- Money Morning Australia

Secret Banking Business


Written on 07 December 2010 by Kris Sayce

You’ve read a lot about the banks in Money Morning during the past week. And today is no different. So strap yourself in…

Yesterday we gave you the reply we’d gotten from the Reserve Bank of Australia (RBA). We’d asked them when the RBA had been told about National Australia Bank [ASX: NAB] and Westpac’s [ASX: WBC] secret loans from the US Federal Reserve.

Its spokesman wrote, “The Bank does not comment on commercial institutions’ business dealings or transactions.”

This apparently even extends to when the taxpayer is also underwriting the banks.

Its funny isn’t it. When you apply for a loan with a bank they quite rightly want to know what other loans you have. That way they can supposedly figure out whether you can afford the repayments or not.

Although over the past thirty years we’ll admit, even that is less important than it used to be. Because over that period it was assumed asset prices would always rise and therefore borrowers were given bigger loans – if they defaulted, no problem, just sell the mortgaged asset at a profit… easy.

Yet when it comes to the taxpayer underwriting loans to banks it seems to be a different story. Everything must remain top secret. The RBA “does not comment…” So there.

So while the taxpayer was told about the deposit guarantee and the wholesale funding guarantee – big enough obligations by themselves – the taxpayer was kept in the dark about the USD$53 billion of loans the RBA had taken out with the Fed. Again, backstopped by the Australian taxpayer.

And the taxpayer wasn’t told about the over USD$5 billion of obligations to the US Federal Reserve that two of Australia’s banks had committed themselves and the taxpayer to.

But the RBA isn’t the only regulator to lose its tongue.

We spoke to Andrew McCutcheon, Media and Communications Manager at the Australian Prudential Regulation Authority (APRA). We’d sent APRA the same email that we’d sent the RBA last week.

We wanted something in writing but Andrew preferred a phone call. Hopefully you’ll forgive us, our shorthand isn’t what it used to be. Actually, that’s not saying much, our shorthand has always been bad.

So we’ll just have to paraphrase the response.

Andrew tells us that Section 56 of the Australian Prudential Regulation Authority Act 1998 forbids APRA from revealing any information regarding the institutions it regulates!

What? How does that work? What’s the point of a regulator if everything is top secret?

Although we’re not surprised he won’t tell us. According to the Act there’s a penalty of two years imprisonment for revealing secret information on the banks.

You can check out the full Act by clicking here.

And here’s the best thing, Section 56 comes under Part 6 of the APRA Act. The heading for Part 6 is… of course… Secrecy.

And because it’s top secret, the Act informs you that “A document that: (a) is a protected document; or (b) contains protected information; is an exempt document for the purposes of the section 38 of the Freedom of Information Act 1982.”

As I say, your editor is no legal eagle. Our only legal training was gained from the Matlock School of Lawyering followed by a post-graduate qualification from the Rumpole Academy. But even that limited training tells us that APRA will never reveal the full extent of what it knew and when it knew it about the Aussie bank bailouts from the US Federal Reserve.

So, the last response we’re waiting on is from the Australian Securities Exchange (ASX). But considering we’re yet to see a notice appear against NAB or Westpac’s names we can assume either the ASX already knew about the secret bailouts and aided the banks in keeping it a secret, or it’s going for the old head-in-the-sand routine.

Quite frankly, either explanation is possible.

And don’t think there are any Australian politicians who are keen to expose the bankers. Unfortunately Australia doesn’t have an equivalent of Ron Paul in Federal Parliament. Someone who’s prepared to stick up for sound money.

Instead, you’re more likely to get the kind of response that Money Morning reader Stuart apparently received from Joe Hockey’s office:

“Dear Stuart

“Thank you for your email to Mr Hockey.

“The Australian banks were not bailed out by the US federal reserve [sic], nor was the Reserve Bank of Australia. As NAB is a public company it would have needed to disclose this to the market, and I can assure you that it did not.

“Yours sincerely

“Alistair”

We’ve not idea who “Alistair” is, but he may want to check his facts. As he seems to have got his logic in a muddle. His argument seems to be that because neither NAB nor Westpac disclosed the bailouts to the market then the bailouts didn’t happen.

Even though they did. Because it’s there in black and white on the Federal Reserve website. But no, a public company would have to disclose that information, and because they didn’t, no bailout!

Madness.

Even the mainstream press has pointed out the bailout dollars received by the RBA from the US Federal Reserve.

And even the mainstream press has acknowledged that Australia’s banks would have received some of that cash as emergency loans.

The fact that NAB received USD$4.5 billion of US Federal Reserve bailout money but didn’t report this to the ASX – or if it did the ASX agreed to keep it confidential shows you this cover-up has gone right to the top.

But as the Wikileaks disclosures show you, governments worldwide – including Australia – have plenty they need to cover up.

Politicians, bureaucrats, conservatives and socialists are all labelling the Wikileaks revelations as treasonous or at least criminal.

We take the opposite view. We take the view that the kind of corrupt and inappropriate behaviour revealed in those documents proves how dangerous it is to have glorified town councillors in positions of immense responsibility.

Put it this way, if you tell your American friend to whack your Chinese friend on the nose, who gets hurt? Well, the Chinese fella obviously. And he may not take too kindly to what you asked your American friend to do.

But that’s pretty much the extent of the damage.

But if a glorified town councillor like the Fairy Ruddfather asks his American buddies to bop China, who gets hurt then? Potentially everyone.

A career in politics for most people in our opinion is simply an attempt to gratify a perverse urge to control others. It’s the same urge from town councillor all the way up to Prime Minister.

Anyway, it seems to be the more we dig, the more we’re prevented from digging. Neither APRA nor the RBA have any interest in keeping you informed about the safety of your taxpayer dollars and your savings… we don’t like that.

However, we have seen several comments that suggest NAB and Westpac were simply doing what any bank should do, access funds for a cheap interest rate from the Federal Reserve.

