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Former Goldman Commodities Research Analyst Confirms LMBA OTC Gold Market Is "Paper Gold" Ponzi

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Sun, 03/28/2010 - 14:11 | 278795 cymro33
cymro33's picture

Roeuters: President O announced details of his new initative to pass the “Retirement Annuity Act “(RAA). The president said the taxpayer does not have the necessary sophisticated financial knowledge (no inside information, no lobbyists to ensure laws are written in their favor, etc.) to compete against banks and hedge funds. Mutual Funds have failed miserably.

1.    All workers will contribute 10% of their after tax salary to their RAA account. Employers will match with 15%.
2.    Funds will be invested in 10, 20, and 30 year TIPS. (Govt will continue to calculate the inflation rate so that it will never exceed 2.25%)
3.    The worker on retirement at age 72 ½ will draw an annuity until death.

The President said this is a win - win for taxpayers and Govt. The cash collected weekly will pay for Govt liabilities (similar to Social Security) and the taxpayer will have their investment in rock solid backed Govt TIPS.

Sun, 03/28/2010 - 14:16 | 278801 Bob
Bob's picture

Just to clarify: So these new "benefits" will run parallel to the Social Security program investments I've been making for my whole life?

Or will they transfer the present value of my SS "contributions" into the RAA?

This has gotta be voluntary, right?

Sun, 03/28/2010 - 15:15 | 278821 cymro33
cymro33's picture

This will be in addition to SS. Govt data found that 31% of workers have saved nothing for retirment. The program will be mandatory.

Sun, 03/28/2010 - 14:55 | 278819 Dantzler
Dantzler's picture


Sun, 03/28/2010 - 16:10 | 278887 cymro33
cymro33's picture

Just in from Tyler Durden   “ It's Official - America Now Enforces Capital Controls”

'And so the noose on capital mobility tightens, as very soon the only option US citizens have when it comes to investing their money, will be in government mandated retirement annuities, which will likely be the next step in the capital control escalation, which will culminate with every single free dollar required to be reinvested into the US, likely in the form of purchasing US Treasury emissions such as Treasuries, TIPS and other worthless pieces of paper.'

Sun, 03/28/2010 - 16:10 | 278885 bc0203
bc0203's picture


The only mention of a "Retirement Annuity Act" when I google it is HR 828, which was introduced on Feb 3, 2009.  According to Washington Watch, the purpose of that bill was the following:

"H.R. 828 would amend chapter 84 of title 5, United States Code, to allow individuals who return to Government service after receiving a refund of retirement contributions to recapture credit for the service covered by that refund by repaying the amount that was so received, with interest."

The actual text of the bill is less than a page long, and pretty much says the same thing.

What are you referring to?




Sun, 03/28/2010 - 16:13 | 278889 cymro33
cymro33's picture

See note #278887.

Sun, 03/28/2010 - 16:22 | 278898 bc0203
bc0203's picture

Oh I get it.  Your post was satire.  Next time start with, "I can see it now," and use a date in the future, so you don't make those of use of us who might be affected have a mild coronary.

Sun, 03/28/2010 - 19:44 | 279110 Double down
Double down's picture

Mild!  I have to clean my chair!

Sun, 03/28/2010 - 14:12 | 278797 Segestan
Segestan's picture

Adrian Douglas for President.

Sun, 03/28/2010 - 14:13 | 278798 Bob
Bob's picture

Jeeze, should we be looking behind this Gold Curtain?

Sun, 03/28/2010 - 14:15 | 278800 PaperWillBurn
PaperWillBurn's picture

$1,100 X 100 =

Sun, 03/28/2010 - 14:34 | 278808 boricuadigm-shift
boricuadigm-shift's picture

I was just thinking about that.  Gold/Silver is cheap beyond our wildest dreams!  When all this shit is really exposed we would have wish they kept the game going for at least another 1-2 years.

Too much exposure in the last couple of weeks.  I'm wondering if the Elite already have all physical gold/silver they need and they are ready for the countdown.

"Houston, we are ready for the countdown"

"Up up and away"


Sun, 03/28/2010 - 17:44 | 278959 DoChenRollingBearing
DoChenRollingBearing's picture

-- Maguire.

-- New ZH thread on reporting American accounts overseas.

-- Now London apparently outed as a Ponzi / gold scheme.

As bugs said on the other thread, it's almost midnight.  Funny how fast things are happening now.

Sun, 03/28/2010 - 20:33 | 279161 delacroix
delacroix's picture

labor and energy to mine and refine 1 oz of silver $6  labor and energy to mine and refine 1 oz gold $635  silver is an insanely cheap bargain right now, and we use it up faster and faster. pretty soon it will be a rare earth element.

