Jeffrey Christian Has A Second Chance To Disprove The Gold Ponzi Scheme, Fails

Tyler Durden's picture

Today, Jim Puplava of the Financial Sense Newshour interviewed Jeffrey Christian, recently made notorious for his disclosure of what GATA has been claiming for years, namely that the paper to physical gold market is about 100-to-1, during questioning at the recent CFTC testimony. Christian, who clarifies his stance on position limits and commercial position limits (he is concerned about PM markets moving away from exchanges to OTC) discusses concentration risk in financial institutions, swap dealers (OTC-futures hedging of presold gold while still in transit to end markets and not yet in Good Delivery form), but most notably the 100-1x leverage which is what everyone would like to hear Christian elaborate on. His version: "I was actually pretty clear but there are these troglodytes in the market that like to distort what whatever anybody says and they distorted what I said. What I said was that if you look at the turnover in the major futures and options markets, and the clearing volume in the London dealer market in gold and silver, you would see that there are 100x times as many ounces trading in those derivatives markets as is produced by mines and refineries every year and used and purchased by fabricators and investors. So that's a 100 to 1 ratio of derivatives to underlying physical new supply. It's not a 100 to 1 ratio of the turnover of the physical market relative to the futures or derivatives market because the physical metal will turnover 5, 6 maybe 8 times in any given year. But you do have a much larger derivatives market in gold and silver than you have a physical market, and that ratio is about 100 to 1."

Jeffrey then proceeds to once again ignore the underlying issue, and highlights other massively diluted ponzi construct markets in which there is a discrepancy between physical and derivatives. "If you look at fishes and loaves of bread, the ratio of derivatives transactions to physical underlying it's 5 to 1; if you look at aluminum or copper it is about 15 to 1." And for the prize: "if you look at currencies or treasury bills or notes, you find that the ratio of derivatives trading to underlying physical is about 100 to 1." Congratulations gold holders - the derivatives market has applied fractional reserve psychology to your holdings, and thrown in a pinch of Exter's pyramid, and made your claims about as valid as those of fiat pieces of paper printed every single day! Of course, just like in corporate CDS (where applying Christian's approach, the ratio of total notional CDS to outstanding debt is about 10 to 1, or a joke compared to the gold market's underlying to outstanding derivative gross notional), when Lehman blew up and a zero recovery on the Lehman bonds was virtually guaranteed (the Lehman CDS auction closed just over 8%), the gross instantaneously became net, and the scramble to cover derivative hedges seemed like it would end the world as the netting merely accelerated the bank run. In other words, Christian once again completely misses the point that should there be a run, and every contract shifts to a net notional position once the credibility of the derivative market is refuted (via counterparty risk or otherwise), you still would have at best a 1% collateral backing of your claim. In other words, the forced conversion of the futures market into physical precipitated by a bank run would result in a 99% loss of what investors had previously considered bookable assets. Christian's conclusion is that this is all fine and good - "the market is much larger than the underlying market, and there shouldn't be anything unusual about that because quite frankly that's how most markets work." Actually, that's how most derivative markets work. And when the asset being "derived" is that which is located at the bottom of Exter's pyramid, the whole premise of its value collapses, as gold only has worth due to the fact that unlike the aforementioned "currencies and treasury securities" it can not be diluted into oblivion by mad Federal Reserve economists, be it by printing presses, nor by speculative derivatives traders.

As for tonight's Jack Handy moment of insight from Jeffrey Christian, he says this brilliant pearl of wisdom: "I've worked at major banks banks and these guys are incredibly conservative, risk averse people. [no, don't fine tune your eyes, you read that right] Banks make their money at the margin. They borrow from so and so [we'll help you Jeffrey, that so and so is called the Federal Reserve] at 75 bps and they lend it out at 85 bps. They've made a tenth of a percent and they are very happy." [for an immediate refutation of this unbelievably naive claim from a so-called expert, see the following speech by the Fed's Brian Sack]. And that's why JPMorgan, would never, never, risk by a naked short in the COMEX, even though with their massive inventory, they are the COMEX. Also, quite amusingly, of the very "conservative, risk averse" big banks that Christian has worked with, his bio lists only Goldman Sachs: truly a paragon of prudent money management and not betting the farm on a taxpayer bailout! It continues: "the banks that have these large positions on the COMEX are not naked short! Those banks' management, their credit departments, the banks that they borrow money from [the Federal Reserve, which as we all know lent out against collateral that was considered "bottom of the barrel"] would never allow them do that. So they are not naked short." And it continues. As a reminder this drivel comes from a person who is self-described as "one of the world’s premier authorities
on commodities derivatives, both for hedging and investment purposes."

