In Ted Butler's Archive


Bear Stearns failed when silver hit $21 in March 2008. Gold hit an all-time high of $1000, and the combined loss to Bear Stearns from its silver and gold shorts was $1 billion. I believe Bear Stearns went belly-up because of the losses from its big gold and silver short positions. If you hold the largest concentrated short positions and prices surge to historic highs, you should expect to go out of business.

About nine months after JPMorgan took over the concentrated short positions from Bear Stearns, they succeeded in rigging silver prices to under $9, one of the most effective manipulations in history. This was the basis for numerous civil class-action lawsuits against JPMorgan. Silver came back, although JPMorgan kept the price under $21 until the fall of 2010.

Once silver broke the $21 mark in late 2010, it quickly raced to $49 amid clear signs of a developing physical shortage. In other words, JPMorgan was unsuccessful in containing the price until May 1, 2011. Then, working in tandem with JPM’s criminal partners at the CME, a series of historic price smashes put JPMorgan back in control.

My point is that while JPMorgan has been manipulating silver prices since March 2008, there are times when the bank has lost control. Assuming the silver manipulation is maintained by JPMorgan a price run to the old highs and beyond cannot be ruled out. If we continue to get giant price rallies, does it matter if the manipulation remains in force?

Fortunately, there are changes afoot that promise to end the silver manipulation. Two recent articles in the NY Times indicate that JPMorgan’s reputation is souring. On Sunday, a front page feature alleged that JPMorgan had hoarded and stockpiled ethanol tax credits amid a giant run up in price.

There is a continuing pattern by JPMorgan (and other large banks) to game the system by coming to dominate and control the markets it touches. And always with the same result – JPMorgan profits and everyone else loses. For this reason it should not be allowed to trade gold and silver. Nor should JPMorgan be allowed to hold a market corner in gold futures as it does now.

Another article in the Times dealt with the expected settlement by JPMorgan for the London Whale fiasco. Most observers are numb to the staggering $920 million settlement.

The article included the following: “The Commodity Futures Trading Commission, the regulator overseeing the market in which the losses occurred, has balked at joining the broader settlement and plans to fine the bank later this year, the people briefed on the matter said. The agency split from fellow regulators as its investigation went in a different direction. Unlike the S.E.C., the trading commission has examined whether JPMorgan amassed a position so large that it ‘manipulated’ the market for financial contracts known as derivatives.”

Hello? Is this not the central issue I write about – JPMorgan holding such large positions in COMEX gold and silver that it automatically manipulates the price? While I am cheered that the CFTC appears to see it in credit default swaps, it makes it all the more unusual that the agency refuses to see the same issue in COMEX silver and gold.

I know that there must be some prior agreement because of the Bear Stearns takeover that has kept the CFTC from clamping down on JPMorgan in silver and gold. However, enough time has passed (more than five and a half years) that the individuals from the US Government who made the arrangement are no longer in office (or will soon depart). That means current key members of the CFTC were not party to the original arrangement with JPM. Why they would continue to allow JPMorgan to manipulate gold and silver prices and risk personal liability is a mystery.

How do you explain the complete silence on the part of JPMorgan, the CME and the CFTC to what is a widespread awareness of the manipulation? It’s important to appreciate how unprecedented is this silence. There has never been a case, to my knowledge, where major financial institutions, like JPMorgan and the CME Group, have not addressed public accusations of criminal market behavior. How more serious can an accusation be to a financial institution than to be accused of market manipulation? I remember stories of corporations accused of wrongdoing by anonymous posters on blog sites, seeking out the identity of those posters and forcing them to retract and cease negative comments. That’s certainly not the case with JPMorgan or the CME.

JPMorgan has made $6 billion in COMEX gold and silver over the years. CFTC data indicate that JPMorgan made more than $3 billion in the downward price manipulation of COMEX gold and silver this year alone.

Over the past five years the sudden price sell-offs in silver defy legitimate explanation. It is not possible for a world commodity to fall 30% or 35% or even 10% in a matter of days with no economic explanation. Couple that with the clear evidence from COT data that all price drops benefit JPMorgan the most. Not only is the bizarre silver price pattern explained by JPMorgan’s actions, but there are no alternative legitimate explanations that come close to making sense.

The downdraft in gold and silver prior to the Fed’s QE decision was nothing more than JPMorgan rigging prices lower to buy as many contracts as possible. Whether they are forced to stop rigging the market or not the price of silver is going dramatically higher. In fact, the long term considerations for silver have never looked brighter.

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