On manipulation

Martin Armstrong (in the essay below):

GOLD is the hedge against government as we are seeing now – not inflation … [Gold] runs in bursts of energy because it is the alternative to official MONEY when the full faith and trust in government is lacking.

I take it the ignoble laureate hack Paul Krugman doesn't read Armstrong. In his latest NYT blog, he approvingly quotes a fellow dunce, who, satisfied that the price of gold hasn't correlated with inflation for the last fifteen years, smugly concludes "I don't see any reason to care about the price of gold," and goes on to pin the blame on … advertising to conservatives. Krugman, objecting that his fellow dunce has not gone quite far enough, takes him one step further, singling out the one man responsible for the 10-year secular bull market in gold … go on, guess ... yup, Glen Beck. Alright then, nothing to see here, please disperse.

The irony is, even if Krugman and his fellow dunce were correct to blame gullible conservatives for the increase in the price of gold, their conclusion ("I don't see any reason to care about the price of gold") still wouldn't follow. Let me explain why.

I got a few tubes of Franklin half dollars today

This coin is almost all silver - essentially a smaller silver eagle. As an aside, you can't handle a coin like this -- just fifty years old -- drop it and hear the sweet silver ping, then hold one of these:

and not feel like you are being treated like a child:

Now, when the government replaces the left coin with the right coin:

they are in effect saying that they have the integrity of silver. Thus, the desirability of real silver (and hence its price) rises in proportion to the believability of such claim.

If the government is seen as lacking integrity, the price of precious metals will go up.

But, the arrow points both ways. It's all about perception, such that rising precious metals prices ipso facto call into question the integrity of the government. Even if prices rise for utterly stupid reasons (because of Glen Beck, or because of Wynter Benton, or because of momentum traders) it really doesn't matter.

Hopefully now it becomes clear why the government must do anything within its power to prevent gold and silver from getting disorderly to the upside.

an effect can become a cause, reinforcing the original cause and producing the same effect in an intensified form


GM Jenkins said...

Great interview of David Morgan by Christ Martenson. It's long, and Morgan is a but verbose, but worth it IMO. He explains why he's sure manipulation occurs, how it occurs, and why the May collapse was orchestrated.

The plausibility of a "conspiracy theory" is a simple function of means and motive.

My post above pertains to motive: the moment the feddle gubmint replaced gold with vapor, gold becomes a measure of its integrity.Its motive to keep gold down isn't simply strong, it's fundamentally necessary. Morgan provides a good account of various means at their disposal, though I've heard better accounts. Morgan is, as he says himself, "in the middle" of GATA and Jeffrey Christian of CPM.

GM Jenkins said...


Warren James said...

Nice link GM, that's a good read (have added it to the 'interesting stuff' link on the right). I like what he says that the trend cannot be manipulated - that makes good sense and confirms a few other independent views on the silver market, i.e. that manipulation can be seen to be both present and absent at the same time. Works for me. Options expiry date game is a good example of this.

Warren James said...

I should just add that I don't endorse David Morgan's comments on the alleged multiple ownership of the bars in SLV. In time we will get closer to the truth. BTW, the SLV bar list appears to be changing every couple of days now - not weekly. We are capturing this because we are now downloading the list daily. But it gives more data to process which is a headache and I'm still playing catchup. ;0

Louis Cypher said...

Hey Warren,
Can you clarify. Are you saying the bars are changing hands more rapidly (implying volatility) or or the data is more precise now because of daily sampling?

Anonymous said...


I am surprised David Morgan has changed sides and now also screams manipulation. Is there any chance you can use your bar list data in order to confirm or refute that claim?

I always thought the most elegant way of producing fake supply of physical silver (or gold) would be to allocate the same bar several times. If an investor wants to check whether the bar exists, voila, no problem, just go to the vault and see for yourself. Only when they all try to take the bars out of the vault will they notice they have been framed.

You just need to make sure the same bar does not appear on the lists of two different ETFs - that could be spotted.