Pay attention to the example presented by Christian at 43 minutes in, of the example of Warren Buffett and the Phillip Brothers cornering the silver market via an advance demand of 129 million ounces of silver for physical delivery in 1998. "This was congestion because there wasn't 129 million ounces of silver readily available for delivery to his account in London in the first 3/4 months of 1998... but by June it was there." We ask Mr. Christian, of the total Silver derivatives and physical market in 1998, what fraction of the market was 129 million pounds? And what was the physical to derivative leverage in 1998, and compared to today? And what would happen if just one percent of the total notional in gold derivatives were to demand physical delivery today? Christian's defense then "it was just a matter of the logistics of coming up with the metal." What would the logistics be of all the physical gold available in the world to derivatives having to be delivered. We can't wait for that particular explanation.

Lastly, Christian totally shoots himself in the foot by discussing how banks, because they are regulated by the OCC, will only leverage one's unallocated gold deposits by 12x (in other words will lend out your gold 12 times), as opposed to AIG, which is unregulated, and will leverage 40x. Good thing over the past month nobody has uncovered how both Lehman and all the regulated banks were using every scheme imaginable to leverage well into the 20s, and before Bear, into the 30s. Somehow AIG was the loophole in the regulatory system. You see, there is always just one cockroach... nevermind that Goldman Sachs itself was bankrupt absent taxpayer bailouts.

Seriously, where did world expert come from? Oh yes. Goldman Sachs. Move along.

At least some piece of truth from Christian: "You do see people come in and especially in the New York premarket before Comex opens, they'll come in with a large order if they want to move the price in their favor. And that does happen. It was much more prevalent in the 1990's. We used to always talk about this with our clients. And we used to tell our gold producing clients - Look, these guys come in, and when you look at the gold price you can see if there is a large order that comes in before Comex opens up, you know that a guy is trying to move the price, and it's not a matter of working a hedge."

And despite this, Christian claims "there's no grand conspiracy to move prices up or down on a sustained basis."

For anyone who wishes to lose 10 IQ points permanently and listen to Christian, his section begins at 26 minutes into the show.

h/t James and Hans

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hedgeless_horseman's picture

Where there are firemen with a truck and a hose, there is usually a fire.

MarketTruth's picture

Apologies for hijacking to top spot here.


You can DL the file at

No need to 'live stream' it. For those NOT using the MaxIpad, right click above link and choose Save Target As...

Womb Service's picture

I wonder if he'll have an "accident" before he gets a chance to open his mouth again?

akak's picture

Rumor has it that he was booked on the Polish delegation Aeroflop flight into Minsk, but had to cancel at the last minute.

Cognitive Dissonance's picture

"Those banks' management, their credit departments, the banks that they borrow money from would never allow them do that."

I feel better already, knowing that these guys would never be allowed to do that. Of course, if I were to apply any logic, common sense or even critical thinking to this quote, I might need to question this little pearl of wisdom. But since mine is not to question why, mine is just to buy buy buy, I can sleep tight tonight.

Good night Daddy.

PS......"For anyone who wishes to lose 10 IQ points permanently...."

Consider it done Tyler, consider it done.

truont's picture

Ironically, gold bug (AKA troglodyte) history will come to regard Jeffrey Christian as the most influential whistleblower on 100:1 paper to metal leverage in our financial markets.

akak's picture

I propose that we encourage some (private) mint to produce a commemerative gold coin with the face of Jeffrey Christian on one side and Jon Nadler on the other (and with little Bernake faces scattered throughout), and with a legend on the edge of the coin stating: "Heroes to the Gold Cause!"

Al Gorerhythm's picture

Bedroom scene: Mother and child, 1 minute past midnight, during a raging, Force 10 storm.

"Sleep little one, sleep. It's only you dreaming. Mommy will make it better".

(She raises her hand and sprinkles imaginary pixie dust over the sleepy child's head. That has been their game and it has always placated him.)

"Thanks mommy." the sleepy child mumbles, reassured.

(As windows implode and the roof blows off, the child closes his eyes and sleeps on, trusting that all is well).

been there done that's picture

I've been listening to Puplava's show for few years now. I heard this earlier today and took some of the same excepions to it. Tyler points out far more than I noticed but I was really scratching my head on this one. Puplava is an inflation guy. He beats you over the head w/ a lot of the same viewpoints over and over (if you care to listen). He has convinced me that oil IS going to be a problem.

