HSBC and J.P. Morgan Face Lawsuits for Precious Metals Manipulations
By Staff News & Analysis - November 01, 2010

Could this be it? … Two guys on our Christmas card list this year will be Ted Butler and Bill Murphy. Butler has been chasing the silver manipulation story since 1990; Murphy's Gold Anti-Trust Action Committee (GATA) has been chasing the gold side of the manipulation story for just about as long. It only took two decades, guys, but finally a regulator returned a phone call. Last week, CFTC Commissioner Bart Chilton described "repeated" and "fraudulent efforts to persuade and deviously control" silver prices, according to the Wall Street Journal. "I believe that there have been repeated attempts to influence prices in the silver markets," Chilton, a Bush appointee reappointed by Obama, said. – The Wallace Street Journal

Dominant Social Theme: Don't look at the man behind the drawn curtain. There. The one looking miserable. He's just been served …

Free-Market Analysis: Hard-money writer David Bond has composed a short but cogent update (excerpted above) that spells out what could be going on with the gold and silver markets now and in the near future. It's his impression (and the impression of some Bell feedbackers, as we noticed yesterday) that the metals markets have arrived at an imminent turning point. The CFTC itself is beginning to acknowledge that there has been significant manipulations of the metals markets and several lawsuits have now been filed. Here's more from the article:

Two traders, in separate lawsuits, alleged that HSBC and J.P. Morgan-Chase were the culprits. According to Forbes, quoting Murphy, who was citing CFTC reports, the two banksters together controlled 43 percent of the net short commercial position in gold and a staggering 68 percent of the short interest in silver last November. It's difficult not to infer a conspiracy here.

One of the traders filing suit alleges that the banksters colluded on the silver futures market and let each other know about large trades, placing "spoof" trading orders in order to suppress the price. At this point these are allegations, but they should be taken seriously, considering their sources. Murphy and Butler were ridiculed for two decades for figuring out what, finally, regulators are waking up to: Something is rotten in Denmark.

More important even than the attention of regulators is that now the Wall Street media can no longer ignore the story. Quipped Murphy: "We've been quoted in Forbes. What's next? Field and Stream?" You won't hear about Chilton or the traders' lawsuits on CNBC or Bloomberg, just yet, but the fuse has been lit. This is a story that's just become too big to be busted …

The last week of October, 2010, may well be the watershed event for precious metals, and for the U.S. Federal Reserve Dollar. Should the short-side manipulation of silver and gold ever become understood by Joe Sixpack, the Fednote is toast and there will be no upside limit to genuine, precious metal money.

Bond is too careful a journalist to draw definitive conclusions, though, at the same time, he is pointing out a potential market event. He is correct to do so, though Bond knows – as do we all – that timing a market is good bit more difficult than predicting a trend. Here at the Bell, we have never much doubted a massive conspiracy to keep down the price of gold and silver. Central bankers in testimony have regulated admitted as much when it comes to gold, though the suppression has always been cast in the language of monetary adjustment, which makes it sound like policy rather than crookery. But lately the entire scheme has been unraveling. We carried a recent article about it, which you can read here: Retiring CFTC Judge: We Covered Up Market Manipulation.

As the gold and silver manipulations unwind – and sooner or later they probably will as legal pressure is brought on the actors – then it will be interesting to see what happens next. This is because the manipulations have gone on for decades, probably with increasing urgency since the 1970s anyway. That means that anyone who has ever purchased gold and silver in the past 40-50 years has essentially been defrauded. That's a lot of people and a lot of precious metals.

We have pointed this out before in several articles. If the conspiracy is actually exposed, even if only partially, the potential for litigation is substantial. Of course we are sure there would be efforts to create a class-action lawsuit to settle damages and to make them tolerable for the system as a whole. But gold and silver bugs are a stubborn lot. Even a large, corporate law firm from, say, New York, might have trouble generating a class-action law suit. If the exposure and resultant litigation cannot be controlled, the entire mess that is the West's current and rapidly eroding fiat-money system might simply collapse. We're not making a prediction, merely pointing out a possibility.

On the other hand, we have noticed when it comes to power elite promotions that investigations tend to move slowly and all but the most serious fiat-money catastrophes tend to be in some sense averted. What does happen over time is that the system erodes as people simply lose faith in it and logic divorces from emotion. But because the elite essentially CONTROLS the system – all parts of it from the judiciary to the legislative and even the executive, both in the US and Europe, the ability to challenge elite sociopolitical and economics structures is always constrained.

As a result, we are not sure of how fast the unraveling happens. We believe it could take another five years to complete this cycle, although we also believe 2011 will be a particularly "shaky year." Of course we have been careful to point out that five-year timeline could be short-circuited by the elite itself deciding to move to some other sort of monetary system (presumably metals based). There are all sorts of considerations: Metals confiscation is a possibility; but so is the possibility that the elite will simply lose control of the monetary economy, which will then erode into some sort of private gold and silver standard along with, hopefully, free banking. We have no doubt the sovereign money crowd will have their say as well.

The elite's promotional campaigns have been less and less viable of late – surprisingly and even shockingly so. On the other hand, the stubbornness of the Anglo-American elite and its determination to move forward with all sorts of plans for global consolidation has surprised us as well. We believed that once the promotional elements of the elite's strategy were exposed, the thrust toward global governance would likewise begin to erode. That doesn't seem to have happened yet.

Presumably this is because the one thing the elite continues to control whether or not its promotions are working, is government itself and the levers of power on all levels in both the US and Europe. As we pointed out in the other staff report in today's issue, what the powers-that-be are doing currently does not make much sense. They seem convinced, this intergenerational, familial elite, that if they can only put the correct legislative instruments into place that this will give them the authority to govern globally – which is apparently their goal.

After Thoughts

From our point of view this does not make much sense. The economic crisis and the truth-telling of the Internet has seemingly shattered their franchise, which depended on secrecy. Insanity, in our view, is doing the same thing over and over when it is obviously not working – especially when the curtain has been lifted! From our point of view, there will likely be massive changes in Western societies over the next decade, but it may well not be those that the elite planned. The question – and it is important one for investors and citizens of the West alike – is not so much at this point whether big changes will occur but when. And how high will money metals go in the meantime. Our bet is a lot.

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