Bill Cohan: The Truth About the Fed

"The truth is, although both incidents do reveal something about the way the powerful and famous get away with more stuff than the rest of us, there’s no real comparison. The Segarra Tapes actually reveal little or nothing that was not already known, assuming you have a shred of understanding how the Federal Reserve banks actually work. Nor is William Dudley, the president of the Federal Reserve Bank of New York, about to get pilloried in public like NFL Commissioner Roger Goodell.

Sorry, folks, but this is simply the way the New York Fed was designed to behave. The system of 12 Federal Reserve banks, established about 100 years ago by an act of Congress following secret meetings presided over by J.P. Morgan himself at an island off the coast of Georgia, has always existed for the benefit of the commercial and investment banks that created the system, that own the banks and that control their boards of directors.

To think that these banks exist for any other reason than to serve their Wall Street masters is complete folly. It has never been so and it will never be so – as long as the current system remains intact – despite what Segarra captured her bosses talking about on tape, without their knowledge."

William D. Cohan, Why the Fed Will Always Wimp Out On Goldman

Gold Daily and Silver Weekly Charts - It May Be Protracted, But It Is an Endgame Nonetheless

One of the more significant things that I have seen so far this year is independent confirmation from a credible source that there is price rigging in the silver markets, and that this knowledge is being suppressed by the mainstream media in the US.

You can read about that here.

I think the fact, given all the rigging scandals from Madoff to LIBOR, that there are major mainstream publications which will refuse to run an article showing evidence of rigging in the silver markets from a credible source is probably as profound as the report itself might be.  They know what is happening, and they are afraid.

So what does this imply.

It implies that powerful financial interests are engaged in an attempt to manipulate the value of certain precious metals to artificial targets. They frequently do this with certain things we know.

Dollars and bonds are amenable to this sort of financial engineering, because the financiers are able to create enormous amounts of money using their balance sheets, and with it buy bonds and other financial paper.  So they can raise and lower interest rates and other benchmarks at will provided that they can do it in secret and with plausible deniability.

They can rig LIBOR, and the ISDAFix, and any number of benchmarks, because these are creatures of their system, without a hard reference or a firm anchor to anything in the real world. LIBOR and the amount of money they have in their vaults can be almost whatever they wish them to be, as long as the people believe.

Their nemesis, however, is when they foolishly tie themselves to something external, something that is beyond their system.  Their error is when they overreach, and try to extend the mythology of their price fixing to things that are not completely under their control for any longer period of time.

Gold and silver are two such things. Yes, they can engage in all sort of gimmickry on their own exchanges where they make the rules and keep the records.  Paper and paper money can symbolically represent precious metals both in quantity and value.   Tonnes of imaginary and hypothecated ounces of bullion may be traded all day long, but without requiring a single physical ounce of gold or silver having to change hands.   The pricing has been divorced from the constraints of supply and demand.  As always, the devil is in the leverage.

Longer term of course there will be effects, very powerful effects.  The amount of actual gold and silver that is represented by their paper continues to dwindle, increasing leverage.   Physical bullion will flee their system, as it is doing already.  That which is unmined will be left in the ground. This is Gresham's Law in action. The 'bad money' will drive out the good.

And they are foolish! There is no real civic need for them to have done this. What does it matter if gold and silver are priced at 1200$ or 3200$ as long as the price increase is orderly and not a panic? All sound economic theory suggests that as the price of gold and silver increase, economic activity will increase to make more supply available.  People might choose it as a store of value, or not.  It has its advantages and disadvantages, depending on the context of its environment.  

You can say that this would cast doubts on the value of the financiers paper, but again, not in any practical sense as long as supply of metal was not constrained and the supply of money was not expanded recklessly without reference to the productive economy.  Even Greenspan admitted this.

By aggressively seeking to manage the price of the metals, by continuing to press their leverage and their perceived successes, the Banks have created a façade and blindly run to the precipice of  an inevitable reckoning, as the London Gold Pool had done in the early 1970's.

The BRICS see this hubris, like the traders who saw the folly of attempting to hold the British Pound to an untenable valuation. And they will continue to keep pounding the Banks' positions with their trades, accumulating more and more of their physical metals, until the trade is unwound, or a failure comes to stand and deliver.

This is what I think is happening. I do not think a serious market failure is inevitable. But a better outcome would require a level of humility, wisdom, and self-awareness of which our ruling class may longer capable. 

Wall Street has become maddened with greed. And by stifling all criticism and dissent, their enablers have only enabled them to go further and further, until the point of no return is reached.