Mon, 03/29/2010 - 00:27 | 279365 Cookie
Cookie's picture

Rare earths are not 'rare', just extremely difficult to refine

Mon, 03/29/2010 - 01:03 | 279395 DoChenRollingBearing
DoChenRollingBearing's picture

delacroix and Cookie, I am interested in rare earth metals as a possible investment opportunity (esp. if I am wrong about TSHTF...!)

Apparently the US does not have adequate capacity to refine the various metals in that group.

I am considering actually buying Europium and Terbium as a medium term investment if our economies get back in order.  Maybe a miner or two of the same.

ANYBODY who knows something about rare-earth metals, please chime in!

Sun, 03/28/2010 - 14:48 | 278814 SWRichmond
SWRichmond's picture

...bread at $150 a loaf.

Sun, 03/28/2010 - 14:55 | 278818 A Nanny Moose
A Nanny Moose's picture

Pitchforks and torches....priceless

Sun, 03/28/2010 - 15:02 | 278826 simonyadig
simonyadig's picture

$1,100 X 100 = $1,100........ apparently.

Sun, 03/28/2010 - 14:32 | 278807 BrianOFlanagan
BrianOFlanagan's picture

GLD investors must be sweating.

If it's not in your hand, you don't own it!

Sun, 03/28/2010 - 14:34 | 278809 Harbourcity
Harbourcity's picture

Arrogance is a common defense of elitists.  Look at Geithner and Bernanke.  They behave as if they are the only ones who knows what's going on and so we should listen to them even if we believe they're wrong.  It's exhausting because there is nothing at this time to hold these peoples feet to the fire.  They do what they do with impunity.

Sun, 03/28/2010 - 15:37 | 278855 DaveyJones
DaveyJones's picture

Arrogance is also a defense of white collar criminals to get you to back off

Sun, 03/28/2010 - 14:39 | 278810 DosZap
DosZap's picture

This has been my contention all along..........ETF's in PM's should not be allowed to operate, unless they have the reserves to back them.

It's a SCAM...............just like fractional reserve banking, you deposit a $1,000, they loan out $10,000,,,,,,,,,,,,,

Except this is worse, they have NOTHING , no reserves (physical of any kind).

Should be shut down, Gold & Slvr, would skyrocket.

NO PHYSICAL STOCK, NO ETF's...........period.

Now, control THAT!

Sun, 03/28/2010 - 15:45 | 278861 Hulk
Hulk's picture

seems to me that a Soros type could make a big enough delivery demand to trigger a delivery stampede and collapse the paper market. This is going to be interesting...

Sun, 03/28/2010 - 17:47 | 278962 DoChenRollingBearing
DoChenRollingBearing's picture

THAT would make it 11:59. 

Or 11:59:55.

Sun, 03/28/2010 - 18:19 | 279004 jedwards
jedwards's picture

I agree with you that a gold run will turn the paper gold instruments such as gold contracts and GLD into completely worthless items, however, I believe that this type of event will will take down physical gold as well.

If global confidence in anything gold-related falters, then I think people en masse will abandon gold completely because they won't know what is fake and what is real.  If this happens, I think the entire gold market could be wiped out.

Look at the auction rate securities market.  All it took was for a couple of failed auctions, and as far as I can tell, it's dead in the water, even though the concept is sound.  If people can't trust paper contracts for gold delivery, without the liquidity that electronic trading provides, I just can't see how people will be able to run to it as a store of value.

Sun, 03/28/2010 - 18:35 | 279030 Shameful
Shameful's picture

If you are correct it would be the buying opportunity of the millennium.  Or do you also think that people will cling to currencies while the central banks are desperate race to debase and devalue to 0?  I do think paper gold will go down but for some reason I don't understand why if there is demand for something then it turns out the supply is 1/100 of the expect supply it would crash in value.  That is like if I bought a Rolls Royce and then all the other Rolls Royces in the world disappeared, would mine get more or less value?

Mon, 03/29/2010 - 00:24 | 279363 jedwards
jedwards's picture

But your example doesn't match the situation.

What if you want to buy a used Rolls Royce, but there are fake Rolls Royces being sold at the exact same price as real ones, and you won't be able to tell the difference unless you bring it in to a Rolls Royce dealership (after buying it).

Now, let's say it's not just fake, but they explode.  Are you still interested in buying Rolls Royces?  If you have no confidence whether or not what you're buying is real, would you really want to bother buying it, or would you switch to Bentley because you know there are less fake Bentleys on the market?

If the problem of fake exploding Rolls Royces becomes rampant, the pool of potential buyers now decreases, and they'll all move to buying Bentleys.  Now, with the demand of Rolls Royces dropping, the value of your Rolls Royce diminishes.

