Friday, July 6, 2012

The Next Big Banking Scandal of the 21st Century

The next big banking scandal?
I wish to remind readers that yet another potential banking scandal continues to loom on the horizon. The U.S. Commodity Futures Trading Commission is in the fourth year of an ongoing investigation into manipulation of the price of silver, and Commissioner Bart Chilton already blew the whistle back in 2010 by declaring: "I believe that there have been repeated attempts to influence prices in the silver markets. There have been fraudulent efforts to persuade and deviously control that price." Both HSBC and JPMorgan Chase were named as initial co-defendants in a related civil lawsuit brought before the U.S. District Court in Manhattan.
Scores of currency-market observers have seen red flags of foul play in the gold market as well, and I believe both metals may be targeted for manipulation as part of a broader effort to cushion the impacts of structural impairments that have roiled key fiat currencies amid the ongoing global financial crisis. After all, the value of fiat currencies is expressed and commonly understood through relative measures against each other, and precious metals offer the primary barometer for weakness throughout the complex of paper currencies.
The proliferation of leveraged financial instruments representing a fractional-reserve approach to the world's supply of actual physical gold and silver paves the way for widespread manipulation with potentially dangerous consequences, and in my view, the sooner these issues are afforded the sort of transparency now befalling the LIBOR and EURIBOR rate-setters, the sooner folks will be empowered to ensure that banks are not colluding to pursue objectives that may ultimately run counter to the common public interest. At the very least, we now know for a fact that banks have indeed colluded to pursue their shared agenda, and I for one would now like to know whether any such collusion has occurred with respect to silver and gold.

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