead to believe that this can't happen at one of the big Too-Big-To-Fail banks.
Regarding my above-statement about MF, hilariously the CTFC today passed "tougher" regulations with regard to commodity and futures brokers abilities to use customer funds.  Interestingly:  

The Commodity Futures Trading Commission, which voted unanimously to approve the rule, originally planned to finalize it months ago. But the agency delayed the overhaul amid fierce push-back from Jon S. Corzine, who at the time was the chief executive of MF Global.   LINK

It's been my contention all along that MF Global would unequivocally have NOT been able to embezzle customer funds the way they did if it were not for the tight relationship between Jon Corzine and CFTC Chairman Gary Gensler.  In fact, I strongly believe that Gensler should be forced to resign his position and AG Eric Holder should open an investigation into his link to Corzine.  Anything short of this and you can be assured that the integrity of our system is rapidly collapsing.

The truth of the matter is that as people who are paying attention start to really lose faith in the system - the banking and brokerage industry, traditional wealth safekeeping custodians and the entitie which make money insuring their integrity (clearing agents like the CME), and the Government regulators who are supposed to be enforcing the rules already in place but are more likely in bed with the corrupt operators like Corzine - we will see a massive sweeping of money from of all paper wealth depositories that will be channelled into in the world's oldest currency and the only one that does not have any counter-party risk - gold and silver. 

For those who are wondering how the dollar has "counterparty risk," understand that the dollar is backed by the "full faith and credit of the U.S. Government."  The Government is therefore the counterparty obligated to maintaining the value of the U.S. dollar and guaranteeing its use as a currency.  Given that the dollar has lost 96% of its value since the 1913 establishment of the Fed, I would say that the risk of the U.S. Government as a counterparty to the dollar is substantial.  Eventually the dollar will completely collapse, as have ALL "fiat" currencies in the entire history of human  existence.  In the meantime, those who are in a position to do so are stealing as much wealth from the people in this country as they can - and they are often enjoined in this venture by those in charge of preventing the theft.  Corzine/Gensler is the perfect example and proof that I am right about this.  Got gold?