The End Game for Silver Shenanigans... / Commodities / Gold and Silver 2022
The federal criminal trial of JP Morgan executives Michael Nowak, Gregg Smith, and Jeffrey Ruffo began on July 8th.These senior bankers are accused of running a years-long scheme to manipulateprecious metals prices through what is known as “spoofing.”
Perhaps the three will be found guilty, butit isn’t likely to have much impact on trading in the papersilver markets. If there is solution toartificially rigged prices, it will come from somewhere else.
It isn’t that regulators don’t have a lotto go on. Investigators had the goods when prosecutors got Deutsche Bank toplead guilty and cooperate.
The German bank turned over mountains ofadditional evidence the FBI used to target two other JP Morgan traders, JohnEdmonds and Christian Trunz. Those two cut deals of their own and agreed toprovide evidence against Nowak, Smith, and Ruffo.
At present, regulators don’t seem to caremuch about cleaning up the markets. They appear to have little interest inholding the actual businesses that drive these corrupt trading schemesaccountable.
The effort is focused on prosecuting a fewlower-level crooks while avoiding serious consequences for the bank and itssenior executives.
JP Morgan, the institution, got a “DeferredProsecution Agreement” from the Department of Justice and paid a modest fine in2020. The bank may continue trading as usual regardless of the outcome of thetrial now underway.
The cozy relationship between the bank andits regulators is apparent. The optics are bad. But they have no shame.
David Meister served as Director ofEnforcement at the CFTC from 2010 to 2013. In September of 2013, his agencyended its 5-year investigation into price manipulation at JP Morgan anddeclared there was no basis for action.
The subsequent Department of Justiceprosecutions have revealed what a farce the CFTC investigation was, but thisfailure seems only to have enhanced Meister’s career.
He left the CFTC just after closing theinvestigation for a more lucrative career as a Wall Street attorney. TodayMeister is Michael Nowak’s defense counsel.
The COMEX and the LBMA, the two privateorganizations operating the markets where the corrupt trading practices occur,apparently have no intention of holding JP Morgan accountable.
You might think physical silver investorswould get frustrated and simply throw in the towel. But they haven’t. Lowerprices and declining confidence in institutions, including banks andgovernment, is driving more buying – at least in the physical markets.
And herein lies the solution. Ultimately,demand for physical bullion – not paper proxies – is the path to ultimatelyterminating price manipulation.
The actual number of bars underpinning theenormous volume of paper silver trading has been in steep decline since early2021. #SilverSqueeze may be out of the headlines, but investors are stillstacking.
Ronan Manly, of BullionStar, reports silverstockpiles in LBMA and COMEX vaults are at a 6-year low.
The inventory situation for the exchangesgets even more dire when accounting for how much of the reported stock is notimmediately available for delivery because the metal is held by ETFs andprivate investors.
If outflows in the next 18 months matchthose of the past 18 months, the available physical inventory could approachzero. That is the moment when holding silver IOUs will not be the same asholding the metal itself.
In such a scenario, a default on thefutures trading exchanges may only be avoided if prices for silver rise enoughto entice the holders of physical bars to part with them.
The CFTC may turn a blind eye to theproblems on the COMEX, but the physical markets themselves aren’t above thelaws of physics.
By Clint Siegner
Clint Siegner is a Director at MoneyMetals Exchange,perhaps the nation's fastest-growing dealer of low-premium precious metalscoins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon,puts his experience in business management along with his passion for personalliberty, limited government, and honest money into the development of MoneyMetals' brand and reach. This includes writing extensively on the bullionmarkets and their intersection with policy and world affairs.
© 2022 Clint Siegner - All Rights Reserved
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