JP Morgan Silver Manipulation (And why you need to know why silver is headed up beyond $500/oz.)
by Jason Hommel
Silver Price – Allow me to bring you up to date on what you need to know about JP Morgan’s manipulation of the silver market.
It is being exposed, and JP Morgan is failing, and losing money on their scheme.
On April 5th, we were given the gift of JP Morgan’s Blythe Masters giving a TV interview on CNBC where she was trying to claim that JP Morgan does not hold any position in the silver market, but rather, is hedging client long positions in silver.
Blythe says, “We store significant amounts of commodities, for instance silver, on behalf of customers. We operate vaults in New York City, in Singapore and in London. Often when customers have that metal stored in our facilities they hedge it on a forward basis through JPMorgan, which in turn hedges in the commodities market,” she said.
“If you see only the hedges and our activity in the futures market but you aren’t aware of the underlying client position that we’re hedging, then it would suggest inaccurately that we’re running a large directional position,” she added. “In fact that’s not the case at all. We have offsetting positions. We have no stake in whether prices rise or decline.”
The article and TV interview are here:
JP Morgan Not Speculating on Commodities: Blythe Masters
Note the phrase: “the underlying client position that we’re hedging.”
Excuse me, my instinct tells me that clients don’t want their long silver positions hedged, or sold short. Why would a client with a long silver position want the bank to create an offsetting short position for the client? If you buy stock or shares in a company, do you want your brokerage firm to short the company you just bought to “protect” you from upside gains? This explanation makes no sense. A client with such a long and short position would also have to pay storage fees on the long silver position, and then lose all of any upside gains due to the short position. It makes no sense, in the way that Blythe is trying to get us to understand the words she is using.
How much will this be worth next year?
As I understand things, JP Morgan (and many other banks, but mostly JP Morgan) has many clients who want to be long silver, in the OTC or “Over The Counter” market and LBMA market, up to perhaps $100 billion to $200 billion worth of “silver” in “accounts”. But JP Morgan (and other western banks) never went out and bought this silver in the first place, because there does not exist $100 billion to $200 billion worth of silver to buy in a world that produces and mines only about $6 billion (at $10/oz.) to $21 billion (at $30/oz) worth of silver per year. This puts JP Morgan (and other banks) in a natural short position, as they owe their clients 10-20 times more silver than the world produces annually. JP Morgan thus has this massive natural silver short exposure. To protect the bank from the silver short position, JP Morgan must cap silver prices, by shorting silver on the COMEX, where prices are set. Otherwise, as silver prices rise, the bank loses more and more on the silver they are supposedly holding for their clients. Only in that sense, does JP Morgan have “offsetting positions”; in other words, shorts on COMEX to back up or shore up JP Morgan’s other losing short positions (client long positions)!
JP Morgan cannot offset such OTC positions in the OTC market. Except, in the sense I just explained, every single additional “sale” of silver in the OTC market protects and hedges every other sale, as all sales of “silver” in “accounts” to customers have the cumulative effect of preventing people from buying and taking delivery of real physical silver which would drive the silver price up.
The key reason why the London LBMA and OTC silver selling is so successful is that nobody ever asks for delivery of the silver, because there is a 20% tax on silver delivery in London.
See here: http://en.wikipedia.org/wiki/Silver_as_an_investment#Taxation
There were two good commentaries on JP Morgan’s Blythe Masters TV appearance, here:
The Russia Today TV show is 27 minutes long, and begins with Jeff Christians shocking admission at the CFTC hearings that the silver market trades 100 times as much silver as really exists to back up all the positions and trades.
JPM’s TV Appearance
JP Morgan first admitted having (or trying or wanting to cover) a short position in silver back in December 2010, about a year and 5 months ago. This was reported by the Financial times, and by Barron’s, and others.