That the banks were simply borrowing cheap money which they could then lend out for a higher rate and pocket the difference.

It’s a nice line. And it could even sound plausible – if it wasn’t complete nonsense.

Let’s not beat around the bush here. NAB and Westpac borrowed from the US Federal Reserve because they had to. And the Reserve Bank of Australia borrowed from the US Federal Reserve because it had to – because it needed to bail out Australian banks.

The idea that NAB and Westpac executives suddenly decided to borrow cheap out of choice is ludicrous. It ignores the entire reason why these emergency loan facilities were made available by the Federal Reserve.

You see, it’s true that banks borrow money all the time. That’s how they work. They borrow money from depositors. They then create ten-times the deposited amount in new money to lend out to borrowers. All the while, the depositor is free to withdraw his or her money on demand.

But we won’t worry about that last aspect today. We’ve covered that before. Banks borrow money for short-term and long-term durations. That means on any given day a bank has to roll-over a loan.

Simply put, if a bank takes out a loan for a 30-day duration then at the end of 30 days the bank needs to repay the loan or it needs to roll it over to a new loan. In normal circumstances, when everyone was happily – and foolishly – lending money left, right and centre, this was pretty easy – out with the old loan, and in with the new.

But then through 2007, 2008 and early 2009, you remember what happened don’t you? The “credit crunch” occurred and lending ground to a halt.

Now, that was a good thing. It should have been the beginning of the end for the current unstable and corrupt banking system. But the central bankers, politicians and mainstream economists thought they knew better.

Instead of acknowledging the dangers of a highly leveraged banking system and allowing it to collapse, they didn’t want that happening on their watch. Hence the bailouts. Bailouts that have only succeeded in postponing the natural consequence of the credit meltdown.

Anyway, can you guess what happened to the banks?

That’s right the banks needed to repay loans but found it hard to borrow the money to pay off those loans.

So, in order to meet short-term loan repayments, the banks needed a bailout from the US Federal Reserve – the loans to Westpac and NAB that we know about – and from the RBA – loans to the banks that we assume will remain top secret.

Without those loans the banks wouldn’t have been able to meet their obligations to repay short-term funding. And if the banks couldn’t repay their short-term funding… they would have defaulted and you would have seen a run on the banks.

That’s why the banks took the loans from the Fed and the RBA. Not out of choice. Not because they recognised an opportunity to make a quick buck. They did it because they had to. They had to in order to not go bust.

But the other thing that amazes us about this is the lack of interest from the hopeless credit rating agencies.

As we’ve pointed out, without the loans from the Fed and RBA the banks would have defaulted on their obligations. Yet the banks retained their AA ratings throughout. And despite this info now being made available to the public, the banks are still double-A rated.

You probably remember all the guff spouted by the Aussie banking execs about how our top four banks all have double-A ratings. How they are four of only twenty banks in the world to hold a double-A rating.

A double-A rating that means nothing when the four banks were obviously within days of collapse. A sure thing if it wasn’t for the Fed chucking them a few billion to tide them over.

But as I say, don’t think that means you should heap praise on the Fed or Ben Bernanke for having saved Australia’s banks from collapse, because you shouldn’t.

All this sorry affair has done is prolonging the pain. Pain that would have been swift and sharp in 2008 has turned into something that will last for years, possibly decades.

Even Ben Bernanke has admitted on 60 Minutes in the US that:

“At the rate we’re going, it could be four, five years before we are back to a more normal unemployment rate”.

So much for saving the economy. Ruining it more like.

Make no mistake, the Australian banking system was bailed out in 2008 and 2009 just like most other banks around the world.

We figure that’s the reason why the mainstream press has completely ignored this story. Because it rubbishes their entire argument about the strength and stability of Australia’s banking system.

It isn’t strong, it’s just like the rest – perpetually on the verge of collapse.

Cheers.

Kris Sayce
For Money Morning Australia

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109 Comments For This Post

  1. UnSpin Says:

    Kris. The banks didn’t feel it necessary to disclose the Fed’s ‘bailout’ cash to the ASX right? So they didn’t need ‘bailout’ money right? So haven’t they defrauded someone by applying for ‘bailout’ money?

    Even if it wasn’t fraud then I’d say that US citizens will be mighty peeved. Afterall, their Reserve leant to our banks at super low interest rates. But when our Reserve lends money it gave it to Rudd who handed it out as cash to middle and low income earners. Right?

    I wonder if Oprah knows?

  2. UnSpin Says:

    Idea for a placard for the Oprah visit. “Thanks for the cheap cash USA. It paid for my LCD TV”

  3. cb Says:

    But would Oprah care? Or dare to disclose this and make a fuss about it? She is part of the top 1% in the establishment. These people don’t rock the boat in which they fare so well.

  4. AS Says:

    What do the credit ratings agencies have to say about this?

  5. cb Says:

    Excellent article, Mr Editor. Give them heaps, and well done!

  6. cb Says:

    Upon reviewing this clip again, I am getting this increasing feeling that it could be made just as plausibly and compellingly to the NWO advocates. For, what an supra-national bureaucracy is going to mean will be even worse than what the EU Parliament means for the countries of Europe, who, in may ways, are one by one losing their paliamentary democracies with more and more of their laws being made for them by internationalists whose are not answerable to them.

    ‘Who the Hell You Think You Are?’ Nigel Farage throws egg in Eurocrat faces
    http://www.youtube.com/watch?v=2gm9q8uabTs

  7. Mickey Says:

    Your doing Gods work.

  8. oysterboy Says:

    Agree – a good topic. Keep stoking away Kris.

  9. cb Says:

    And so it appears that the Wikileaks controversy circus is making a show, with just enough criticism from MSM to make it all look important and credible. This article certainly would fit that mould:

    Why Assange is no Gandhi
    http://www.businessspectator.com.au/bs.nsf/Article/WikiLeaks-Julian-Assange-news-leaks-pd20101207-BVSMD?OpenDocument&src=kgb

  10. UnSpin Says:

    @cb. You’re probably right. But I suspect her viewers would care.