We observers are almost like Harry Markopolos, who wrote of his frustration in Madoff: No One Would Listen.  We are like those who warned of the growing housing bubble, and took steps to protect ourselves from it.

We only need to abide, and if we can abide,  then we will prevail.   Their schemes will eventually fail  And in that failure there is both risk, and opportunity.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - All's Quiet On the Western Front

Stocks bounced back today, for no particular reason really.

The third GDP revision was inline at 4.6%, and increase over the prior 4.2%.  This is GDP from the second quarter! 

 

This is an artificial market. And the real buy and sell volumes, ex speculative poofery, are low.

The good news I suppose for Wall Street is that prices are therefore fairly easy to push around using leveraged instruments like the SP futures.

The bad news is that if we see a certain type and level of exogenous event, there will not be much to hold prices up once the day trading dip buyers run to the sidelines. And without human market makers managing the flow, the downdraft could be fairly impressive.

But timing something like this is almost impossible. This is more an occasion of knowing the types of trails which we are skiing, and not necessarily where and when there could be a specific instance of danger.

Have a pleasant weekend.

Mr. Cohan Responds On His Silver Rigging Exposé - Two US National Publications Refused the Story

"We run carelessly to the precipice, after we have put up a façade to prevent ourselves from seeing it.”

Blaise Pascal

This is starting to make more sense. 

Apparently Mr. William Cohan, a highly respected journalist, did look at all the relevant information he had been provided, and decided to write a story about rigging in the silver markets.

It was submitted and refused by at least two US publications which refused to run it.

Based on past history, one might assume the two national publications that refused to publish it were on the order of The New York Times, and perhaps Bloomberg News or even possibly Forbes.

The actual reasons that they gave for refusing to publish the story are not stated. One can assume they were not sufficient for Mr. Cohan to decide to take his name off of it in his professional judgement, so we can only surmise. 

So we cannot tell if this was editorial scruples, a failure in fact checking, or just good old fashioned minding of one's place.

Insiders never speak ill of insiders.

Bill was good with publishing the piece at ZeroHedge with his name on it.  So he apparently still had confidence in what he had written. 

 

That speaks volumes. 

At that point the whistleblowing parties, if one might call them that, deferred, feeling perhaps that printing something like this on the web alone, even on a large and widely read site, would relegate it to something easily dismissible by the status quo.  The Very Serious Players choose to read only properly vetted, fully credible and approved mainstream sources.

I am being a bit sarcastic, but not so much.  The thought leaders and ruling class in the US are, alas, out of touch almost without regard to their origins. And one does not have to think too hard about it to discover why.  They only read the right publications, watch the right shows, talk to the right people, say the right things, and think the right thoughts.

They live in virtual palaces and bubbles of ease and influence.  To borrow a phrase from one of their less pliant pets, when they go out amongst the common people, it often resembles Prince Charles on a royal visit to Papua, New Guinea.   As George Orwell noted in his diaries, 'apparently nothing will ever teach these people that the other 99% of the population exists.'  

They exist, they just don't matter in the halls of power anymore.

I might have suggested some publishing options a little 'out of the box' like The Guardian or Der Spiegel.  Choosing publications that might be less beholden to the New York financial powers seems as though it could be a more fruitful course of action.  South China Morning Post, or even the Asia Times?  Radio Free America?

So there you have it. We have a story. And the mainstream media refuses to publish it. And there is some wrangling about where and when it might achieve adequate exposure to do some good.

To:  addressees

Thank you all for writing me regarding Andrew Maguire's story of alleged "manipulation" in the silver market. As you may know, I was approached 11 months ago by a PR representative of Mr. Maguire's who wanted to introduce me to Andrew and to his attorney Gordon Schnell, at Constantine Cannon, in New York. I found what Andrew had to say very interesting, especially so in light of a piece I had written in the New York Times about the silver market three years ago.  A Conspiracy With a Silver Lining

I wrote up the story and submitted it to a national publication in the United States, which decided not to publish it. I then tried another, national financial publication, which also decided not to publish it. I then abandoned hope that the story would be published.

About a month ago, Ned Naylor-Leyland contacted me and suggested that Zero Hedge might publish the story. I thought that would be a fine idea.

Unfortunately, Mr. Schnell did not like the idea of Zero Hedge, nor apparently did his clients. They also declined to approve the use of key facts and key quotations that I felt needed to be included in the story to give it credibility. Part of my agreement with them was that they would be given quote approval and without their approval, I could not use their quotations or their information.

