Is The CME's 150% Hike In Gold Collateral Just A Ploy To Increase Amount Of Legally Confiscatable Gold?

Tyler Durden's picture

Earlier today the CME did something quite contrarian to its nature: it validated gold by a factor of 150%, when it announced that the amount of gold bullion that customers can post as collateral is increasing from $200 million to $500 million. To confused NYU adjunct economics professors this means that the credibility of gold in the global monetary system just increased by more than ever before. Regarding the stated reason for this move "the Chicago-based company said that the change will allow market participants to better manage their risk and to take advantage of lower gold lease rates." As for the real reason for this surprising move we are unsure: whether it is due to an actual shortage of dollar dollar bill margin as collateral or some other reason we don't know. In fact, we are confident the CME will likely hike gold margins once again as soon as gold approaches $1900 shortly. But at least it has finally tipped its hand as to how even the biggest US futures exchange feel about the yellow metal. Of course, the end result is that should gold, just as cash, be used to collateralize stupid transactions which result in margin calls, the collateral will be confiscated. Therefore, one would be forgiven if one assumes that this is merely a ploy to more than double the amount of perfectly legally confiscatable gold in the capital markets. Which of course would mean that someone, somewhere would be interested in procuring far more physical gold than is already in possession. But that's just crazy talk. Why would one want gold, especially at these near record prices, when one can have glorious spam?

From Reuters:

"I think that it really shows that people in the gold market want to use gold more efficiently," Harriet Hunnable, CME Group's managing director of metals products, told Reuters.


"We are very comfortable with the amount of gold that we hold as collateral," Hunnable said.


Placing physical gold as collateral is highly effective for market participants in a low interest-rate environment, she said.


Hunnable said that CME Group has ensured there is enough liquidity in the physical gold market for its customers to provide bullion to the exchange as collateral.


Analysts welcome the move because investors could now use physical gold instead of just cash to meet margin requirements of other market products.


"It gives gold additional credibility as the alternative currency. It might also lessen liquidation of gold, as it is now used as a margin vehicle so participants are not actually liquidating," said Bill O'Neill, partner of commodity investment firm LOGIC Advisors.

Look for the Shanghai Gold Exchange to proceed with an identical action, as Exchanges around the world scramble to put far more physical gold collateral at risk in margin accounts, which then put the fate of said physical gold at the mercy of paper market manipulation, a game which is always won by the casino. Said otherwise: all the makings of a perfectly legitimate, and perfectly legal gold confiscation scheme.

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chumbawamba's picture

"It is the public policy of this state that public agencies exist to aid in the conduct of the people's business....The people of this state do not yield their sovereignty to the agencies which serve them." [California Government Code, Section 11120.]

In enacting this chapter, the Legislature finds and declares that the public commissions, boards and councils and the other public agencies in this State exist to aid in the conduct of the people's business....The people of this State do not yield their sovereignty to the agencies which serve them. [California Government Code Section 54950.]

Laws, whether organic or ordinary, are either written or unwritten. [California Code of Civil Procedure, Section 1895.]

A written law is that which is promulgated in writing, and of which a record is in existence. [California Code of Civil Procedure, Section 1896]

The organic law is the Constitution of Government, and is altogether written. Other written laws are denominated statutes. The written law of this State is therefore contained in its Constitution and statutes, and in the Constitution and statutes of the United States. [California Code of Civil Procedure, Section 1897]

Any judicial record may be impeached by evidence of a want of jurisdiction in the Court or judicial officer, of collusion between the parties, or of fraud in the party offering the record, in respect to the proceedings. [California Code of Civil Procedure, Section 1916] the Revolution, the sovereignty devolved on the people; and they are truly the sovereigns of the country, but they are sovereigns without subjects...with none to govern but themselves..... [CHISHOLM v. GEORGIA (US) 2 Dall 419, 454, 1 L Ed 440, 455 @DALL (1793) pp471-472.]

The very meaning of 'sovereignty' is that the decree of the sovereign makes law. [American Banana Co. v. United Fruit Co., 29 S.Ct. 511, 513, 213 U.S. 347, 53 L.Ed. 826, 19 Ann.Cas. 1047.]