  11. KP Says:

    Well done Kris! You’ve just pointed out that the Titanic has hit an iceberg… but the passengers don’t want to know and they’re being told by the Captain that the first watertight doors will solve it. If not, they’ll close more water-tight doors until its solved.

  12. Fred Says:

    RBA borrowed money to stabilise the falling AUD, not to bailout the banks.

  13. michael francis Says:

    http://www.gocomics.com/nonsequitur/2007/04/10/

    I think this cartoon from the debtwatch website pretty well sums it all up.

  14. cb Says:

    lol, MF. Even the iceberg must be behind them by that point, so what, possibly, could go wrong?!

  15. cb Says:

    You may be right, Unspin, but they don’t exactly strike me like a bunch of deeply engaged people. They look more like a cheer squad to me. Am I being too harsh?

  16. cb Says:

    JP Morgan Silver Manipulation Explained
    http://www.youtube.com/watch?v=Gl47z2g2EvI

  17. cb Says:

    DC – watch that clip to the end. If you have seen it, watch it again. It addresses the questions we are discussing in the earlier thread.

  18. cb Says:

    Comex can easily go bankrupt, get physical gold/silver! Peter Schiff (Crash JP Morgan Buy Silver)
    http://www.youtube.com/watch?v=hd57H_QxID4&NR=1

  19. cb Says:

    Drew – The Schiff clip on the subject we are discussing.

  20. cb Says:

    DC – The Schiff clip also covers the pros and cons of paper gold versus physical gold, which we are discussing in the earlier thread.

  21. dc Says:

    cb – I will :)
    but would it hurt to hedge your bets both ways?
    What will happen to the EFT when it is discovered there is no physical gold? Could you not just do a quick dump of your stock?

  22. UnSpin Says:

    cb. It was really just a throw away line and an attempt at sarcastic humour. I was guessing Oprah’s viewers subscribe to the idea of fairness. And there isn’t anything fair about the RBA borrowing from the Fed and then giving $ to Rudd who gave $ to Aussies to spend. Meanwhile Americans were being told that the credit crisis was caused by Americans getting cheap loans to buy homes and that they deserve to have their homes reposessed and have to tough out the high unemployment.

  23. cb Says:

    No, DC. ETFs are supposed to hold the physical metal, so that if people start redeeming their shares in the ETF, the ETF can sell the metal and pay the proceeds to the sellers. But if it turns out that they do not have the metal, that in fact they are short the metal, then their share price will simply collapse and the company goes bankrupt. And you, as an unsecured creditor, lose all of your money that you put into it. Caput. That’s it.

    The ETFs are strongly suspected to be short of the metal. Plus, their custodians, who are supposed to store the physical metal, are the largest shorts in the futures and options markets. So, if the custodian goes bust, the metal will be gone, and the ETF goes belly up. Finito.

    The most likely scenario is that the ETF’s are long the metals in the futures and options markets, that they are hedged against whatever metal they are short. But if their counterparties cannot deliver the metal, or honour the contracts with paper, the ETF and its shareholders will be once again screwed. Avoiding counterparty risk is possible only if you hold the real McCoy. If you hold a piece of paper, that is all you may end up holding when it hits the fan. Don’t take that risk. These are very dangerous times. Those who are clueless, reckless, or careless, will be burned.

  24. cb Says:

    Yes, Unspin. I actually agree with you, and in making that comment I had in mind the cheer squad that is coming over with her, rather than viewers in general, which you probably had in mind. Lots of people watch Oprah, and they would drink deep if Oprah decided to take up the issue. That is why, in fact, I fully expect that this would be a NO-NO for her to do. What would be your guess, though?

  25. UnSpin Says:

    cb. What about Perth Mint paper? Any good?

  26. cb Says:

    That’s a tough one, UnSpin. No less than the WA taxpayer stands behind the Perth Mint, which is owned the WA State Government. So, chances are that any Perth Mint holdings will be paid out, if not in gold, then in paper. The question, though, for the more suspicious and weary is this: How much will that paper be worth if, and when, the PM pays in paper, rather than delivering the metal? Chances are: Not much. Also, if there is a forced repurchase of the metals at any point, you will only paid in paper if you hold your gold in some officially designated valult, or safe deposit box. These are all risks that you have to consider, as against the risks of holding it under your own lock and key. Who do you trust more with your metal? Yourself, and your ability to keep it safe, or others?

    Nick might have some more helpful comments to make on this. It would be good to have his take on it again.

  27. cb Says:

    Also, JC has been tossing up the question of allocated vs unallocated metal at the Perth Mint. Perhaps he would not mind sharing with us his conclusions.

  28. cb Says:

    Drew – I find Trace Meyer’s version of the inverted Liquidity Pyramid quite a useful tool for thinking about the question of where the metals are likely to be going forward:

    The Great Credit Contraction by Trace Mayer J.D.
    http://www.youtube.com/watch?v=37MS3AgrxnY

  29. cb Says:

    Sorry, Drew, that is not a particularly good link. I thought it would be all about eplaining the pyramid, but it is not. I will try to find a better one.

  30. cb Says:

    Try this one, and compare the relative valuation of the amount of each of the world’s assets in USDs. The questions to ask here are:
    - Which of these asset classes is money most likely to try find refuge and safety in the face of the current debt and credit contractionary environment?
    - With the ongoing contraction of the money for the real economy, and the attendant risks, which of these asset classes are going to be the beneficiaries of money flows trying to find safety? Will it be in derivatives, real estate, shares, etc. ?

    http://www.creditcontraction.com/images/affiliate/Great-Credit-Contraction-Liquidity-Pyramid-Large.jpg

  31. dc Says:

    cb, so are you saying that if you are in an EFT, you could effectively be sitting on a nice profit one day and then zilch the next with no prior warning?

    Given that these are dangerous financial times, and the various scams circulating would it not make sense to have some more assets liquid in order to quickly change course if new information comes to light… if not in an EFT, what about shares in companies that are sensitive to the gold price like a gold mine say?