RatherBFlying's picture

Ever since Puplava came back from vacation in August 2009, he's moved from a Prudent Bear to a Total Pump Monkey. He completely missed the run up from the March lows to August, then jumped back in and has been touting the market ever since then. The show peaked in 2009 when they did the Inflation/Deflation debate, but it seems to me the only one who didn't listen to what was said in the debate was Puplava himself.


That said, I'll keep listening to the show because of John Loeffler. If you didn't hear his mock interview with the combination Sheep Herder/Investment Broker last week, you missed a chance to laugh your ass off.

SWCroaker's picture

Puplava makes a point of inviting both types of guests: those that he agrees and disagrees with. He's also stated (and shown) that he is not in the habit of cutting his guests down (ala CNBC shoutfests) and leaves his listeners to think for themselves.  He does, I do, and I find it refreshing.  JP is also a proponent of managed storage over personal possession, and there I take liberty to think my own way as well.  Nobody's perfect, and even if I was listening to *me* hosting the show, I'd probably find bones to pick.


When I first listened to this interview, it dropped my own personal star rating on both the guest and his firm by several stars.

akak's picture

Puplava would not have been "cutting down" his guest Jeffrey Christian in any way to merely ask him some obvious and pointed questions as follow-up to some of Christian's more disingenuous and opaque statements.  I think Puplava really dropped the ball on this one, and I was almost dumbfounded listening to the interview to hear some of the outrageous bankster machinations that Christian tried to defend, and the misinformation that he attempted to peddle, with no meaningful response from Puplava whatsoever.

Next time, Jim, throw some hardballs, and stop striking out on every easy pitch that comes your way!

Vendetta's picture

When they start calling people names like "troglodytes" we know we are getting on their nerves.  They don't like to explain themselves because they can't with reasonable explanations so they inevitably start sounding like Charlie Brown's teacher.

Problem Is's picture

Hilarious Vendetta...

"...sounding like Charlie Brown's teacher."

You mean: "Wah-wah-wah-WAH-wah?"

"When they start calling people names like 'troglodytes'"

The Fallacy of the Ad Hominem  Attack

Notice Jeffery "Peckerhead" Christian (whoops I did it...) did not retort or counter the facts of the dissenter. The dissenter would be the "troglodyte".

"Conspiracy Theory" is the ever popular method of discrediting the dissenter by... not refuting his facts but by the fallacy of the Ad Hominem attack... calling him names to discredit the position or argument the dissenter brings forward. Classic sloganeering by idiot mouthpieces (whoops... did it again) of the oligarchy.

The problem with Myth Narratives like what Cristain is espoucing... is they are logically invalid arguments. So when confronted with facts, counter examples, bitch (damn... did it again) has no facts to stand on or no place to go but..."troglodyte."

Hansel's picture

Me caveman.  Me like shiny rock.

The Person Familiar With The Matter's picture

Should have bought after seeing the Friday CNBC viewer poll. But after hearing an "expert" explain it, will be buying GLD and SLV first thing Monday morning.


perchprism's picture


Dood, before you do that, go to and buy a few oz of gold for personal possession.  Buy a couple hundred Mercury dimes, and Standing Liberty quarters.  Maybe a roll of Silver Eagles.  You can order online tomorrow and pick it up at the Post Office by Friday.



chumbawamba's picture

Wait, what!?  The whole idea here is that you cannot trust any counterparties.  And you just have not been doing your reading.  GLD and SLV are not gold and silver: they are paper investment vehicles, nothing more.  You will no more extract any gold or silver from each respective fund that you would blood from a turnip, or the truth from a Goldman Sachs banker.

Physical gold and silver, in your possession.  Hurry.

I am Chumbawamba.

Attila's picture


We were in Kitco the other day and the gal there broke into fits of laughter when she found we were looking for Silver Maples. She said they had some in early March which lasted less than one day.


The Canadian Mint advised they MIGHT have some Maples in July.


Guess there's a surplus of Ag...



Real Wealth's picture
by Attila

"We were in Kitco the other day and the gal there broke into fits of laughter when she found we were looking for Silver Maples. She said they had some in early March which lasted less than one day."

