Posted on 12/13/2008 7:18:14 AM PST by djf
From "Midas" Commentary by Bill Murphy LeMetropoleCafe.com Friday, December 12, 2008
I received a call this morning from a commodities broker who told me that the Comex is alerting various futures firms about the potential of a squeeze on the December contract and is advising the $840 December shorts to exit their positions. That is the remaining open position.
There have been 12,636 notices of delivery. The shorts have until December 31 to make delivery. Normally they deliver early to take in cash and earn the interest. They must be delaying. As I understand the situation, that represents about 40 percent of the gold available at the Comex, and of course someone could enter the scene late, buy February gold, and then spread into December, which would stun the shorts.
My broker friend said his back office said this sort of alert is highly unusual and that the concern is real, not only for gold, but for other commodities too, like copper and palladium, as there is a good deal of talk of taking deliveries there too. But gold is the one for which the advice to cover went out.
This is an extremely productive development and could spur the price of gold up quickly as word spreads. As we all know, buying Comex gold and silver (the cheapest way to buy precious metals) makes all the sense in the world in this financial environment.
I’m seeing copper now at $1.46 a pound and nickel at $4.86.....
Copper peaked at just under 4$/lb
From “Midas” Commentary by Bill Murphy LeMetropoleCafe.com Friday, December 12, 2008 .......
Metropole are super gold bugs so this probably won’t pan out....though i don’t mind if it does
That is EXACTLY what that means. Based on this, if you’re betting gold is going down, and you have sold an actual futures contract, you stand to get burned big time. However, if you BOUGHT a futures contract, you expect it to go up, and so could be in a GREAT position to make big $$$ if what they say in this article is true. Been reading lots of stuff on the net lately about people not being able to get actual, physical gold. They may have it on paper, but they aren’t getting the real stuff on hand.
Interesting times, to say the least...
But people are debt saturated. And the confidence level is near zero.
Boy are you right. It is not a question of lowering interest rates on cars and high ticket items now. 0% -- So what? 'Will I have a job to pay back the loan at ANY rate?' The banks have got to be wondering the same thing. 'Will we ever get this money we lend back?'
I am an idiot about this stuff - my accountant is an optimist and sees DOW 11,000 this spring. I see destruction of the equity market.
I fell for the Y2K scare, Howard Ruff back in the 70-80's(?). I lean towards doomsday scenarios, so don't trust myself to look at this objectively - but I feel like we are not going to be the same country in about a year. Am I wrong?
Ping!
What happens is this:
People who own/trade metals deposit it at the COMEX.
Some people come along and decide that they want to buy “futures”.
Futures means you write a contract with someone to buy something in the future at a fixed price.
Now if the price of the stuff goes down, then the guy who bought the futures contract is SOL. If the price goes up, he can either settle the contract for some extra money or demand delivery of the metals/commodities.
Now it is not unusual for the people who have metals on deposit to write more contracts for futures than they actually have physical metal to sell.
If that happens, and the price goes up large enough, there is a possibility that there might be more demands for delivery than they actually have.
It’s like say I have six eggs but I write a contract to you that Jan 1 I will deliver to you twelve eggs.
Then on Jan 1 you want your eggs.
I give you six and you say wheres my other six and I am forced to go out and try to find 6 more eggs to give you.
But if nobody wants to sell me any eggs, the price could go astronomical.
I’m not a trader and understand things probably only a bit more than you, but I think that’s the gist of it.
Unfortunately, Home Depot doesn't deal in scrap copper. Well, even that's debatable from a plumbing point of view, but what they sell is fashioned into a useful form - pipe. And fact is, they probably bought that stuff months ago so it's priced based on its cost (and on what us home-improvement drones are willing to pay). If I were a plumber, I'd be more tuned into prices or I'd be using that plastic stuff that they seem to be pushing now.
On a happier note, drywall board is down from what it was a couple of years ago during the building boom. Not that I'm going to stock up on it or invest as if it were gold!
As for gold, I'm holding what I've got. I'll buy more if the price drops quite a ways.
Got to add, if the price spikes way up, I may sell a few ounces to feed the irrational market. Cash is still useful, too.
I LOVE these stories about how gold and silver prices are either up or down as measured against FRAUDS (Federal Reserve Accounting Unit Denominators).
Since becoming acquainted with the HISTORICAL role of precious metals as stores of value in previous economies back in the early 80s — including this one — I chuckle every time I hear one of those stories because I know that the measurement should be reversed.
But, of course, the friends of paper money MUST perpetuate the myth that pieces of paper with various numbers on the have intrinsic value.
Historically, “money” has had to meet a number or common sense definitions (which definitions have been stripped from high school and college texts over the years).
Any substance used as “money” was to have been durable, portable, divisible and relatively rare, which gave it an intrinsic VALUE to those who held and used it.
Back during the LBJ years when treasury officials were urging abandonment of the link between our paper currency and gold and silver, that intellectual giant LBJ was reported to have agreed and said that gold and silver were too VALUABLE to use as money!
And so, despite having been warned by far wiser men than the majority of economic ignoramuses allegedly “leading” us in Washington today, we find ourselves here!
As we stand by for the inevitable massive abuse by the friends of paper money who visit here at Free Republic, please pay me the courtesy of at least scanning the information below to see just what the majority of our Founding Fathers did in an attempt to save us from the current financial mess.
In one of the rare bits of wisdom to emerge from Harvard, philosopher George Santayana cautioned that “Those who fail to learn from history are condemned to repeat it.”
So repeat it we are.
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(I wrote this a number of years ago when things were NOT going well with the economy. Trust me: They WILL get ugly once again as man — or certain men — cannot resist playing God. We continue to violate the universal, immutable laws of economics at our great peril.)