    By the way I only skimmed through todays article, but I think Kris was referring to this particular WikiLeak:

    http://seeker401.wordpress.com/2010/12/07/wikileaks-rudd-to-clinton-be-prepared-to-use-force-against-china-if-everything-goes-wrong/

  32. cb Says:

    DC – Yes, rich on your computer screen one day, destitute the following morning. That is the risk with an ETF.

    Much better, as you suggest, being in Gold and Silver mining stocks for whatever paper you are prepared to hold. They should do well, and many times over better than the metals they are actually mining. In terms of asset allocation, I like David Morgan’s take on it:

    For the most part, for your savings that you want to preserve, your nest egg, you hold actual, physical metals, and the rest, the speculative money that you are prepared and can afford to lose, you buy well chosen PM mining company shares.

  33. cb Says:

    But never hold paper metals in an ETF!!!! Their risk-reward profiles are absolutely the worst you will find.

  34. cb Says:

    DC – This is a quote from that link you just gave above:

    “Mr Rudd also told Ms Clinton during a meeting in Washington on March 24 last year that China was “paranoid” about Taiwan and Tibet and that his ambitious plan for an Asia-Pacific community was intended to blunt Chinese influence.”

    Unbelievable stupidity, arrogance and indolence. The Chinese are unlikely to be amused. And Rudd is now our Foreign Minister!!! How scandalous! How absurd!

  35. J.C. Says:

    CB@30,
    You should be interested in the following commentary on the up-and-coming copper ETFs. This also touches on gold and silver ETFs. Highly recommended.

    http://chart.ly/4bnu8nf

  36. J.C. Says:

    CB,
    I agree with most of what you say about ETFs and I think that you are giving others some valuable advice. Commodity ETFs are a highly speculative instrument for dummies. I don’t believe they are as risky as you believe (at this point of time), but the truth will ultimately prevail. If you want to speculate on them, time is running out by the day.

  37. cb Says:

    Yes, JC, I suppose I am just trying to highlight the worst case scenario of what could happen. It does not mean that it will in fact happen, but simply that ETFs carry the risk of total wipeout if, and when, they fail. The fact is that this risk is simply impossible to quantify, because the SLV or GLD or GOLD have never been, and can never be, audited for the metal they actually have. That is one problem, and I should think that in these treacherous times it is a decisive one. For me, anyhow.

    The second problem with etfs is that, unless you are in fact hold allocated metal in them, with specific and unique serial numbers having been advised to you in writing by the ETF, or your broker, you are nothing but an unsecured creditor to the custodian of the ETF’s metal holdings. This is clearly written in the prospectus, and I have personally investigated it to my own satisfaction. If you hold shares in the ASX listed GOLD etf, for example, you are an unsecured creditor to HSBC USA, one of the biggest gold shorts on the COMEX. Now, if the custodian blows up, so does GOLD, and all the money people have put into GOLD shares will be in line as an unsecured creditor.

    How much of your money would you expect to get back on the dollar? If you asked me, you would be optimistic to expect a single cent. Could I be wrong? Sure. But where does reason say about the probabilities?

  38. cb Says:

    The media circus is building around assange, but what I would like to know is this: Why can we not watch this video of Tarpley’s take on the show? Anyone here geeky enough to know?

    Monday, December 6, 2010
    Julian Assange Threatens To Release More Documents
    http://geraldcelentechannel.blogspot.com/2010/12/julian-assange-threatens-to-release.html

  39. J.C. Says:

    CB@35,
    Yes, you are correct. There’s something very perverse about these ETS in that when the shit eventually hits the fan, the price of precious metals will plummet, in the short term anyway. All it will serve to do is further pis of the public at the expense of the financial oligarchs who will make a killing. My guess is that you should be prepared for your “paper gold” to become worthless. However, I suspect that there will be a hedge but I have no idea what that will be. It surely couldn’t be currencies.

  40. cb Says:

    JC – that is not how I think about the dangers. Rather, it is like this:
    The printing goes on and on, but at some point, something spooks the herd, and they lose faith in fiat money. At that point, they will want to get rid of fiat money, no matter what the price of the real thing, gold and silver, or other real things that are not paper. This is a hyperinflationary scenario, a panic, where paper loses its purchasing power simply because nobody trusts it as a form of payment. In such a scenario, the holders of the ETFs will want to cash out their invested money to purchase real things with it, or take delivery of their share of the gold the ETF is supposed to hold.

    And at that point, if the ETF does not have the metal, it goes bust, because it cannot possibly pay out the exorbitant amounts of paper money, let alone give metal to the share holders. In such a situation, the price of the physical metal will have gone through the roof and anyone who owes metal that it does not have, will not be able to buy it to make good on their debt. Consequently, an ETF that is short the metal, will not be able to make good on its commitments to the shareholders and will go bankrupt and even though the shareholders might be owed trillions in paper, sitting on mountains of paper gains, there will be nothing in the kitty with which to pay them out, so they lose the lot. You understand?

  41. dc Says:

    British police arrest Assange http://is.gd/ikSX6

  42. Nick Says:

    cb…I don’t think it’s Tarpley but here is a link that shows your link.

    http://news.yahoo.com/video/us-15749625/assange-threatens-to-release-more-documents-23364209

  43. cb Says:

    But you don’t even have to have an hyperinflationary scenario for an ETF to go belly up. Take SLV, for example, where JPM is the custodian, the bank who in fact is supposed to hold the physical metal, the silver, for the ETF. It is well known, that JPM, owes more silver on its trading account than there is in above ground stockpiles around the world, including the silver coins you and I have in our pockets, or in a safe deposit box. So, if the silver price keeps going up because of physical demand for the metal, JPM will be clocking up massive losses on its trading acccount. If silver doubles or tripples in price, they will be in deep, deep doo-doo. They already are.