If you wanted to detect the scam, you would need a large public database against which all private investors can check uniqueness of their bars. And you would need a substantial participation rate in order to detect it.


Warren James said...

@Louis - What used to be a weekly PDF is now a fully automated report which can be triggered whenever they want to create a new issue. In June I started downloading daily to try and catch any changes. So far this month alone we have a new 'version' published on July 1st, 4th, 5th, 6th, 7th, 8th, 11th, 14th, 15th, 18th, 19th, 20th. Each bar list is different in terms of quantity of bars. I have ZERO idea about the significance of that - it's just data but the goal is to simply record and catalogue it all then open it for analysis. We are going to make the archive of PDF's also publicly accessible so that everyone can independently verify.

@Victor - yes, we hope to ultimately address the 'multiple claims on the same bar' idea with pure data analysis, because I think it's a faulty claim and that silver investors are being misled by that particular meme being perpetrated. My analysis data will be public for all to verify. Part of what I am doing is creating an audit trail for all the data analysis, and this is painstaking.

You would be correct that the easiest concept for introducing fake silver/gold inventory is to simply 'sell' the bar out to more than one entity, but it turns out that in practice this goes completely against the business model of any major ETF, and it makes perfect sense once you follow it all the way through. I took a trip to Perth to speak with Bron Suchecki in person on the matter and I have a lot of good info which I am still in the process of compiling.

The best way of introducing fake inventory would be to fabricate entire production runs - but the problem there is that you must ensure those bars are never candidates for delivery (even if they are made from Moly) because once that occurs then the game is over. To do this consistently would be a logistical nightmare, but even so we should be able to isolate any fake production runs simply through data analysis and a bit of bayesian probability. What is more the fingerprint for fraud will be present in the HISTORICAL data which means regardless of what they do, we'll still find it ... IF IT EXISTS. But either way I won't draw any major conclusions until I've checked the data several times over.

@ everyone: I'm aware that I'm sitting on a lot of good material @ the minute - I promise I'll make it worth your while with an article soon. The key here of course is that if they really do have all the silver they claim then the market ain't really as tight as it's made out, and perhaps it's all just a bit exaggerated.

Cheers & beers,

Warren James said...

And just to add - I am personally still looking for the model of the silver market which explains how EVERYONE IS RIGHT, from their perspective. i.e. Turd, Butler, Maguire, Sprott, Armstrong, Kid Dynamite, SGS, Brian O'Flanagan (p.s. Brian what happened to your website?)

Louis Cypher said...

Thanks Warren, I wonder why they changed it up?

Off subject but worth mentioning. I was talking to an independent mortgage auditor at Bank of America on Saturday and I was picking his brain for all it was worth and he said some curious things.
One of the things he mentioned is their mortgage dept is completely and utterly screwed because they cannot reconcile billing and payments on their current mortgages. The biggest problem they have is they have to go back years reapplying payments received as they were only applying to interest and not principle in some cases. The practice is obviously illegal. Also, when people were making extra payments to be applied directly to their mortgage principle they were applying that full amount to interest in some cases. It was all haphazard and inconsistent. In other words it didn't happen to one customer consistently. The govt regulators are breathing down their necks to get this mess straightened out. So it looks like BOA have even more problems to deal with than previously thought and anyone with a BOA mortgage really needs to look closely at their statements and call them out if there are discrepancies.

Warren James said...

@Louis - I may have waffled a bit on your original question. The additional SLV publications does help increase the resolution on the SLV data for us (a good thing). But I think the new publishing frequency is simply because their new process allows them to do it. It certainly brings them closer to the other funds which publish on a daily basis - specifically the ones we are now tracking e.g. GLD, BullionVault and ETF Securities).

That's an interesting story about the mortgage accounting department - it makes sense of the stories we are hearing regarding mortgage defaults and squatters. Here in Australia the big banks have their accounting act together pretty well and everything is well documented.