They did not approve. At that point, without their cooperation, I did not feel the piece could be published. I explained that to Mr. Naylor-Leyland but he didn't seem much interested in those facts and then went on to encourage the publication of the piece to which you are all responding.

All of which is to say, you are directing your passion to the wrong person. If you want the piece published, you need to reach out to Mr. Maguire and Mr. Schnell.

Thank you for your interest and your passion on this topic.

William D. Cohan

Related:  Ned Naylor-Leyland Suggests Media Overhanging an Exposé of Rigging in the Silver Markets

Gold Daily and Silver Weekly Charts - Curiouser and Curiouser

Gold was holding a weak bounce and silver drifted lower today, while US equities were showing their first ~2% correction in some time.

Today was unusual only because the metals did not react much to stocks, and also to their option expiration on the Comex, although as I have indicated October may not a particularly important contract per se.

The big news in metals is still the opening of the Shanghai metals exchange, which takes deliveries in physical not cash. The East is where the action is these days for gold and silver.

I recently read about the concept of terra nullius.  It is the principle in law by which ownerless land and other property may be taken by exogenous parties for productive use.   In its abuses, the more 'civilized' decide that the indigenous peoples do not have fully human societies, and are too incapable or insufficiently evolved to be considered proper owners who can make efficient and proper use of the assets (aka fully exploit).   It is a particularly popular concept with the ubermenschen.  

 

I think there are some actors out there that would like to declare terra nullius on the indigenous 99%'s retirement accounts, pensions, deposit savings, civic assets, and a whole lot more than they have already opened up for plunder.  They are on a roll, and seemingly insatiable.

During the day I noted an interesting revelation about an unpublished article said to contain some fairly important sounding information about rigging in the silver markets. You may read about that here.

If there is nothing untoward going on the silver market, it may be one of the few notable markets that hasn't been systematically rigged by our largely unreformed financial system.   My gut hunch is that this has been one of those half assed, poorly thought out government programs that gets co-opted by market wiseguys and free-booted into one of their personal piggybanks.  The credibility trap and personal embarrassment of some overly important people keeps a lid on.  Until it doesn't.  There are some big sharks circling the tank.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Whoops!

Today we got something a little unexpected. I have to admit it caught me by surprise, and brought back at least a little twinge of seller's regret.

Russia's new draft law permitting them to seize foreign assets and to offer compensation for their nationals who suffer from the Western sanctions shook up the markets a bit, starting with some tremors in the Dax, but achieving their full blossom in US equities. The popular indices were down about 1.5 to 2 percent.

Some pointed to the very low durable goods number this morning, which is fashionably dumb. Durable goods is notoriously volatile because of airplane sales. If you back those out of this morning's figures, then the number was not notable. 

 

And AAPL has reported some problems with their new iPhone6.  The cases are bendably thin, and they are having some software problems.  

 

Our market are this fragile?   It was more likely geopolitical jitters triggering profit taking from the tech bubble fostered by debubbling in AAPL and BABA.

And these sorts of big moves are characteristic of the narrow market we are in, as shown by the NDX/RUT and SPX/RUT ratios.

The same line of dumb thinking says that if we get a revision to 2Q GDP tomorrow it might be over 5 percent, and that would prompt the Fed to tighten more quickly next year, due to our remarkable recovery.

A revised 2Q GDP with no supporting trend, a stagnant median wage, and a recovery that is so selective that it is almost embarrassing if you don't spend all your time talking to the 'right class of people.' Are you kidding me? I cannot believe the level of groupthink that possesses the financially aloof and their spokesmodels on financial television. It's pathetic.

The next move of the markets may be lower, and the support levels are obvious. We are still in a formation that looks like a large inverse head and shoulders consolidation. So we would be looking for any market moves that either negate or activate that formation.

So the markets remain risky, but the volumes and market action is 'narrow,' driven significantly by professional trading that is algorithmically driven. So are we in the long managed rally as we saw in the early 2000's or the kind of reckless bubble making we have seen so often since 1987? Probably both since they are children of the same policy errors.

Have a pleasant evening.

Ned Naylor-Leyland Suggests Media Overhanging an Exposé of Rigging in the Silver Markets

This is an excerpt of a statement apparently made by Ned Naylor-Leyland about an article involving alleged evidence presented on silver rigging that has failed to see publication anywhere for a year.  This statement has now appeared in several public places overnight.  A quick email to Ned last night confirmed that it was his.  I have found Ned to be a serious person and highly competent analyst.