    So, what can they do? What they are probably already doing is this: They have in their vaults the silver they are supposed to hold for the SLV. This silver is in their custody, in their care, similar to the way you would hold your brother’s savings in your account for him. But if you have some big expenses, and you are tempted to make good on your payments for these by using up your brother’s savings, what will happen to your brother’s savings when he asks them back? Same with JPM. Chances are that they are honouring the physical obligations for delivery with other people’s silver, and one day when these people who want it back through their SLV investments, they cannot have their silver, because JPM used their silver to make good on its obligations against its trading account.

    At that point, the game will be up, JPM cannot deliver, the silver price will shoot to the moon, and the ETF investors are burned out of their money. Finito. The price of silver did not fall, that is not why they lost their money. They lost their money because the custodian sold their silver from under them, and has neither their silver, or their money. Caput.

  44. cb Says:

    Thanks, Nick, but I get the error: Sorry but this video is no longer available. Can you please check again on your computer and tell me if it is still good. thanks.

  45. cb Says:

    Helen Thomas on Her Resignation and Middle East
    http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=5765

  46. Al Says:

    Kris
    What your saying about the FED and our banks.
    Could you post a link (from FED site say)?

  47. Al Says:

    Kris
    Probably just coincidence that Irish Banks are having ‘system problems ‘ and can’t pay out customers. Makes you wonder if the reserve banks are really needed.

  48. Fitch Says:

    Hi all, Interesting comments by all but i feel that you all need to take a sideways glance at your own comments to realise that buying silver won’t crash JPM and in fact will do the opposite. IMO it will crash the price of silver and evaporate most of JPM’s liabilities.

    2007-2008 tells us that most unsophisticated investors which make up the majority will hang on through the ups and downs. Few will rush JPM’s doors looking for their silver and the ETF is an all care no responsibility arrangement so as much as it is a beautiful dream I doubt it will deliver the fruit.

  49. Fitch Says:

    Oh and lets not forget the fraud and high crime this lot are accustomed to with the full co-operation of governments and central banks to boot!

  50. cb Says:

    JPM may and may not go belly up through the Keiser campaign, because the exchange can always declare a force majure and force all parties to settle in cash, and those wanting to stand for delivery will not get their metal, but will be paid in paper only. That is one possibility, but I cannot see why you would expect the campaign to have the opposite effect of in fact crashing the silver price. Why are you saying that? How do you see it happening, if it is in fact true that people want physical silver and supply is falling short of demand?

  51. cb Says:


    Jim Rickards of Omnis has an interesting anecdote about global gold mania.

    He tells King World News of a client of a major Swiss bank who was refused access to his one ton of physical gold ($40M) and was forced to make threats to convince the bank otherwise:

    “Correct, and through all of that eventually the individual did get his gold…it took lawyers, it took threats of publicity, it took a lot of pressure to do that, which my inference is that that gold was not there. The bank had to scramble, go out and find it somewhere before they could make good delivery.”

    To be safe, Rickards says you should take out your gold out of the banks before governments freeze physical holdings.

    The risk isn’t unfeasible. Gold is already treated as a paper asset, sold in futures, options and ETFs. All you need is a government order and “gold” becomes something that isn’t to be backed by real gold. At which point you’d be wise to have real gold in a treasure chest at home.”

    Read more: http://www.businessinsider.com/jim-rickards-take-gold-out-of-the-bank-2010-12#ixzz17QpFxnDj

  52. cb Says:

    http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/12/7_Jim_Rickards__Part_II.html

  53. Fitch Says:

    There is only one way to remedy our financial and fiscal problems and that is to stop spending. If every citizen of the western world refused to spend any money at all on any given but the same day it would bring them to their knees.

    The following day we would reclaim our markets and determine our own destiny once again. If we actually exercised our freedom of choice and abstained rather than complained we could regain our status as a miracle of nature rather than wanton consumer and debt slave.

  54. Fitch Says:

    cb @ 46 You asked why I would say that? I thought I already had. Despite them not having enough silver to settle all bets they still have the greater portion of it and who singularly will call their bluff?

    cb I think you know that I would like nothing better than to see light poles in NYC adorned with investment bankers swinging in the breeze.

  55. Fitch Says:

    cb @ 47 I couldn’t agree more even if we were talking about cans of baked beans but the problem with all this is that we are focusing on a handful of metals and that makes it all the easier for the other side.

  56. The Wolf Says:

    Just saw this…

    JPMorgan doubles down on copper. It turns out the mystery buyer of more than $1B of copper is JPMorgan (JPM). The purchases account for more than 50% of all the copper stored in official London warehouses, and though the revelation that JPMorgan is the buyer has alleviated some concerns that a single trader was trying to corner the market, investors are still worried about an impending supply shortage. Copper futures +2.6% to $4.114 (7:00 ET).

  57. The Wolf Says:

    Love the comment about the “alleviated concerns” about a single trader… clearly it is OK to be raped by JP Morgan, but heaven forbid someone else…

  58. cb Says:

    JC – Listen to that example in the KWN interview with Rickards. A good case that illustrates the point that depository institutions may and may not in fact have the gold for which people have paid good money. What would have happened if 10, or G-d forbid, all the bank’s clients wanted to take delivery of their gold? Would that bank be able to deliver to them all? I would not trust it. Would you?

  59. Fitch Says:

    Wolf – That’s exactly what I’m talking about. To use Max Keiser’s phrase “casino gulag” it’s a matter of upping the anti to smash the small investors and the hedge funds/large investors will soon figure out which side of the bread is buttered.

  60. Fitch Says:

    So my point is that the PONZI extends to everything we hold dear so the only way to win or at least limit your loses is to leave the table while you still have something worthwhile that you can legitimately claim to be your own.

  61. cb Says:

    Fitch, I do not doubt your bona fides for a minute. That is not why I was asking, I just do not follow the logic of the claim.

    Let us forget about JPM for now and just focus on the fundamentals. Which of these premises do you dispute?

    1. Silver is in demand, from investors as well as manufacturers from around the world, and this demand is greater than available supply.