The people of this State, as the successors of its former sovereign, are entitled to all the rights which formerly belonged to the King by his prerogative. [Lansing v. Smith, 4 Wend. 9 (N.Y.) (1829), 21 Am.Dec. 89 10C Const. Law Sec. 298; 18 C Em.Dom. Sec. 3, 228; 37 C Nav.Wat. Sec. 219; Nuls Sec. 167; 48 C Wharves Sec. 3, 7.]

....This declaration of rights may not be construed to impair or deny others retained by the people." [California Constitution, Article 1, Declaration Of Rights Sec. 24.]

The state cannot diminish rights of the people. [Hurtado v. People of the State of California, 110 U.S. 516.]

The assertion of federal rights, when plainly and reasonably made, is not to be defeated under the name of local practice. [Davis v. Wechsler, 263 US 22, 24.]

Where rights secured by the Constitution are involved, there can be no rule making or legislation which would abrogate them. [Miranda v. Arizona, 384 US 436, 491.]

There can be no sanction or penalty imposed upon one because of this exercise of constitutional rights. [Sherer v. Cullen, 481 F 946.]

Whereas, the people of California have presented a constitution....and which, on due examination, is found to be republican in its form of government.... [Act [of Congress] for the Admission of California Into the Union, Volume 9, Statutes at Large, Page 452.]

Republican government. One in which the powers of sovereignty are vested in the people and are exercised by the people, either directly, or through representatives chosen by the people, to whom those powers are specially delegated. [In re Duncan, 139 U.S. 449, 11 S.Ct. 573, 35 L.Ed. 219; Minor v. Happersett, 88 U.S. (21 Wall.) 162, 22 L.Ed. 627." Black's Law Dictionary, Fifth Edition, p. 626.]

The State of California is an inseparable part of the United States of America, and the United States Constitution is the supreme law of the land. [California Constitution, Article 3, Sec. 1.]

This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby; any Thing in the Constitution or Laws of any State to the Contrary notwithstanding. [Constitution for the United States of America, Article VI, Clause 2.]

Educate yourself.

I am Chumbawamba.

X.inf.capt's picture

been digging in there, chumblez

good stuff

common law, magna carta.....

 im not too deep into the site though, but its  teaching me more....

just like ZH and ZH'ers do, everyday....

Pladizow's picture

Perhaps they mean post GLD as collateral!

How many parties are out there that have $500 million of physical gold and are also stupid enough to then jeopordize it - you would think these two qualities would be mutually exclusive!

X.inf.capt's picture

no kidding, plads...

i have maybe $80 face in silver...

and i would NEVER let someone hold it as colladeral.

man, who do they think the're foolin'...

flacon's picture

What's wrong with just holding the physical metal, 100% - Mike Maloney style? If we would all just buy two ounces that would be hundreds of millions of ounces taken out. 

X.inf.capt's picture

i do, flacon,

maybe 6 or 7# troy.

by ZH standards, not much...

by the 99% standards, alot...

by my standards, enough....

thank you, ZH, for teaching me the way, and showin' me the way.....

Comay Mierda's picture

confiscate gold + crash fiat currency = perfect recipe to enslave all mankind

ratso's picture

No one is going to be confiscating anyone else's gold.  Tyler, you asking an inflamtory and unnecessary question that just brings out the crazy conspiracy theoriats.  IF that's what you want - you got it.

strannick's picture

1. CME knows hard currency when they see it. And they want it. Notice they asked for actual gold, instead of bullshit, gold-demand diluting, bankster crinkly papergold GLD.

2. What the #%&@ is a theoriat?

akak's picture

2. What the #%&@ is a theoriat?

I'm not sure, but I bet it wields vastly more power than a mere anthroriat.

CrazyCooter's picture

Oh, since its missing from the thread, I guess I will do the honors ...



thewhitelion's picture

Of course not!  I mean hey, it never happened before. . .

Mr. Mandelbrot's picture

$80 face value silver?!! That's nothing. You need way more--quickly. If you can't afford it, just ask Chumbawamba how to use revolving credit to get your own personal bailout . . .

chumbawamba's picture

One of the best aspects of taking advantage of your sovereignty is the ability to counter-sue the creditor suing you for money in your sovereign capacity in a court of record.  You can bring up issues that a civil court might disallow, like the securitization of your credit card limit, which means the banks have already been compensated for the money they "loaned" you and are trying to double dip.  And then of course you can discharge the debt entirely through your strawman.