Currently silver is in good supply locally.  However, my last visit there was an 50ish black gentleman buying like $850 worth in cash.  Previously, I'd only encountered other white males hoarding PM.  I was tempted to ask if he was buying with cash (no markup for using credit or check for silver) in fear of the government tracking his purchases for confiscation.

cossack55's picture

When this cat left did he perhaps get into a large black Chevy Suburban with tinted windows?

cswjr's picture

Could this guy possibly be talking about the velocity of gold derivatives (i.e., # of times 1 Toz. worth of gold futures is traded around) vs. the transactions velocity (# of times 1 Toz. changes hands) of physical gold?  Is that ratio anywhere remotely near 100:1?  The guy's idiocy just boggles my mind and I'm searching for a seed of rationality in there somewhere.  Of course, even if this is his meaning he's still WAY off with the 100:1 ratio for currencies and Treasuries.

LeBalance's picture

I have figured out Jeff Christian, he is a member of the Yes Men.  As you will recall the Yes Men are an activist group who perform "identity correction" on their corporate target by masquerading as spokespersons for said body.  In the past the Yes Men have spoken on BBC as DOW and apologized for the Bhopal Incident (

Bravo "Mr. Christian!"

Bolweevil's picture

shh! if you listen real close you can almost hear the music.

SWRichmond's picture

I heard the music.

Mr. Christian confirmed that gold in unallocated accounts is lent out in a fractional reserve system.  Unallocated accounts are often called pool accounts.  If you buy gold in a pool account you are actually contributing to phony gold supply and price suppression.  I think from the analysis elsewhere of GLD anyone could find ample reason to be suspicious of their actual physical holdings.  Under these circumstances, the only acceptable way to own gold is to buy physical gold and take possession of it.  Mr. Christian alluded to this in his interview, but the example he used was FRN cash.  He said that cash in a safe deposit box was not counted as an asset of the bank and could not be lent against.  Did everyone else miss this? 

akak's picture

"Mr. Christian confirmed that gold in unallocated accounts is lent out in a fractional reserve system.  Unallocated accounts are often called pool accounts.  If you buy gold in a pool account you are actually contributing to phony gold supply and price suppression."


And curiously, it is the very man who is perhaps the most publicly vocal in his anti-gold rantings (and most quoted by the "mainstream" media on gold), Jon Nadler, who was the architect of the precious metals pool accounts peddled both by the Royal Canadian Mint and Kitco, his employer.  No, no possible connection whatsover between that and his rabid and hysterical denunciations of, and innumerable attacks on, the "Radical Goldbug Extremists" (his words) who demand to hold physical gold instead of paper promises.

(roll eyes here)

Kina's picture

Should GLD price drop by a factor of one hundred?

And the price of purchased physical gold price rise?

Or will the investor be scared off gold altogether?

If there is subsquent crash in the gold price is it an opportunity to buy more?


Gordon_Gekko's picture

If there is subsquent crash in the gold price is it an opportunity to buy more?

A crash in the paper Gold price doesn't necessarily mean physical will be available at that price. Paper Gold and the physical metal are two ENTIRELY different products.

SWRichmond's picture

Watching for backwardation.

AUD's picture

Indeed. The gold 'deposit' will trade at a discount to the physical asset. Just as bank deposits have before and will again trade at a discount to physical bank notes.

Fancy that, you pay to store your gold, while the 'depository' lends it at interest. That's good margin!

john_connor's picture

Exactly.  I think the market wants to call the moral hazard bailout train down to the river right now.  Let's see how congress feels when long bonds jump 500 bps in the next 2 months and physical gold is 2K per ounce.

Shameful's picture

Whoa there partner!  I'm with you on a meltdown and either a spike in bond yields or the Fed being the only buyer, but 2 months?  Why two months?  I mean more and more fraud is getting pushed out there but most people still have their head in the sand.  It's not like the herd is fully spooked yet.  A jump that dramatic would trigger the end game and I have to think they will do their damnedest to slow it down.

Hephasteus's picture

Last time they paper crashed it. The premiums on coins went up to compensate. LOL That was only a 74 billion dollar paper crash.

Stormdancer's picture

Christian says position limits on commercials will "skew" the pricing of futures...but of course he never explains the process. So, unregulated, naked positions of unlimited size DON'T "skew" pricing? Can't have your cake and eat it too Jeffery.

Of course no mention of COMEX paper hedging LME paper (but it's physical paper!)

No wonder Nadler quotes him.

truont's picture

Oh, it's physical paper!  Here I got all worked up over nothing about the 100:1 leverage in metals exchanges...  

The Person Familiar With The Matter's picture


Sarcasm button was hit like caps lock. I use, they are always 24 over spot on 1oz gold bars. This is 9 to 11 less than, didn't pull up.

perchprism's picture

I get and mixed up.  Have bought from both.  Haven't tried

I wondered if you were being sarcastic. 

carbonmutant's picture

Trilobytes, Trilobytes? These guys sound like a bunch of dinosaurs

Apple Basil Martinis are really good...

chindit13's picture

I really understand this fellow and can help explain his methodology, even though Goldman was not one of the firms I worked for in my youth (otherwise, of course I would willingly submit to sterilization so as to eliminate the threat of my seed from the human gene pool).