JP Morgan cuts back on US silver futures (Available only by subscription)
Report: JP Morgan Cutting Back Big Bets Against Silver
What’s excellent today is the comparison of today’s explanation to JP Morgan’s lie from a year and 5 months ago. Back then, JP Morgan was trying to claim they were closing out, or had closed out, their short positions in silver. Today, a year and 5 months later, they supposedly have this rational excuse that their firm’s short positions in silver exist to offset other client long positions. Both explanations are lies, obviously. What I like about the lie of “offsetting client long positions” is that it is a lie disguised by the truth. The truth is that they do have client long positions that would likely bankrupt the bank if they filled those positions and tried to buy silver that does not exist, and to hedge that exposure, they must manipulate the silver market’s prices lower. Thus, the current lie is sort of like an admission of the truth, but they are being very deceptive and tricky about how they present it. The best kind of lie is simply a distorted version of the truth, of course.
The New York Post exposed JP Morgan’s manipulation of the silver market back in May, 2010, when they exposed an ongoing investigation by the CFTC AND the US Department of Justice into JP Morgan’s silver trading.
Feds probing JP Morgan trades in silver pit
My readers told me they wrote to the US Department of Justice about silver manipulation, without mentioning any company names, and the US Department of Justice sent back form letters saying they were looking into JP Morgan’s activities in silver, mentioning JP Morgan by name!
So, what about my claim of the size of those OTC silver positions being in the range of $100 billion to $200 billion, which are far larger than the silver that trades on the COMEX?
Well, those are not my claims, but rather, those are numbers produced by the BIS, the Bank of International Settlements.
The discrepancy or change in the BIS data from $203 Billion of “Other Precious Metals” (in other words, silver) down to $93 billion is still being reported at the BIS website.
From the 2010, June report: $203 billion for the June, 2009 period.
From the 2010, December report: $93 billion for the June, 2009 period.
See Table 22a, Amounts outstanding of OTC equity-linked and commodity derivatives, in the category of “Other Precious Metals”. Scroll down about 90% into the pdf documents.
This BIS data is the smoking gun of manipulation in the silver market.
There is no way that the big banks can increase OTC shorts by $100 billion in silver in 6 months, when the world barely produces $15 billion of silver per year, without the silver price going bananas to the upside, unless this kind of silver derivatives exposure is silver that is owed to clients, which is essentially a naked short position, or silver that was “bought” by the customers, but never purchased by the banks in the open market, purposefully and maliciously and with the specific intent to prevent the silver price from running away to the upside, and to keep the fraud of the paper dollar going as long as possible. This is really revealing the fraud of the multi trillion dollar paper money scam that the world has going.
There is no reason to disbelieve the BIS numbers when the banks accidentally reveal data that condemns them, and exposes the silver short selling fraud; and every reason to suspect bad faith and nefarious intent when they later edit the data at a key time, Dec. 2010, when JP Morgan is being investigated by two arms of the US Government.
JP Morgan first took on this silver short position when silver was about $20/oz. Later, the silver price was manipulated down to $9/oz. Today, with silver at about $32, we can see that the manipulation game is failing. All frauds eventually fail completely. This one will, too. In the end, holding silver in accounts with large banks will not help you. You need real silver in your own real vault that you have personally lifted and stored away. Any other kind of silver that others hold for you is likely fraud, and will not protect you in the event of the collapse of the dollar or the collapse of the financial system or the collapse of your brokerage company.
By the time this fraud is exposed fully, and by the time a mere 1% of people or money in America starts buying silver, such as only about $180 billion in the banking system, the silver price will exceed $500/oz. and large firms such as JP Morgan will either be bankrupt, or they will be bailed out to the tune of trillions to keep the financial system together, which will create further inflation that will drive 2% of people into silver, and create the very runaway metals market that will just not stop until all paper money and paper accounts are destroyed for generations.
I strongly advise you to take possession of real gold and silver, at anywhere near today’s prices, while you still can. The fundamentals indicate rising prices for decades to come, and a major price spike in silver can happen at any time.