On a side note: I cannot even begin to imagine how much your life must suck, when your greatest thrill is having the opportunity to respond to one of my comments.  My condolences.


Mr. Mandelbrot's picture

Thank you. Your acknowledgement has made my sucky, meaningless life somewhat less sucky and meaningless. Thank you Chumbawamba. Good bye everyone . . .

Whalley World's picture

Excuse me, sucky and meaningless?  What the heck is wrong with that?

Most people spend their entire lives wondering who or what they are!  Just knowing what you are lets you stop looking and start living.

P.S. I lika sucky sucky

Mr. Mandelbrot's picture

P.S. I always love your ideas and research and am one here who really roots for you Chumblez, but I often end up cringing at a lot of your posts because your tone too often devolves into that of such an . . .

chumbawamba's picture

Yep, totally misread that comment.  God damn contextless text.  Your life has meaning.  I was talking about that OTHER Mr. Mandelbrot, that imposterous douchebag.


JohnG's picture

So he's pissed off.  Why aren't you?

Mr. Mandelbrot's picture

I used to be pissed off -- super pissed off (you have no idea!).  Over the last decade, I've come to my own conclusions (helped in part by my fellow ZHers) and positioned myself accordingly so that I don't have to worry anymore.  Scenario one, my business is soaring.  Scenario two, gold to the moon.  Who needs Ambien . . .

HungrySeagull's picture

Forget Ambien.


Xanax is talking. Barring that then vices with or without legal sanction is the last resort of the lost.


No credit cards, no rental loans, no one except the Government can call me out for a student loan which will not ever be paid off until after I die, and if only my assets survive probate. (And it will not.)


I don't care that BOA is on fire I don't care if the markets rise or tank. I don't care about anything except peace, tranquility and mountains of prep for various scenarios which may or may not come true in the future.


Silver? Yes a little. Gold? sure. But I carefully look to the prices and one rule above all.


Buy low, sell high and leave some for uncle sugar who wishes to sodomize you for 30%. Cain's 999 plan should take care of that minor inconvience.


However if one morning Silver and or Gold goes Plaid and hits Ludicrous pricing, a flap of a gentle butterfly

with a glint of a few coins tumbling across the velvet will make the Government whole on the student loan, position me to buy whatever it is I desire in this world. Which is really nothing.

There will be no longer any pain of servitude to your employer, you can actually purchase the company and mold it to your way of thinking and run it as you wish, or hire a bunch of yes men/soft women who will grovel and lick your boots for approval on everything that they do, including getting up early enough to be on time to work.


It would be the Zombies who will come. And when they do, I hope my stair master will fling me half a mile across the street to my death as that old mean lady did in the movie Gremlins.


In the meantime, rent the movie "The Hudsucker Proxy" and enjoy. It's all about that Blue letter, everything else is bullshit.


And those elevators are good to the last drop. Never really cared for those autoboxes that go here and there with a button.

Prisoners_dilemna's picture

Discharge my debt through ny strawman? Where can I learn more?

Kiwi Pete's picture

Plad, is your new avatar a robot's vagina on it's side? You're becoming a bit more subtle but I like it.

Mr. Mandelbrot's picture

Plad, I'm a married man, but I miss the titties. Your avatar was . . .

macholatte's picture

a robot's vagina


Hey, man. You need to get out more.

Snidley Whipsnae's picture

"How many parties are out there that have $500 million of physical gold and are also stupid enough to then jeopordize it "


My reasoning... Any person clever enough to accumulate 500 million fiatscos of gold would never fall for so obvious a scam... Of course, there is the occasional fool that inherits mega wealth and then fritters it away in short order.

mayhem_korner's picture


I wouldn't underestimate the stupidity out there.  Wasn't it just a month or so ago the SNB dumped a bunch of bars in its desperation? 

Also, sometimes what you do is a function of the caliber of the gun to your head.  Maybe Mr. Corleone has whispered in some ears that there will be no liquidations of Treasuries...