If this becomes a global trend, and people move away from gold or Rolls Royces as a store of value, then it becomes a real problem.

I don't think this would occur until there's a gold run.  And I think the probability of a gold run is very small.  But if there ever a gold run, it could be the case that global interest for gold as a store of value could potentially be irrevocably damaged.  Maybe it might move to USD again like it did in 2008, or maybe the yuan, oil, platinum, etc.

Mon, 03/29/2010 - 00:53 | 279387 Shameful
Shameful's picture

If you are referring to the paper market, then I take possession of my Rolls and let other people play with paper Rolls.  The paper ones explode and my real one remains.  In this case there would be a clear distinction, as one exists the other one does not.

Now if there was fake physicals Rolls then yes you would be correct.  However it is difficult to fack 1 ounce coins.  Not impossible to be sure but any real counterfeiting would be at the hirer end of the market because harder to sound test and more opportunity for profit.  Now I'm not convinced of the whole tungsten bar scandal is gospel.  If that happen that could hurt the market, but again the small coins are still safe.  But those trying to sell large bars would find confidence at a premium.

But counterfeiting happens.  It happens a great deal with paper money after all.  I suppose one could even try to counterfeit oil (addatives) if we have to haul drums of it around as currency.  Counterfeiting has always been a problem, at least with counterfeit gold there is still gold in it otherwise hte fact could never pass.  With counterfeit paper it's all worthless.

Sun, 03/28/2010 - 19:21 | 279091 Gordon_Gekko
Gordon_Gekko's picture

Testing for fake Gold isn't that hard. All you have to do is to melt it. Any kid in Asia knows it.

Sun, 03/28/2010 - 21:32 | 279206 Cognitive Dissonance
Cognitive Dissonance's picture

Which is what makes Gold coins so valuable. They are so small and thin it isn't worth it (yet) or even feasible (yet) to fake them with tungsten, making them good as Gold, pun intended.

Mon, 03/29/2010 - 00:31 | 279366 Cookie
Cookie's picture

+1 GG. I am astounded about the lack of knowledge in the western world about how here in Asia gold, is, was, and will always be money and the ultimate store of wealth. There are as many gold shops as 7-11's for God's sake!!

Sun, 03/28/2010 - 19:46 | 279112 Double down
Double down's picture


Mon, 03/29/2010 - 18:27 | 280033 Renfield
Renfield's picture


That was a fine summary of recent key events in this paper-gold fiasco. Very clear for those of us less versed in goldbug-lore. I hope you will continue to write more in this vein - I need more stuff like this, condensed down, especially when showing family & friends who are even less money-minded than I am, and who are continually confused by the paper 'gold' price.

Khrysos bless you - and Adrian Douglas and Harvey Organ too!

Sun, 03/28/2010 - 14:42 | 278813 Gold...Bitches
Gold...Bitches's picture

and thats why you need to own some physical before this thing blows up

Sun, 03/28/2010 - 14:51 | 278817 cognitis
cognitis's picture

So many posters here divulge themselves to be dolts and gullible. Everthing provided by Blogger are nothing more than hearsay, fabrications, fallacies; as I observed in a prior post, the gullible rustic Andrew Maguire never provided "direct evidence" of anything but rather hearsay from anonymous sources; trading volumes of any derivative in excess of known inventories is common and necessary for liquidity, and only someone who has never traded any futures contracts at all should be ignorant of this commonly known fact; different prices between fungible markets at different times is also common and never indicates "market manipulation", since--golly gee Gomer--JPM could pump the gold market in Hong Kong as easily as in NYC or London. To the dolts and gullible who credit futures markets to owe them free money and a living: continue buying the headlines and conspiracy rants, since someone has to lose and get blown out at short-term bottoms.

Sun, 03/28/2010 - 15:12 | 278835 Quintus
Quintus's picture

You go your way brother, and we'll go ours.  One side will be right and one side will be wrong, only time will tell.

Now, those of us taking the Precious Metals side of the debate have heard arguments, if that is not to overly elevate the status of your little rant, like yours several thousand times before.  It always amazes me that you paperbugs devote so much time and effort to Gold-related discussions.  Any discussion of Gold or Silver seems to possess an irresistible attraction to paperbugs; pulling them in like bees to an open jam jar.  On the other hand, Precious Metals investors do not, to my knowledge, generally troll paperbug blogs and websites attempting to convince those who believe that their life savings are best stored in paper that they are wrong.  

Please feel free to curb your missionary zeal to bring enlightenment to the poor benighted savages (or 'Gullible Dolts' as you charmingly put it) in the Precious Metals markets.  We're fine as we are thanks.

