SilverSeek.com reports that BIS admits $190 billion silver fraud.
(emphasis mine) [my comment]
BIS Admits $190 Billion Silver Fraud
By: Jason Hommel, Silver Stock Report
-- Posted 6 April, 2009
(Almost, if you know where to look!)
Silver Stock Report
In the past, I've pointed out various frauds in the silver market such as, the excessive futures contracts on the COMEX, the excessive trading in "London" silver, and the excess silver in the new ishares Silver ETF, SLV.
In 10 years of reading and writing and searching, I've never known the numbers of paper silver in the OTC "Over the Counter" market until a reader informed me, just today.
This is directly from the BIS, the Bank of International Settlements. This is good data.
http://www.bis.org/statistics/derstats.htm
At the link above, see
21 Amounts outstanding of OTC single-currency interest rate derivatives
"21C By instrument, maturity and counterparty"
That's this link:
http://www.bis.org/statistics/otcder/dt21c22a.pdf
See the center middle column towards the bottom, under "Other Precious Metals", which excludes Gold. This would be Silver, Platinum, and Palladium. We can exclude Platinum and Palladium as nearly irrelevant, because those markets are much smaller than silver, and very few people hold paper instruments of that type. Furthermore palladium is much like silver in that the market is dominated by industrial demand, and investor demand is less than 5% of the market.
The number of "Single currency interest rate derivatives in other precious metals (SILVER)" from June 2006 to June 2008, in two short years, more than doubled:
From $84 billion to $190 billion!
That's about 40 times larger of a fraud than I had thought.
This is serious news. This is original reporting. Will any other news agency cover it? Probably not.
How much new paper silver is that?
Well, the physical silver investor market annual demand is about $1.3 -$2 billion per year! And yet, they sold $100 billion in new paper silver in the span of 2 years, which is over 50 times as much paper silver as exists in the world annual physical silver investment market!
Previously, I had written and exposed that one or two banks sold, over the span of about a month, 130 million ounces of silver at COMEX to depress silver prices, which is only 1.3 times as much as annual investor demand.
I'm shocked at the figures. Most people who are thinking that they are "buying silver" are still just trusting banks and brokerage firms that have no silver.
Real silver investment demand has therefore not yet really begun, because those banks have not bought any silver. Just wait. It's going to get absolutely crazy.
I just watched a History Channel show last night on the Madoff Scandal. This is nearly 4 times as big! It's the same kind of Ponzi scheme, as they have not bought the real silver that they owe their clients.
People kept saying that the Madoff Scandal was the biggest Ponzi scheme in history. It wasn't. The biggest is not even this silver scandal. It's paper money; that's also a Ponzi Scheme!
I know many people who have most of their wealth with the brokerage houses, and just "some" of their assets "in silver" with the same firms. It's time to pull 100% of your assets out of those firms [Agreed]. Put most of it, if not all of it , into silver first, palladium second, and gold third [A silver dealer will have a bias towards silver. I personally believe gold first, silver second, palladium third (most people don't know what palladium is). However, I expect all precious metals to do very well.]. Let the diverse metals be your diversification.
Spread it around in several locations if you have a lot. Buy the vaults you need to protect it.
Buy it now, when the silver market is relatively calm, when silver is available.
We offer about $78,000 worth of physical silver at auctions nightly at seekbullion.com. And it's available for immediate delivery, unlike many of our competitors who offer silver for delayed delivery.
Below is a screenshot of the BIS report mentioned above.
My reaction: I own both silver and gold. I believe both metals will do well. Points to take away from article above:
1) COMEX gold (and silver) futures makets are tiny in comparison to the OTC derivative market for precious metals.
2) Notice the large amount of call options for precious metals. These options were not written by producers, who have been closing down their hedge books.
3) There is a lot of data missing from data above. (gold leases aren't included in numbers above, for example)
Conclusion: Central banks (mainly the fed) are on the short side of gold/silver derivatives, either directly or indirectly. That is to say, even if the fed didn't write the 400+ billion call options on gold, it will most likely have to bail out the banks which did (JPMorgan, etc...).
I'm not sure this constitutes fraud at all.. presumably the derivatives are always cash settled so there is no fraud here - the buyers of these derivatives contracts know (or should know) that they are backed only by the creditworthiness of the issuing financial institutions involved.
I tend to agree with Robert on this. Although the volume of paper silver might have increased, trading paper silver has been going on for decades probably so it's not al that new I believe. Besides, for most other commodities (besides precious metals) a paper market is in existence.
I often witness people scream bloody murder on finding out about the paper market, but that is mainly due to them having believed the market to be all physical instead of the paper trade being a real outrage for all market participants. Many of them know about it an simply do not care. It might stay that way.
How was is determined that Options represents "Calls" you could have "Puts" as well as part of this figure. This figure could be the Open Interest amount.
To all:
it is the amount of derivatives which is suspicious. If, as Robert says, the derivatives are backed by the credit worthiness, and not the metals, then that is the same as fraud, because the Fed will bail them out. As to the options, who in their right mind would write put options on the metals, just look at the premiums on the retail level.
gt. on p.metals, but . . . .
re: buying metals
If we buy precious metals,
then. . . what do the
sellers do with our paper money?
invest it in oil futures?
plz Update: did PR China
get to buy into metals mines?
(e.g. aust. said it is reviewing a
bid by PRC to buy Aust. mine co.).
Being creditworthy, or perceived to be creditworthy is license to commit any fraud, because you can pay for the damage if you get caught in the act? A fraud is when someone enters into a contract that they know perfectly well they are totally unable to deliver upon. It's true that most will settle their futures contracts in cash, rather than demanding their delivery, but since the issuer cannot gaurantee delivery, because he's sold much more silver than he has, or has any ghost of a chance of ever delivering, he's operating a fraud. To say otherwise is just naive. It's basically dishonest, and tantamount to counterfeiting. Is it OK for a brokerage firm to flood the market with shares of any given stock, which he doesn't own, or even have options on, in some cases more shares than even exist, because a firm is perceived to be credit-worthy? Is creditworthy status justification for anything, just because the company is perceived as capable of paying for the damage if they get caught in the act? Is that what we've come to?
"That is to say, even if the fed didn’t write the 400+ billion call options on gold, it will most likely have to bail out the banks which did (JPMorgan, etc…)."
Is this true? Since when do pirates pay off a debt? Can't they just say that they're sorry the country is in an emergency and precious metal hoarders are part of the problem, so the contracts are void?
Eric, I'm reluctant to ask because you did say you favor both metals(gold and silver) to do well but what is your reasoning behind gold doing better than silver?
From what I understand above ground silver is currently more rare than above ground gold BUT there is more silver in the earth(to be dug up) than there is gold. So his(Jason Hommel's) idea of getting more silver first and then palladium second and then gold third makes sense because silver and maybe palladium will out perform gold at first since they are more rare above ground but later as more of the metals are dug up gold being the most rare as a total(above and under ground) will then return to outperform the other metals. So I would say get mostly silver now and when silver reaches it's peak trade your silver for gold.
Why I Prefer the Silver Lining by Howard Ruff
http://www.kitco.com/ind/Ruff/ruff_apr032009.html