Just sayin we can't see the whole landscape.

Snidley Whipsnae's picture

MK... "Wasn't it just a month or so ago the SNB dumped a bunch of bars in its desperation? "

We know that SOMEONE dumped a bunch of gold just before the SNB pegged their currency to the Euro. I'm not sure which central banks/bullion banks did the dumping... but maybe you have better info than me?

" Maybe Mr. Corleone has whispered in some ears that there will be no liquidations of Treasuries..."

Extortion of this sort might work on Japan, England, and some other Western oriented central banks/soverign wealth funds... I doubt it would work on China.

I appreciate your comments and I have certainly been wrong many times in the past. All I can do is offer explanations based on what I see...which is a small portion of the pie.

If the US reaches the point where Treasuries can no longer be posted as collateral in financial transactions, even commodities transactions, the game is over.


slewie the pi-rat's picture

it's hard to tell what is meant here

but the reason given isn't too bad: "...the change will allow market participants to better manage their risk and to take advantage of lower gold lease rates."

here's the kitco piece:  Kitco.crimex  the lease rates are negative (as usual?  again?) but at any rate, $500,000,000 worth of gold, today, is the same sized stack as was worth $200,000,000 when gold was a ways under $700;  the same # of ounces

i think that if i take my gold to crimex and sell it, it is a sale;  if i take leased gold to crimex and sell it, it is a short sale.  i think.  leasing is a kind of fractional reserve bullion banking, a forn of paper gold.  i'm not sure why "legal confiscation" is an issue.  if you don't want to lose your collateral, don't put it up to invest, gamble, or bet with, ok? 

CH1's picture

All good stuff, Chumbawamba, but the state is composed of no-think drones and operated by sociopaths. They don't care about laws or sovereignty; they love power and they mean to expand it.

chumbawamba's picture

Don't stereotype.  Lots of people who work within the system love it when guys like us come in and start taking charge.  They will help you, but you have to make the effort.

Opposition only matters when you're outnumbered.  Yes, you will be opposed, and you might fail, but there will be two guys behind you to try next, and two guys each behind them.  You must learn it and pass it along.  Soon enough we shall be legion.

I am Chumbawamba.

macholatte's picture
    We cook your meals. We haul your trash. We connect your calls. We drive your ambulances. We guard you while you sleep. Do not fuck with us.


