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Is The CME's 150% Hike In Gold Collateral Just A Ploy To Increase Amount Of Legally Confiscatable Gold?
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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Good Call C/E. Hard assets.
Indeed. Can't take yer casino chips down to the Food Way for some delicious chee-tos...
Doesn't anyone trade for A living?
Yes
CME gets an "F" for subtlety but an "A" for curiousity...
"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.
This comment is a ruse. The liquidations are nearly all paper, n'est-ce pas? So why would elevating the ceiling on physical gold collateral impact the liquidations? (Am I missing something?)
Possession is nine-tenths of the law...
A fool and his [gold] are soon parted...
Y'know some crackerjack (adjunct NYU economics perfesser) quants are holed up with his algos and abbacusses penning a thesis about why this will gin up 50bps somewhere in the portfolio.
When you see the enemy lined up outside the walls of the city...get out.
(Regrets for random meanderings)
Now watch.....they'll start leveraging paper gold.
Isn't it great? They can lever the paper up and take physical delivery on the way down via contrived margining. It's a thing of beauty if it weren't robbing people blind...
Gold has resumed its uptrend in foreign currencies.
http://stockcharts.com/freecharts/candleglance.html?GLD:FXE,GLD:FXY,GLD:...|D
Please tell me you are female! Whale tail is just not right!
In Fight Club, his name is WhaleTail!
i think i just saw satan standing in line to buy a parka!
On Oct 1, Nouriel tweeted: "Gold went to a high of 1920 to a low of 1520 last week only to rise back a modest 6% now. A most volatile, unstable, fickle & risky asset"
Yet, the CME is comfy with The Tradition as collateral, which also goes by the name security? Confused NYU adjunct economics professor, indeed.
I think Count Chocula Rube-beany should go back to his more lucrative (and qualified) position as a model for children's cereal boxes.
Roubini's broads and boozing have addled his brain
Let's hope the CME doesn't take the Hitler thing to heart - building Easy Bake ovens, and "processing" folks for their fillings and rings.........
"Why would one want to hold Gold".
Good question indeed, especially when Gold "isn't backed by anything" while the esteemed US Gov stands behind fiat Federal Reserve Note barf.
The risk of confiscation is a potential that I am trying to mitigate.
My current thoughts are:
1.) Gold, if used as collateral and held even in a Lock-Box, at any financial institution in the US, then, simply because it is on deposit at a Federally-regulated institution, it becomes subject to all Federal laws.... Should confiscation happen, that is the 1st place the govt will go to freeze and take posession of what at that point is no longer private Gold.
2.) If recent history further repeats itself, then, should confiscation be implemented, anyone thinking that they can simply hide their gold until such time (generation or two down the road) as the Gold Standard is revoked and private ownership of it is again permitted, I recall reading of a recent case (in the last year) where the family members representing the estate of a some man (a former jeweler who was in business in the 1920's) had sought to have appraised quite a huge sum of Gold coins (estimated in the multiple $ millions)...that were left to them by the deceised relative...upon which the Fed learned of it, and immediately confiscated all of it, arguing that it was gold that "should" have been turned in when the original gold standard was implemented. The fact that it was not turned in does not change the fact that the Fed considers it to be US government property.
3.) Should confiscation be implemented, an owner of gold might quietly consider having it melted down and remade into a plate, bowl, jewelry, or anything ornamental... Assuming that ornamental gold is not subject to confiscation, as was the case the first time around. If America can't figure out how to round up the illegal aliens in the US, and then deport them, I doubt they'd be too successful in rounding up all the ornamental gold in private posession...as long as it is not kept in a Federally-Insured institution.
4.) For those with deeper pockets, Gold is not the only hard asset that has some intrinsic value based on it's finite supply. Investing (legally) in Fine Art, for those who can afford to do so, is another option to Gold... that I doubt will ever be subject to confiscation, unless it is taken as part of some other legitimately illegal activity - like busting an illegal narcotics distributor or terrorist organization, etc...
Anyway, FWIW, these are just a few random thoughts on how to keep the Government from taking what is not theirs to take.
no what you read about is a guy who stole gold coins from the mint, and they were 'missing' for like 80 years. hahahahah.
i read that story and thought the same thing , until it was clarified.
and the government wouldn't take money for the coins, they took the coins themselves which was messed up since they were super valuable for their neumismatic appeal. --a rare run of coins can be very valuable=---particularly if they are wierd or stolen, or some odd thing about them.
Thanks for setting me straight on that point. If the coins were indeed stolen, then I have no issue with that... But I still wonder if gold is not turned in when confiscation is in force...but turned in some time later...when confiscation is not in force....aside from taking the gold out of public circulation, what other cost...if not the long arm of the Government...coming after the decendants' gold assets a few generations later...would a private holder of gold likely experience or "pass on" in his estate?
What? They stopped accepting tulip bulbs as collateral? When did THAT happen? It's gold now?? OK. Whatever. Collateral's collateral, guys. Moving from $200MM to $500MM is nothing more than a 2.5:1 stock split. "Step right up! Pick a number, take your chances. One spin of the wheel."
Hookers probably acccept your gold watch as collateral, pawn shops do. You can probably bargain with the corner shy lark and the Vegas bookie with gold. Those are the only 'lender' I can think of who might actually want your collateral (sinlce they're lending at 10 cents on the dollar). But unless allowed margin goes to zero, the CME still losses money if you default or get hit by a beer truck. Right?
