Saturday, October 1, 2011

Q&A With The Doc: Is Bart Chilton Really a Good Guy?

David writes:

Hey Doc!
I've been long on silver since '99 and have been loving it.
The ongoing manipulations from JPM and HSBC have infuriated me to no end. I've been corresponding with Mr. Chilton on the CFTC for over 3 years now. Some of my emails were so acidic that I got no response, but I have to tell you, for the most part, my emails were answered!
Do you think he's on the Morgan/Goldman payroll or is he (as I have had different people tell me) the only one of the commission who is seeking free markets? What's your take on him (if you have one)?

David, excellent question. Seems like every silver investor has his own opinion on this matter.  Ted Butler seems to be the champion of the belief that Mr. Chilton is the lone good guy at the CFTC and is working towards ending the silver manipulation.
Mr. Chilton's statements in 2010 regarding the silver market seem to substantiate these beliefs.  With the 3rd week of September coming and going without further promised comments on silver from Mr. Chilton, many are now questioning whether Chilton really has any intention of ending the silver manipulation.

I believe that the real reason for the CFTC's inaction regarding silver are the MACRO implications of the CFTC  actually ending the silver manipulation by forcing the silver shorts to cover and close out their massive short silver positions. 
Silver investors view this as a black and white subject concerning silver, but I guarantee you that the CFTC is more concerned about the domino effect of MAJOR MACRO economic implications that would be a direct result of their action force-ably ending silver manipulation.

As of 2009, the BIS report for derivatives involving "other" precious metals (SILVER) were $203 BILLION.

This is with a silver price of ~ $15/oz in 2009. 

The BIS' 2011 report indicates that silver derivatives have decreased to $93 BILLION, even while price is 2-3x higher since 2009.  It appears likely that the BIS has fudged the numbers to show a smaller problem with silver as the numbers of gold derivatives appears unchanged from the 2009 report to 2011 at $425 Billion, and total commodities derivatives were also unchanged at $3.1 TRILLION.

Whether the true number remains over $200 Billion or has in fact decreased to $93 Billion as the 2011 BIS report indicates, the fact remains that should the CFTC suddenly force a liquidation of JP Morgan and the rest of the cartel's massive short silver positions (and gold for that matter) forget their futures market losses, the TBTF banks' precious metals DERIVATIVES LOSSES would instantly vaporize the banks involved with shorting gold or silver.
If for example the CFTC enforced a liquidation of JP Morgan's positions by Monday Oct 3rd, the ENTIRE WORLD ECONOMY would be living in the stone age again by Tuesday Oct 4th.
The CFTC knows this and THIS is the real reason that they are dragging their feet regarding silver/gold price manipulation.  Sure they realize there is a problem, but they also realize that there is currently no solution to the problem as any meaningful action by the CFTC ends the modern financial system.  Instantly.
We can speculate all day as to whether the CFTC actually cares about precious metals manipulation or not, but unless and until they can figure out a way to end it without triggering the detonation of $203 Billion in silver derivatives and $425 Billion in gold derivatives, don't expect any changes to the status quo brought about by the CFTC.
The Doc has always believed it will be the supply/demand fundamentals and the free market that will eventually end the precious metals manipulation, and nothing has changed thus far that has made me question this belief.