kill switch's picture


on October 3, 2011 8:24 AM

All last week across the media landscape, in pod, blog, flat-screen, and crunkly old newsprint columns, fatuous professional observers complained that the Occupy Wall Street marchers "have no clear agenda" or "can't articulate their positions." What impertinent horseshit. I saw a statement on one OWSer's sign that said it all: $70,000 College Debt $12,000 Medical Bills I'm 22 Where's My Bailout? What part of that is unclear to interlocutors of what we called "the establishment" back in the day? That would be the day of the Vietnam War and the Aquarian Upsurge. One difference being that in 1968 we at least had some solidarity in the older generation coming from figures of gravity like Senators Robert Kennedy (bumped off), Eugene McCarthy, J. William Fullbright, George McGovern, Rev Martin Luther King (bumped off), and even one US Attorney General, Ramsey Clark. Today, the entire "establishment" is a clueless, hopeless blob of self-interested, craven opportunism. Even the arty fringe - the people who pretend to be an avant-garde - are nothing but narcissistic self-branding operations masquerading as culture leaders. The worst offender this past week was the prating empty vessel Nicholas Kristoff at The New York Times who affected to offer the OWSers his own tidy agenda of nit-picky, arcane tax reforms (e.g "Close the 'carried interest' and 'founders' stock' loopholes") and limp-dick banking regulations (e.g. "[move] ahead with Basel III capital requirements"). David Plotz and his Gen X sidekicks at the Slate Political Podcast were equally mystified. I have some heartier suggestions: bring the full weight of the RICO act and the federal anti-fraud statutes down on Lloyd Blankfein, Jamie Dimon, Brian Moynihan, Angelo Mozilo, and a host of other impudent schmekels still at large in their world of Escalade limos and Gulfstream vistas. Or, if that's just too difficult, how about a handy lamppost and about 40 feet of stout nylon cord? It is cosmically ironic, of course, that the same generation of Boomer-hippies that ran in the streets and marched through the maze of service roads around the Pentagon has become a new "establishment" more obtuse, feckless, greedy and mendacious than the one they battled with over 40 years ago. I guess they just don't see that their time has come to get right with reality - or get shoved aside and trampled. The essence of the OWSer's argument is pretty simple: they've got a raw deal; somebody dealt them a bad hand; someone ran their society into a ditch and not a goddammed one of the older generation will set in motion the machinery to correct the situation, or even acknowledge it. At the apex of this new establishment is the Baby Boomer's moral trophy president: Barack Obama, whose election made the Boomers feel good about themselves - while they preceded to loot the national treasury's accumulated capital, and then reach forward a few generations to rob their legacy, too. I haven't heard Nicholas Kristoff (or any of his colleagues at The New York Times) complain about Mr. Obama's stupendous inattention to the crimes of Wall Street, or to the dereliction of his proconsuls in the SEC and the Department of Justice. I'd at least send somebody to hold a mirror under Eric Holder's nostrils to see if he is actually alive. For my money, the OWSers have plenty to yell about. Apart from the crimes and turpitudes of their elders, the younger generation hasn't even been prepared for the massive change in reality that these times are heaving them into. If it was me out there, I'd conclude that I'd better make up the future on my own, with no help from my parent's generation. In fact, that future is rushing toward all of us so cold, hard, and fresh even in this autumn season that it might splatter the banking establishment - and the global economy - like a bug on a windshield. The OWSers have a front row seat down there in lower Manhattan. The financial gangrene (thank you Zero Hedge) is not just seeping anymore, it's blowing through the arteries of the money underworld like fracking fluid. The damage can't be contained. Let the Arabs have spring. The OWSers of America own the fall. Rock on OWSers and don't let the "pigs" (as we used to call them) get you down.
chumbawamba's picture

The beauty of sovereignty is that, as King, you can take your own action, either by presenting an indictment to a proper Grand Jury, or if you are enjoined to the bankster fraud, by suing them in your court.  They would actually have to respond.  Imagine 10,000 individual Kings and Queens suing in their sovereign capacity in their home states?  Yes, this is all doable, now.

We can literally take this country back legally and lawfully.  We can systematically repossess the courthouses, the capitol buildings, the sheriffs departments, the police stations, the city halls, everything.  Take it back piece by piece, lien by lien, lawsuit by lawsuit, a million Kings and Queens across the states exercising their sovereign prerogative and dispelling the government cronies that have taken over this land one by one until once again, it is a land of, by and for the People.

This is an achievable dream, but it can only happen if people dedicate themselves to the learning.  It is work, and it is a sacrifice, but it is a joy to learn.  What can be more joyful than unlocking the door to absolute and total freedom?

This is a whole new paradigm, a whole new way of seeing yourself as a citizen of this nation.  You are the owner, you are the sovereign.  It is your birth right.  You only have to be bold enough to claim it.

Take the red pill!

I am Chumbawamba.

TheKinski's picture

Good to hear from you, Chumba.


vato poco's picture

Awww, God, another nitwit sighing with nostalgia for "the '60's, man!" Your ideas of "Figures of Gravity" were clods like RFK, Fulbright, and Mcgovern?? Srsly?? RFK: A spoiled racist (Refresh my memory: How many black folks have married into the Kennedy clan again?)(And who was the Atty Gen who kept MLK under surveillance?) rich kid who had everything handed to him via family connections - just like Bush. Fulbright: A career racist senator who not only opposed but filibustered the Civil Rights Acts of '57 and '64, and also found time to vote against the Voting Rights Act of '65, AND not only voted for but sponsored the (now proven to be absolute bullshit) Gulf of Tonkin resolution, allowing his buddy LBJ to make some serious coin for Brown & Root and, BTW, get 58,000 troops killed for no reason at all except the wars are good for the economy, and LBJ and Fulbright figured a few dead G.I.'s were a small price to pay for re-election. Mcgovern: Hell, let's just go with "LOL", ok?