Seriously, when the IRS starts accepting gold for tax payments (versus confiscating it for tax liens) then I'll be worried about plots, Big Brother and aliens in my closet. Until then, gold is only currency with your local hooker and bookie. ANd it'll be a sad day when ‘she’ increases her collateral limits.
P.S. When the IRS, SEC, FDIC, CME... confiscate gold they turn around and sell it, often at a discount to then current value. A lot of folks got they hand on Maddoff's gold at auction, none of it's buried in Fort Knox. Oh. I forget. That place is empty, also.
One deposit gold for collateral, and may get back tungsten.
Hey, gold fish breeder! Get a life... I'm thinking snake handler/
And what about the CME lending your gold to someone else for a fee..... just like the banksters do?
Is this the beginning of fractional reserve lending of PM's?
Don't worry about the price. When you get a little money together, buy PM. When you get more money, buy more PM. Whether last week or next week, don't worry about the price. One day you will wake up, turn over the TV, and see dollar bills being swept up in the street with the other trash, and you will still have something of value that you can trade for a chicken or a loaf of bread. Don't forget the lead side of the equation though.
El Gordo! Sweetness!
Precisely! Just buy it as you get money. That is what I have been doing since the 1980s.
Also correct about having lead and lead delivery devices. Lead is a precious metal when movong at a high enough velocity!
FYI, Nikkei slow roasting again: down 1.7% @ 11:00am Tuesday (Tokyo time). Hong Kong and China also red.
The stock market I think is telling the rest of the world that it's running out of Greater Fools real fast.
It desperately needs volunteers. If that doesn't work, TPTB will no doubt enact some form of 'draft'. You know like taxes to make up the diff.
Don't forget that we're just modern-day serfs.
The King must be fed. Long live the King.
These CME wackos think GLD is real gold.
FOOLS.
On 10-1 2010 a quarter ended! Get with the program!
The safest place to store your gold is in your mouth.
http://www.goldteethusa.com/products-caps1.htm
Nah. I think my mother-in-law's braziere is about as foolproof a safe storage facility as you'll ever come up against.
ZH is full of shit. How about telling us the number of the Seante vote so we can go and see how our respective senators voted or are you just another media outlet conveying emotion without the relevant information. Terrible oversight gentlemen. As you were able to quote a number for the vote that infers that at least one senator called for a vote unlike declerations prclaiming that Israel is incapable of doing anything wrong which always pass by voice vote.
If you are going to direct your misguided rage at ZeroHedge, at least do it in the appropriate thread.
I just have one question........
Who (will) run Bartertown?
Hehehehe ... fab! I had to laugh at that one.. +1! :D
This is extremely positive for the price of gold going forward as now gold won't have to be sold to meet margin calls.
In 2008-2009 liquidation of gold to meet margin was the main reason gold prices fell so sharply.
Yours and the post above from Printfaster about it being a liquidity problem make the most sense to me. Move those gold chips directly onto the square instead of selling to put fiat onto the square. Frequently time is an issue in these trades, this makes things flow faster and prevents margin calls and CDS events. Assets don't lose value as quickly (maybe not at all). I see this as an application of the brakes to deflation. Confiscation may be an added future benefit, if need be, but not the primary reason.
Yes...and there's nothing "conspriratorial" in agreeing with that assessment either. All we need to ask is "who are the biggest holders of gold?" If you answer "banks" you are wrong. If you say "governments" you are right. If gold is of no value then why do governments still hold it massively with the USA still being number one? The answer is of course obvious: they know their own paper money over time doesn't have value and therefore they must use whatever means necessary to get as much physical gold in their actual possession. If Mr. CME has become the emperor with no clothes then simply put Mr. CME doesn't need to be told what the government wants nor what he needs to do to try and get for the government what it wants and thus keep Mr. CME safe. The fact that a sound financial system is where your banker (and you of course!) have all the gold and the government has none cannot be argued IF you are being bullish on a financially driven economy. Period. I'm not so sure if i would argue the only reason for bull markets is simply an ability to resolve the obvious issues of excess in a decidely inappropriate manner...however i would not argue with those who do. Indeed that's pretty much all i look for as "an indicator of recovery" and probably what drew me to "these here parts." Perhaps we're all just frustrated that we can't participate more? Anywho this is the real deal...and it involves governments. Watch your freedoms AS WELL as your gold people. And yes i do want to have sex with pretty much all the women who do this media thing on t.v. i do have my favorites however. Maria B is just SUPER HOT to me...and i mean that for real. Of course my true t.v. love is still...
Hey vet.. are you a Viet Nam vet? You need to get a hold on reality. Stop watching so much TV.
Take a vacation to somewhere like Costa Rico. Life is laid back there and you will get laid a lot.
A lot of my buddies came back from Nam really fucked up. A little pune-tang can help get a vet
back to earth. No disrespect meant.
CME should do nothing! If they continue like this pretty soon no one is going to perticipate in paper gold trading
this is actually extremely bullish for gold. not sure about confiscating anything... but ah, just the psychological impact of this is bullish for gold. other forms of markets can also adapt such practices and drive the price of PMs higher. smile, pieces are coming together for destruction of paper fiat currencies...
Isn't it just a ploy to increase the amount of gold available for shorting? i.e. leasing.
I Still dont understand why platinum is cheaper than gold.
Law of supply and demand.
You can't eat spam.
But you can eat the words of Jon Nadler!
Millions of people around the world eat tripe every day.
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