Numbers and greed without limit
By The Mogambo Guru
Ed Steer, who is called "correspondent-at-large" at Casey Research, says, "I
see that the derivatives market expanded 44% last year (according to the BIS)
and now sits at US$596 trillion dollars ... that's spelled with a 't'. If this
pace keeps up, by this time next year, total derivatives will exceed one
quadrillion dollars ... that's spelled with a 'q'!!!"
Those of us who are chillingly familiar with the implications implied by three
exclamation points gulp in horror. My daughter says, "What are you so afraid
of, you Big Mogambo Sissy (BMS)!" and when she laughed at me, I realized that
she is right! With a fiat currency, maybe all things ARE possible!
Trying heroically to calm down, I take another look at the
sentence, and I can't help but note that global gross domestic product is only
about $50 trillion or so, while the BIS (Bank for International Settlements)
says that derivatives alone total $596 trillion, which is staggering enough,
but then one's brain is overloaded with the concept of a quadrillion dollars!
$1,000,000,000,000,000.00!
When you divide one quadrillion dollars by the measly 100 million workers in
the USA who have a non-government job (and thus are the only ones capable of
turning a profit through high value-added work), this comes to the amazing sum
of $10,000,000.00 for each American worker! Bets are made that total 10 million
bucks per private sector worker! How the hell can such bets pay off?
For the derivatives market to make a profit of 1% is equivalent to $1 million
per worker! Hahahaha! It's so insane that it doesn't make any sense, and that
is why you soon find your brain whirling, whirling, whirling and you whimper
and cry in terror of the unknown and the terrifying unknowable.
Mr Steer is made of sterner stuff than Big Crybaby Mogambo (BCM), and instead
of screaming and crying like a little wuss, he calmly summarizes with "I don't
think we're in Kansas anymore, Toto ..."
And since we are already talking about derivatives and how I am such a wimp,
David Morgan of silver-investor.com boldly says that he can "prove perhaps ONE
HUNDRED TIMES the amount of silver exists on paper than exists in the physical
world."
This affected me enormously; I don't know why. Maybe because I am so scared and
paranoid at the economic horror that is looming in our future that I have been
drinking heavily and consuming various medications in various quantities just
so I can stop screaming, screaming, screaming in horror about inflation in
prices, which is always (and necessarily) caused by an inflationary increase in
the money supply, which is all thanks to the banks, the damned banks, the
damned greedy banks.
But the prospect of 100 ounces of silver being sold short for every ounce of
silver in existence was so exciting that I immediately noticed that I was
grinning from ear to ear and that my hands were shaking at the Very, Very Happy
Prospect (VVHP) of being on the squeezing side of a big short squeeze for a
change! Hahaha!
Spontaneously, I started singing in joy, my Melodious Mogambo Voice (MMV)
ringing through the spring air as I warbled that old time favorite, "We're in
the money! We're in the money! We got a lot of what it takes to get along,
because I have silver, and now for once in my pathetic, wretched life, I am
going to be the squeezer, while some other sorry bastard is going to be the
squeeze, and he'll lose his butt for a change, while we're in the money! We're
in the money!"
Everybody was just kind of agog, looking at me with their stupid mouths hanging
open, which I innocently mistook for interest and a desire for more, so the
second verse went "We're in the money! We're in the money! We got a lot of what
it takes to get along and hire lots of lawyers to file lots of nuisance
lawsuits against my enemies, like my wife and kids, whom I sue just to show my
OTHER enemies the kind of relentless, heartless, grudge-carrying bastard that I
am so that they might more accurately anticipate the kind of non-stop, legal
butt-kicking they can expect when I finally get around to them, which I will,
because I got lots and lots of silver and I can afford it now that we're in the
money! We're in the money!"
Mr Morgan, as I gather from his lack of response to my fabulous song-and-dance
act, is not a big fan of spontaneous musical theater, and neither applauded nor
put any money in the hat I had conveniently placed on the ground in front of
me, along with the helpful little placard that said "Put money in this hat!"
Instead, you could tell by the tone of his voice that he was singularly
unimpressed, and went on to reiterate, "The derivatives markets are alive and
well in both silver and gold", which is again made obvious when he says, "there
is roughly one hundred ounces 'claimed' on paper for every physical ounce of
silver."
And not only that, but Ed Steer of GATA puts it as "David Morgan of
SilverInvestor.com and The Morgan Report today may have settled the question of
manipulation of the silver market. In his new essay, 'Silver Price
Manipulation,' Morgan notes that while there is no limit on the creation of
paper promises to deliver silver on the New York Commodities Exchange, the
exchange limits silver deliveries to 7.5 million ounces per month. That is, the
exchange's rules are overwhelmingly stacked in favor of those shorting the
metal."
Mr Morgan says that this answers the question, "'Why doesn't some big investor
come along and just buy up the remaining silver?" He says that the answer is
that "It cannot be done. There are delivery limits now! Let me repeat!! It
cannot be done, there are delivery limits NOW!!"
Even more ominously, he says, "Oh, you might ask, 'Is there any limit to the
amount of silver that can be sold on paper?'"
Ominously, he explains that the answer is "no", "there is no limit to the
amount of paper silver that can be created!", which is bad enough, but
apparently there is no limit on the amount of silver to be loaned, either, as
Jason Hommel of the silverstockreport.com says that "If The Perth [Western
Australian] Mint is storing your metal, they admit that they may have loaned
your metal out to AGR Matthey", which in turn, he says, shows that "AGR Matthey
has well-established relationships with the major bullion banks and regularly
supplies to them on a contractual basis." What? Hahahaha!
And the proof is allegedly found in the notation that "The $880 million of
precious metals deposited by Perth Mint Depository clients (note 17) was used
in operations by Gold Corporation as inventory ($381 million - Note 8b)."
Unbelievably, this looks like they are taking your money and buying silver for
you, and then loaning the silver to people who sell it, dumping it on the
market, driving the price of silver down, which is the opposite of what you
wanted when you bought the Perth Mint certificates! Hahahaha! What a scam! Ugh.
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.)
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