Choosing to ignore this would be a decision on my part as much as choosing to ask about it in as polite and as even handed manner one can manage.  I became loosely aware of this yesterday, but decided to take no action here until something appeared 'in print' and in more than one place.

 

William D. Cohan is a highly respected financial journalist who has recently published a book in  April of this year titled The Price of Silence: the Duke Lacrosse Scandal, the Power of the Elite, and the Corruption of our Great Universities”.   He is certainly no stranger to controversy and to telling the truth against opposition.  He is one of my favorite commentators in business journalism.

I have not personally seen the article referenced here, or any of the evidence or facts which it is said to contain.  I do not know Andrew Maguire.  I am not familiar with the particulars of this situation, not in the loop as they say.  I was aware that some whistleblowers had come forward after the CFTC hearing on silver, but was not aware of exactly who they were or what they had to say.  And I do not even know now if this is in fact the basis of this story.

I would have preferred if there had been a statement from Bill Cohan about this before this story was released.  How do we know he has not taken some serious efforts to have his article published against bureaucratic delays?  For a journalist there are legal considerations and fact checking that may not be as paramount for others who are not professional journalists.  But we have also seen these processes abused in order to delay certain stories artificially.    Since this has the appearance of an ongoing conversation it seems probable that he has had the opportunity to comment and has deferred for whatever reason.   But he certainly now ought to say something.  

Have whatever facts involved in this become Mr. Cohan's exclusive property?  If not, how can he become the presumed bottleneck for these revelations?  I can understand the slowness of processes involved in something like this,  but people are aware that other stories have been held until after important elections before by the mainstream media so as not to embarrass any political figures.  

And there are some sensitivities here since the CFTC conducted a four-five year study of price rigging in the silver market, sat on the results over the protests of commissioner Bart Chilton, and then killed the study without issuing any results. 

Despite sincere efforts by some, the regulators have managed their public awareness responsibilities somewhat awkwardly to say the least.  And this is not incidental to their mission but paramount since they are public interest representatives in a publicly funded position.  There is a general aloofness and high-handedness in this Administration that is not consistent with a healthy democratic process. 

And it is not as if market rigging is some sort of outlier that only conspiracy specialists would imagine given all the recent scandals in LIBOR, etc.  One might say that if a market can be profitably rigged this days, then it most likely is.  Former CFTC Chair Gary Gensler is alleged to have said that recently, and it makes sense.  And what the heck does that say about our current markets and their health, given that we are now six years past one of the greatest collapses of a control fraud in the financial markets and have supposedly reformed them, while spending trillions to support them?

Are the ruling elite going to retreat into silence again, and then wait until we forget about this and go away and let them do whatever they want?  Are we at the point when even asking legitimate questions has become a concern?  I should hope not, because then we would be truly lost beyond repair.

The lack of transparency in these matters is therefore a likely precipitant to speculation about what is happening, and what the facts may be, given the overly secret nature of the markets and regulation, and some of the seemingly out-of-the-norm happenings and positions. 

If any of this is being done to promote confidence, then it is surely not being done well.  The US and UK could not have eroded confidence in their markets any more than if had gone out and purposely intended to sow doubts about their integrity in the eyes of the world.

Light is a marvelous remedy for doubts, suspicions and secretiveness.   And impatience is no excuse for incivility, although one can understand how continual stonewalling can grate upon the public temperament.  Let us therefore have some light, please, and less efforts to manage and hide some of the more potentially embarrassing facts or mistaken policies of the past. 

As we have seen so often it is rarely the initial missteps that cause  the most serious problems, but the downfall always seems to be in the subsequent attempts to cover it up, and too often to save someone important some embarrassment, all in the name of 'confidence.'

Is the emperor naked?   Do we dare look?

You may read the entire piece at TFMetals here or at Bill Murphy's site here (free trial available.)

"I very much hope that pressure will now be brought to bear on William D. Cohan to publish the article that he wrote a year ago and is still sitting on; the suppression of this evidence and regulatory collusion is helping to keep this rig going. An investigative financial journalist of repute has looked at the evidence, wrote a long and scathing editorial piece about what happened (a year ago) and yet STILL we sit waiting for discovery or publication of his piece.

While nothing comes of this Precious Metals investors continue to experience real losses, something that is unacceptable to me as an observer aware of the background story. I take no pleasure in naming and shaming in this way, and am heartened that Cohan confirmed and corroborated Andy’s evidence, but now is the time for the pot to be filled and the perpetrators flushed out. If it takes intervention by a third party to set fires in order to get it out there, then so be it."

Ned Naylor-Leyland

 

 Please see:  Mr. Cohan Responds