    2. Given the diminishing trust in paper, the demand going forward will be likely to continue outstripping available supply.

    3. Given that there are no massive stockpiles of silver that could be dumped onto the market to overwhelm the demand, the only way to drive the price of silver is to keep selling silver that does not exist.

    4. But if people do not want any more promises of silver, and want the real thing, they will not be interested in silver promises, but will want to have the real thing.

    Now, if you accept all of those premises, how do you see them being still consistent with a crashing of the silver price going forward? I simply cannot see how it would happen, unless the government decided to fix the official price at a lower price. But then I would wish people good luck in getting actual silver being sold to them at the official, artificially mandated price. If anything, the price of the metal would skyrocket on the black market.

  62. Peter Fraser Says:

    Fitch @ 51- if some of the prophecies espoused here come true then the value will be in tinned food, guns, and ammunition.

  63. cb Says:

    PF – Like which particular “prophecies”? Be specific, so that we can guage for outselves as to whether under those conditions holding silver and gold would be any good, as in bartering them for tinned food, guns and ammunition.

    You appear to insinuate, once again, that silver and gold is not the place to be. You will, of course, deny this in your response, but read again your comment and see the overall message of your throw away line.

  64. cb Says:

    An awsom Nigel Farage on KWN:

    Nigel Farage: Founding Member of the UK Independence Party (UKIP) & Member of the European Parliament (MEP) for the South East region and is the leader of the parliamentary party in the EU parliament.
    The central aim of the party is the UK’s withdrawal from the European Union and to regain control of this nation’s governance through our own Parliament at Westminster.

    http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/12/1_MEP_Nigel_Farage.html

  65. Peter Fraser Says:

    cb – that’s not what I said at all. You are just getting ultra phobic now.

  66. bb Says:

    Anybody see follow up/result of the public revolt on France’s banking system? What might our equivalent be like here in Aussie? Perhaps Shane Warne closing his accounts with BetFair and SportsTab? http://www.smh.com.au/lifestyle/people/cantona-puts-boot-into-banks–calls-for-mass-withdrawal-20101207-18nip.html

  67. cb Says:

    There you go, again, PF, with yourpejorative language, with your belittlement. I expected you to say so, and said so. Of course you did not say that, but your response made a statement, a totally unsubstantiated claim, that value will be in tinned food, guns and ammo, and hence, by implication, not in gold or silver, if some unidentified “prophecies” (there we go again with that pejorative use of the term) people have made here come true.

    It is all insinuation and a sly, diversionary dig at the idea that people might just be wise to put money into gold and silver. That is how it comes across, anyhow, that is the net effect, even if you did not say any of these things in so many words.

    But let’s leave all that aside. Why don’t you specify the “prophecies” as you put it, under which the value will be in tinned food, guns, and ammo, as opposed to gold or silver? This is just an invitation to explain what you were saying in response to a very specific comment by Fitch @51 concerning whether silver would be a good place to be going forward, that’s all. You cannot divorce the contents of your comments in response to what Fitch was saying, as if your comments had nothing to do with what he was saying. Not without looking fishy. So, let’s hear it.

  68. cb Says:

    lol, bb.

  69. JB Says:

    Fitch @ 44
    You’re dreaming mate. it cant and wont happen.
    The increasing demand for real silver is an irresistable force…

    While prices may be manipulated down for brief periods, that’s simply a very temporary blip on the radar, and a signal to those with any brains to buy more…

  70. dc Says:

    Why is Greenland so rich these days?
    http://seeker401.wordpress.com/2010/12/08/why-is-greenland-so-rich-these-days

    If you think that leaving the EU would be catastrophic, take a look at Greenland. By rights its people ought to be poor. Their island is isolated, suffers from freezing weather, has a workforce of only 28,000 and relies on fish for 82 per cent of its exports. But it turns out that since leaving the EU, Greenland has been so freed of EU red tape and of the destruction of the Common Fisheries Policy, that the average income of the islanders today is higher than those living in Britain, Germany and France.

  71. dc Says:

    Can’t have independence now.. can’t have common plebs actually benefiting from the fruits of their labour.. that’s just too much..

    solution….?

    wack em with HAARP maybe?

    For those who are unfamiliar with HAARP, many believe HAARP to be weather modification system under the guise of a government ionospheric research facility located Gakona, Alaska and other locations around the world. Many believe it can create earthquakes and other types of weather modification anomolies.

    But of course these people are all fruitcakes right?

    Iceland Under Attack? HAARP Activity Corresponds to Iceland Earthquake Swarms
    http://www.thetruthseeker.co.uk/?p=15712

    Can’t say for sure, and many jump to the conclusion that every earthquake is the result of HAARP or other atmospheric heater activity. Haiti for example did have corresponding HAARP activity and other anomalies. Chile apparently did not.

    But checking a HAARP monitoring website after seeing the news about the heavy earthquake activity in Iceland, there’s a clear correlation.

    Put it this way. We know it’s possible for this technology to do such a thing.

    Who’d benefit, and why Iceland?

    1. Iceland didn’t take the bail out and hasn’t wanted to knuckle under to the EU. They still have a strong free market economy and are poised for recovery. That’s not falling in line with the program.

    2. In addition, Iceland recently established themselves as a “free speech haven” to protect journalists and their sources, even offering censorship-free servers and other services to journalists and internet businesses.   Sound like an idea those wanting an internet crackdown would like to see happen?

    3. More volcanoes would also further exacerbate the horrific weather Europe is experiencing. That should keep their minds off of politics, their engineered economic maelstrom and quell any thoughts about demonstrating now, wouldn’t it?
    and…

    4. Mighty nice distraction from the Wiki-storm and all its fallout, wouldn’t you say?

    Just wondering.

  72. dc Says:

    speaking about fruitcake conspiracy theories, this was posted today.

    UFO’s are Tesla’s Flying Saucers
    http://www.henrymakow.com/teslas_flying_machine.html

    Nick have you heard about Tesla anti-gravity techology?
    Is it legit or a hoax?