You see, he informs as well as educates when he says that those "conservative" banks---you know, the ones who brought about the destruction of $40 trillion of asset values worldwide---borrow at 75 pips and loan at 85 pips, for the magical ten point spread that covers SGA, loss reserves and most important:  bonuses. 

Now Jeffrey, in point of fact they borrow at 10 pips and loan out at 2999 pips, for a gang-raping 2989 pip spread, but I am willing to accept that is simply a rounding error as you define such things, kind of like the size and value of the "hedge" your former employer had on its exposure to AIG. 

In any event, that is a valuable window into the manner in which Fletcher's, er....Mr. Christian's mind operates.

Regarding gold derivative trading, he makes a point about the value of traded contracts relative to the actual supply of the underlying physical material, hoping to inform the troglodyte-community-at-large as to how a Once-a-Goldman-Always-a-Goldman mind works. 

Now some of us trogs are foolishly caught up in this "time is linear" thing and believe that open and closed contracts on an underlying asset are totally different from just plain open contracts.  Silly us.  For example, Gordon Gekko and I might have 100 troys of gold between us (I won't tell the truth, GG, your secret stash is safe with me).  I sell it to GG, he sells it to me (pardon the blasphemy!), I sell it to him...maybe fifty times in a day.  At the end of the day a single contract of 100 troys is open, though we have traded 5000 troys worth of real money.  All well and good.  No fractional reserving here, nor velocity.

Mr. Christian reminds us that it is intent that is critical, and that the difference between volume and open interest is really just a nuisance not worth bothering about.  Thus, at the close of a typical Mr. Christian day in Wonderland, while positions representing 1 million contracts might be open, and physical supply might only equal ten thousand contracts, if the intent of one of the contract sides is to close the position and not worry about physical delivery---or even sell a million more contracts so as to run troglodyte stops---then the difference is merely a combination of rounding error and a way in which the Einsteinian Time-Space Continuum is more fully exploited for fun and profit.

If all of that is just too complicated for a troglodyte mind infused with too many deep Earth gases from all the mining activity, just take comfort in this:  it's technical.

JmBob's picture



A small, but vital, point;  the banks didn't destroy $40Trn of asset value, they just returned the value of those assets to something more nearly approaching their 'true' value - having previously allowed their apparent value to increase exponentialy in the first place.


This is a 'good thing'.

truont's picture

Yes, that is why I just don't get the 100:1 paper to metal leverage. 

It is just too technical for my trog brain to grasp.

Good thing we have these Goldman savants to help guide the less fortunate masses like we--the useless eaters that we are!

Oracle of Kypseli's picture

The collective total IQ is constant. it's just that the population is growing.


hamurobby's picture

If I were GS, I would probably pick a more smooth talking guy to be in this guys shoes. What he is saying is true and fine about the 100 to 1 ratio of longs and shorts, to actual deliveries, but let there suddenly be a large increase in contracts for delivery. I read somewhere that there has been a substantial draw down of gold and silver available for delivery. Now, that does not mean the world is out of gold and silver, it just means it will take some time to get deliverable metal. If there is a real panic, such as a CONfidence failure in fiat, be glad you own gold in your hands on that day. Let them keep holding price down, I keep adding to what I have. One day very soon, we wont mind cause it wont matter.

three chord sloth's picture

I've got a question...

Do any of these derivatives have an actual claim to physical gold? Or is this like a very high risk financial version of fantasy football, where a hundred leagues can offer a hundred Peyton Mannings on a hundred draft days, but none of those leagues have any claim to the real Peyton Manning?

To put it another way, does it matter if there is a hundred bets per ounce of gold if those bets have no legal standing to take possession of the original ounce?

MsCreant's picture

Looks to me the answer is no, technically they do not have an actual claim to physical. It seems to me the bet is not gold and that is what is at issue. It is acting like it is existing gold on the price. A seeming unit of supply, when it is not a unit, but a bet. They trade it as if the bet is gold in existence.

It matters. BIG TIME. When I want gold, I don't want to be given a $ instead. If I want oil, I don't want a $ instead. If I were in an ETF, I'd only be there, understanding I was trying to out ponzi a ponzi scam. Move in, make my profit, get out. I don't have the time or stomach for it. I'll keep my physical, thanks.