You might want to do a little research before lionizing dipshits like those in a post complaining of intergenerational theft. Who the fuck do you think led the charge to fuck over the unborn generations to come, hmmm? WTF do you think 'Social Security' and 'Medicare' are? Well-conceived, brilliantly-run, abundantly-funded social programs dedicated to helping people? ? Or vote-buying scams funded with the kiddies (unmade) money? The bankers just took the ideas & tactics of the statists/fascists you've rhapsodized about and ran with the ball. Took it to the next level. But they were essentially just following the playbook written by your gravitas-laden heroes. So who should get the lion's share of the blame here? The criminal scum of the moment? Or the criminal scum who **set the precedent**?

But don't feel too bad. At least the "kids" down on Wall St. "fighting the power" now, right? Of course, there IS a slight problem.....Along with jacking off to impotent fever dreams of hanging or RICOing Dimon, Blankfein, et al, we read they're also squealing to "Re-elect Obama!" Yeah, that'll fix the problem. ("Gulag prisoners riot; demand better conditions and continuation of Stalin's reign") And after awhile, they'll peter out and slink on home, because in the end, nothing beats NFL action, baby!! Or 'American Idol'!! Of course, this leads to an uncomfortable question: Who's stupider? The fuckwits demanding "change!" while simultaneously clamoring for the re-election of the guy with the single most responsibility for saddling them with mountains of unpayable debt.....or the guy who scribbles poorly-written love letters (with no breaks for paragraphs, because paragraphs are, like, bourgeois!) to said fuckwits?

Tapeworm's picture

0000, and why bother any more.

holdbuysell's picture

Interesting site. Will need to look more. Thanks for sharing.

Ben Bermonkey's picture

Hey folks and gold bucks read the FT, page 13, comment from Mark Williams

the gold bubble is finally bursting, expects Gold to fall down to USD 700 due to ETF leverage, forced sales.


Of Course, this is, not my opinion, ladies.

Since, it was not by chance, hehe, as the impeccable conquestor not longtime ago said

akak's picture

Yeah, I really believe that the price of gold is going to fall back to its average cost of production, if not below it --- and that ignores the likelihood of rising energy costs, and thus a further rise in the average per-ounce cost of production for that one reason alone in the years ahead.

Such stellar analysis and insightful commentary is worthy of The Jon Nadler Award for Best Disinformation Disseminated in the Service of the Power Elite.

Tapeworm's picture

I get it, bt Pt is 191 USD below Au at this moment so I suggest converting to Pt before glod goes to 300

Captain Benny's picture

I take this to mean that a bear raid across the commodities market is about to commence.  Increase the effectiveness of gold, encourage deposits of physical, squeeze the markets harder than they've ever been squeezed before.  Not only let prices collapse, but make it worse by increasing margins across the board.  Margin call the shit out of every single leveraged long.  Take gold collateral and empty long bank accounts.

Fed has unlimited fiat to play with, I'm sure they'll be a factor in it all... probably through their favorite puppet: JPM

CH1's picture

That's a fair guess, but who can tell what the sociopaths will do?

Buy and hold physical - sleep well at night.

jekyll island's picture

Fed > JPM puppet.  I think you may have that backwards.

bankruptcylawyer's picture

lather , rinse, squeeze, repeat. 


works every time, till you've cleaned your dishes to the point where you can't eat on them anymore.

Snidley Whipsnae's picture

CaptBenny, CH1... Buying physical and holding is the only way to beat the bastards and their continuous printing.

Demand for physical is still waaay beyond what can be filled in Asia, India, and the Mid East...

All the physical coming on the market is being purchased.

Central banks are under great stress... If they lease forward more gold to bullion banks to depress the market it is being snapped up. If they stop leasing the price of gold rises and makes their paper look like the crap it is.

We have SE Asia, India, the Mid East and many more individuals/soverigns on our side. We will prevail.

Keep the faith, keep up the pressure, forget paper PM games.

DoChenRollingBearing's picture


Everyone should be listening to Uncle Snidley! Be your own central and buy gold.

Buying and holding physical has numerous benefits, Snidley points out a great one: that it puts the central banks (the real ones) under a lot of stress.  The more they try to keep the price forced down, the greater the blow-off will be.

Yes, we the holders of gold will win.  Have no fear, we will win!