  73. dc Says:

    The Select Committee on Global Warming closed..another nail in the coffin of AGW
    http://seeker401.wordpress.com/2010/12/08/the-select-committee-on-global-warming-closed-another-nail-in-the-coffin-of-agw/

  74. dc Says:

    Bernanke says more Fed easing is possible
    http://seeker401.wordpress.com/2010/12/08/bernanke-says-more-fed-easing-is-possible/

  75. dc Says:

    How the U.S. can now extradite Assange http://is.gd/imuFv

  76. Peter Fraser Says:

    cb @ 63 – actually under certain circumstances there would be greater value in tinned food and guns, but we are not there yet.

    Clearly desirability of items such as a Leonardo Da Vinci Painting is high in certain times, and you would swap one for a loaf of bread in other times.

    The same applies to gold and silver, the value of the items is determined by the desirability, and that is dictated by the conditions.

    One glass of water may be more precious than gold when there is no water, but usually the gold wins.

    It all depends on Icke and the Lizard men.

    http://www.davidicke.com/headlines/36651-david-icke-what-the-controllers-really-fear

  77. Peter Fraser Says:

    and
    http://davidicke.com/headlines/41712-how-to-brainwash-a-nation-

    It seems to be working just fine.

  78. GTO Says:

    PF, that is obvious to any one with common sense. But its too redneck to appeal to conspiracy luvvers. They want survival mechanisms spelt out with theory and justification. Well heres one – the econonmy collapses, the govt collapses, hunger and starvation take over and then you will kill for food. Try eating your gold now.
    How – financial meltdown, total drought where lack of water causes industry and food production to cease.

  79. GTO Says:

    JB at 65. Just keep buying your silver you lemming. Just like all the lemmings that overbought into property in 2007/8, eventually the bull run stops.

  80. dc Says:

    David Ike is another disinfo agent, who preaches that reptilian aliens, masquerading as global leaders are in fact ruling the planet, all mixed in with some legit information to hook in confused freshly-woken up inquiring folk. He’s one of the more bizarre shills, but not the most far fetched by any measure

  81. Peter Fraser Says:

    I know for a fact that George Bush was one.

  82. Peter Fraser Says:

    GTO @ 74 – yep a complete collapse of the financial system due to asset value failure is a possibility, although QE may yet save us from that scenario.

    Of course if QE doesn’t work we may face anarchy.

  83. Peter Fraser Says:

    GTO @ 74 – I don’t think we will see a drought yet, but we could for a few years face lower rural production due to flooding, and THEN get ravaged by a drought as the El Nino effect, heightened by global warming, takes a solid grip of Australia in a few years.

    Maybe if we convert all of our gold and silver into guns and ammo in 2012 – what do you think?

  84. dc Says:

    if I read correctly, people’s comments suggest that there is nothing fundamentally wrong with Keiser’s buy silver call to action, then maybe what Keiser is saying is true. From what I gather Keiser is the flagship show for RT (Russia Today), who are funded by the Kremlin. Perhaps forces in Russia are using Keiser as a tool to wage their own financial warfare against JP Morgan and others? Just a thought

  85. Peter Fraser Says:

    dc – so you reckon that Max Keiser is just a mouthpiece for Russia Today?
    Interesting.

    What are the Russians buying at the moment, and what are they getting out of?

  86. benito Says:

    I wonder what accounts will emerge if and when the banks go bust.

    The Gov. has guaranteed all accounts up to 1 million and there is no way of knowing if any will be added afterwards.

    Another point is that Swann has been making noices about giving Credit Unions the ability to compete with banks.

    Credit unions have been going along alright and I worry that they will change the rules so that Credit Unions can be taken over by Banks.

    There is a lot of real money in a Credit Union to get their hands on.

    I do not trust them.

  87. JB Says:

    GTO @ 75
    Yes, i will and i have thanks.

    Actually its nothing at all like the property market in 2007/2008 which was clearly grossly overvalued at that point already.

    Silver is currently grossly undervalued, and has a very very long way to climb still, but i dont expect simple minded people to realise that.

  88. JB Says:

    PF @ 78
    QE may save us yet???

    thanks for the good laugh – that was really very funny!!

    talk about half baked theories….

  89. JB Says:

    PF @ 81
    The Russians are buying gold and selling US dollars.

  90. Peter Fraser Says:

    Hey JB @ 83 – glad someone has retained a sense of humour.

    I thought it was funny, it was a classic pincer move if you think about it.

    JB @ 84 – Yes someone posted recently on Russia and China changing their holding of US currency. It might have been Nick.

    I see the world moving to another “reserve” currency over time, but it may take some figuring out trying to guess what it will be.

  91. JB Says:

    PF
    i may be a tad biassed, but i cant see the sense in any reserve currency other than gold and silver.

    Whatever is used as a reserve currency will have to be of such a nature that it has value and it cannot easily be fraudulently reproduced or “thinned out” …

    i’m all ears for something having these qualities other than gold and silver.

  92. Drew Says:

    JB @ 82,
    Re – “Silver is currently grossly undervalued”
    How did you go about determining that?

  93. cb Says:

    DC @ 66 – And isn’t the Greenlandic experience telling?!!!
    If one thinks about it, all a union like the EU, or the NWO Wold Government it is a stepping stone to, do is add another layer of parasitic, obstructionist bureaucracy as a burden on productivity in the real economy. Go Greenlanders!!!

  94. JB Says:

    Drew @ 87
    I keep my ear to the ground and have done my homework.
    i believe that’s what investing is all about … gathering as much info as you can in order to determine which asset class(es) are currently undervalued…

  95. cb Says:

    PF @ 72 – I agree with all of that, but what is that thing about your dragging in Icke into our exchange? It looks like a diversionary tactic to me, if I may say so. I asked you to specify the so-called “prophecies” you say some us here have been making, which, if come true, will see value in tinned food, guns and ammo, rather than gold and silver. The question is this: Who has proficied here such dire conditions that gold and silver will count for naught? Give us the name and the reference. But you cannot, because you just made that up for a good sounding throw away line with derision and innuendo for those seeing sense in putting money into metals. Prove me wrong, or admit the charge, and then we can discuss Icke and other distractions.