Sun, 03/28/2010 - 16:43 | 278923 SWRichmond
SWRichmond's picture

Any discussion of Gold or Silver seems to possess an irresistible attraction to paperbugs; pulling them in like bees to an open jam jar. 

What a gem that is!  Isn't it amazing how the radical paperbugs always show up to cajole, threaten, debase?  Well, debasing is what they are best at, isn't it?

Sun, 03/28/2010 - 18:05 | 278989 Gunther
Gunther's picture

the trading volume can be higher then the physical supply if the same stuff gets traded back and forth during the day. With the two daily sessions of the LBMA I do not see multiple trades happen but it might be possible.
The big issue is if more metal sold then really available. That is the equivalent of naked shorting stocks with the difference that is possible to ask for delivery of the metal. Nobody claimed that the bullion banks sell only metal short that they own thus they are in trouble if delivery is called. That is the point.

Sun, 03/28/2010 - 20:21 | 279147 TheGoodDoctor
TheGoodDoctor's picture

I thought every trade needed to have a unique serial number that was tied to the bar. So, are they doing multiple trades from the same bar? Or are there multiple serial numbers per bar? How are they doing it to get away with it if there is a 100x multiple in the paper markets?

Mon, 03/29/2010 - 02:12 | 279424 A_MacLaren
A_MacLaren's picture

So, are they doing multiple trades from the same bar?

Yes.  Unallocated accounts.  Pools of ledger entries. There is no bar in their warehouse with your serial number on it.


Sun, 03/28/2010 - 14:56 | 278820 Lionhead
Lionhead's picture

The coy smile & pauses of Gensler after Adrian Douglas drops his bomb is priceless. The CFTC's paper scam game with the collusion of the bullion banks has just been officially exposed at their own hearing. As for Christian, his terms of obfuscation, e.g., beneficiation process & the physical market just add to the confusion to muddy the waters to the public investor. Oh, yes he admits, "Well actually, I misspoke." No doubt he did on his earlier comments.

If the CFTC allows business as usual in the futures/OTC markets, then the bifurcation between the real physical market & the paper market will continue with a premium on the physical market prices. Since they cannot fix that, they eventually loose control over price discovery. Game up boyz...

Sun, 03/28/2010 - 14:58 | 278822 b_thunder
b_thunder's picture

"how do you short somethign to cover a sale"  -- no, it's not a hedge. it's doubling down, the favorite recommendation of so-called financial advisors whose previous recommended investments are under water.  "You liked it at 10?  You sure will like it at 5!"


" Mr. Christian is not concerned about the ability of the shorts to deliver because they can cash settle! He clearly has no understanding that when someone wants to buy precious metals giving them cash  instead is a failure to deliver. It is a default!"   --   it may technically be a default, but if the government declares a "gold holiday" and says you have 2 choices:  take cash (perhaps at fixed exchange rate, so not to overload printers in the Fed) or do 15 to 20 without possibility of parole, you'll gladly take that cash.


Sun, 03/28/2010 - 15:35 | 278853 Waterfallsparkles
Waterfallsparkles's picture

Yes, they can cash settle because "Owners" do not Own the physical Gold they just have a Ledger entry in their name not an account backed by the Physical Gold.

Based on the Fiat Money system.  No one will ask for their Gold so sell 1,000.times what you actually have in your vaults.

Clever and misleading.  But, hey, anyone who deals in the commodity Markets should be smart enough to know.

Sun, 03/28/2010 - 15:53 | 278872 Crime of the Century
Crime of the Century's picture

Many people in GLD think they will be able to collect "their" gold should they desire. Despite the blinding legalese in the prospectus, it was sold to them as buying gold. Real gold.

Sun, 03/28/2010 - 15:53 | 278870 fightthepower
fightthepower's picture

I am not sure why you would sell something to hedge a sale. 

The actual transaction should go like this:  A mining company wants to sell 10,000 ounces of gold, they call up Goldman Sachs and sell the gold.  Goldman Sachs buys the gold from the mining company, then sells a gold futures contract to hedge the purchase.  Is that what he was talking about?

Mon, 03/29/2010 - 08:01 | 279501 saulysw
saulysw's picture

Ah, but when I too k delivery of my ounces, I decided to rid myself of worldly goods and threw them into the ocean. So sorry!

Sun, 03/28/2010 - 14:59 | 278823 digalert
digalert's picture

I don't have the education or salary of these clowns in suits, so forgive me when I stumble on this,

"there is a hundred times what there is" statement. So to make it simple for me. I would be better off trading all my physical Gold for that there ledger Gold, then I'd be full of it.

Do NOT follow this link or you will be banned from the site!