  96. cb Says:

    Good on you, JB. For my money, you are switched on. I wish I were at your age.

  97. cb Says:

    JB @ 86 – Have you heard of Unobtanium? It is Un in the periodic table, but I am not entirely sure of its precise atomic weight ;-)

  98. cb Says:

    So, GTO, did you ride the property bull over the decades, or were you as clueless about property as you currently are about the metals? Just asking.

  99. Fitch Says:

    What draws me most to Max Keiser is his hatred for central and investment banks and the league of maggots that serve them. I see him as fundamentally right about global corruption and mis-management but to quote him he said “If everyone bought an ounce of silver we would crash JP Morgan”.

    I would have to agree with that as 7 billion ounces would surely do the trick. I also believe that JP Morgan have been selling silver they don’t own or that even exists but all the banks have done that with money and are still doing it and getting away with it.

    JP Morgan and their f*&#buddies HSBC are custodians to the greater portion of the worlds physical and paper reserves at the lowest possible prices so my point is that whatever doesn’t kill them will make them stronger. Steeply rising prices and demands for physical metal will produce untold profits and might just suck some of the gas out of the cloud they’ve created.

    As for “$500 silver if you want it” surely this will require many a greater fool.

    On another matter JP Morgan received Westinghouse and Tesla in his bedroom only hours prior to his death. Tesla outlined his theory of wireless power transmission and the benefits to the world as a whole. Morgan waved them both away as he saw too many difficulties with the billing process and couldn’t justify the investment.

    Nikola Tesla claimed by Croatians and Hungarians to be one of their own as his birth place has on many occasions alternated between the two nations through shifting borders was a genius. The inventor of the generator, alternator amongst many other technologies upon which we are all dependent. He also invented the wireless radio of which he handed a flawed prototype to his protege Marconi with detailed solutions saying ” take this, it will work. Do what you wish with it as I have grander plans”

  100. cb Says:

    Fitch – Keiser says that the market capitalisation of JPM is 150 billion. He also says that every dollar rise in the price of silver means 3.3 billion loss on JPM’s trading account, and hence their balance sheet. That means that if silver rises just by $45 an ounce, JPM’s balance sheet goes to zero with silver at $75 per Oz, meaning collapse.

    Of course, honest business is alien to these crooks, so they will extend and pretend and will suspend all relevant laws to keep the miscreants in busioness. Still, something or other will have to break with a mighty big crack when silver hits tripple digits, as it is expected to reach by many. What exactly gives, I cannot be sure. If not JPM, then it will have to be the credibility and the legitimacy of the elite, the bankers, and their political bureaucratic and regulatory whores. And if that should come to pass, people better have silver, rather than paper, whatever its nominal value might be in paper currency at a time like that. .

  101. Fitch Says:

    cb – your reasoning is sound and Max Keiser makes sense also but the strategy is based on buy and hold which is mostly what’s happening now. However one must ask how much of this accumulation is leveraged by investors looking to profit from capital gains. If all that results from this is that silver trading increases at higher prices where is the threat to JPM?

    Coincidentally it’ll soak up a vast amount of QE paper and divert it from the productive economy.

  102. Fitch Says:

    The belief that any asset class can only increase in value is a recipe for disaster.

  103. Peter Fraser Says:

    JB @ 86 – Gold and Silver have had their day as reserve currencies, although a percentage holding may be part of the mix.

    But really who knows at this point..

  104. Peter Fraser Says:

    cb @ 90 – I didn’t bother with this before, but yes there have been plenty here predicting revolution and anarchy.

    I wasn’t specifically referring to you, I don’t believe you have predicted that.

  105. Peter Fraser Says:

    cb – I don’t think that gold and silver will count for nought, but under the right conditions other commodities will hold more value, even if only temporary.

    It was a “nothing is certain” statement.

  106. Peter Fraser Says:

    So what happened with the bank run on the 7th December that was touted here by Nick as a possibility – it fizzed didn’t it.

    ffffiiizzzzzzzz – pop.

  107. JB Says:

    Fitch @ 97
    I agree fully. This is why the property idiots – i.e. the majority of Australians – are busy getting burned and there is still a lot more pain to come!

    as for gold and silver – yes there will be a time sometime in the future when they will have reached the top of their cycle and it will be time to sell.

    but that sure as hell aint now

  108. cb Says:

    Fitch – Okay, I follow you now. Ultimately, the question you are driving at appears to be this: At which point will gold and silver have reached a more or less natural equilibrium point with their pricing in fiat paper?

    That is a BIG question, but it is the right one. However, equally, the answer to it is very very complicated. Much will depend on whether these metals are going to be officially remonetised and used, either as a backing, or in their own right as coins and bars in trade.

    Official and formal monetisation would necessarily require a great deal of metal being put aside for this purpose, metal that otherwise would be available for industrial use in electronics, jewellery, etc.

    There are other factors relevant to answering that question, but probably this is one of the biggest ones. And, to be sure, we do not even know the answer to this at this point. PF is is confident that the days of the metals for this purpose are over, and he may well be right. There are others who are quite sure that at least a partial re-monetisation is inevitable if this crisis of debt money is to be ever brought under control. Bob Chapman appears to hold this view, and I cannot at this point make my mind up about it one way or another.

    However, the one thing that is quite clear, I think, is that we are still a long way away from sounding the “all clear” for fiat money. This, I suspect, forms part of JB’s reasoning, with which I am most inclined to concur.

  109. Sandra Says:

    JB at 102
    I agree. i believe that one indication as to when the time will be ripe to cash in some or all of your bullion is when you can purchase an average sized home for between 500 and 1000 ounces of silver…

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