Despite the apparent economic strength of the American economy, history proves that EVERY house of cards eventually comes down. And the higher the card house, the harder the fall when it finally comes. And when it does, the more freedoms we will voluntarily surrender to “restore order.” It was the Founders’ concern about this historically valid problem which prompted their attempt — now ignored — to keep American “money” sound and honest.) Dick Bachert 1998
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UPDATE:
A fiat money system of the sort we are now painfully watching collapse creates a FALSE world of FALSE feelings of well-being and elevated lifestyles. During the expansion phase of such a system, those living under it spend or borrow more than they should, have more children than they can afford, nationally, come to believe they can afford to allow a score of millions of illegals to come here for educations, welfare payments, medical care, etc. They reject the immutable and universal economic realities and embrace what my old friend, the late Tupper Saussy, called “the IDEASPHERE.”
Now that the inevitable economic catastrophe is upon us, how much fun is it to watch the idiots in congress who triggered this thing scramble for cover by blaming everyone else? Not much!
The only folks who feel good now are the Hank Paulsons of the world who are in the process of conducting what may prove to be one of the largest raids on the REAL wealth of this nation – our labor and real property – ever witnessed.
“Liberty lies in the hearts of men and women; if it dies there, no constitution, no law, no court can save it.” — Judge Learned Hand, 1944
DB 10/2008
* * * * * * * *
The Forgotten History of Money
This is the fascinating story of the efforts by certain of the Founding Fathers to prevent the economic distress we find all about us today. It is also a sad story on the basis that modern, “sophisticated” Americans have abandoned the corrective institutional mechanism that remains in place to this day. As you read it, think about a world with many fewer S&L, banking and political scandals and economic problems now considered the norm.
“Blood running in the streets. Mobs of rioters and demonstrators threatening banks and legislatures. Looting of shop and home. Strikes and unemployment. Trade and distribution paralyzed. Shortages of food. Bankruptcies everywhere. Court dockets overloaded. Kidnappings for heavy ransom. Sexual perversion, drunkenness, lawlessness rampant. The wheels of government are clogged, and we are descending into the vale of confusion and darkness. No day was ever more clouded than the present. We are fast verging on anarchy and confusion. (George Washington in a 1786 letter to James Madison, describing the effects of fiat paper money inflation then ravaging America in the pre Constitutional period.)
“The annihilation (of the paper money) was so complete that barber shops were papered in jest with the bills; and sailors, on returning from cruises, being paid off in bundles of this worthless money, had suits made of it, and with characteristic lightheartedness, turned their loss into frolic by parading through the streets in decayed finery which in its better days had passed for thousands of dollars.” (Contemporary writer, Breck, 1786)
“Paper money polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade and husbandry, and the manufactures of our country, and went far to destroy the morality of out people.” (Peletiah Webster, 1786)
At the drafting of the U.S.Constitution, there were many “Friends of Paper Money” present. On August 16, 1787, when the discussion arose on Article 1, Section 8, the proposed wording was this: “The Legislature of the United States shall have the power to...coin money...and emit bills of credit of the United States.”
A hot argument ensued on the power to emit bills of credit, which is another way of saying “printing paper money”.
Here are the actual words James Madison wrote describing the debate in his diary: “Mr.G.Morris moved to strike out *and emit bills of credit.* If the United States had credit, such bills would be unnecessary; if they had not, unjust and useless.
MADISON: Will it not be sufficient to prohibit the making them a tender? This will remove the temptation to emit them with unjust views. And promissory notes in that shape may in some emergencies be best.
MORRIS: Striking out the words will leave room still for notes of a responsible minister which will do the good without the mischief. The monied interest will oppose the plan of the Government, if paper emissions be not prohibited.
COL.MASON: Though he had a mortal hatred to paper money, yet as he could not foresee all emergencies, we was unwilling to tie the hands of the Legislature [Legislature = Congress].
MR.MERCER:(A friend to paper money) It was impolitic...to excite the opposition of all those who were friends to paper money.
MR. ELSEWORTH thought this was a favorable moment to shut and bar the door against paper money. The mischiefs of the various experiments which had been made, were now fresh in the public mind and had excited the disgust of all the respectable part of America. By withholding the power from the new Government, more friends of influence would be gained to it than by almost anything else...Give the Government credit, and other will offer. The power may do harm, never good.
MR.WILSON: It will have a most salutary influence on the credit of the United States to remove the possibility of paper money. This expedient can never succeed whilst its mischiefs are remembered, and as long as it can be resorted to, it will be a bar to other resources.
MR.READ thought the words, if not struck out, would be as alarming as the mark of the Beast in Revelation.
MR.LANGDON had rather reject the whole plan than retain the three words *and emit bills*”.
The motion for striking out carried.
Historian George Bancroft later wrote: “James Madison left his testimony that *the pretext for a paper currency, and particularly for making the bills a tender, either for public or private debts, was cut off.* This is the interpretation of the clause, made at the time of its adoption by all the statesmen of that age, not open to dispute because too clear for argument, and never disputed so long as any one man who took part in framing the constitution remained alive.”
(Bancroft – founder of the U.S.Naval Academy at Annapolis among other accomplishments – wrote a book on this very subject entitled “A Plea for the Constitution of the United States: Wounded in the House of Its Guardians.” During WWII, FDR – a serious friend of paper money – ostensibly to supply the war effort, ordered the printing plates for many historical books smelted. Bancroft’s book was among them. A photocopy of one of the remaining originals can be found here
ROGER SHERMAN(1721 1793)should be a name familiar to every American. As familiar as Washington, Madison, Jefferson and Adams. He is the only man to have signed all 4 documents surrounding the formation of the United States of America: The Continental Association of 1774, The Declaration of Independence, The Articles of Confederation and The United States Constitution. He was a Judge of the Superior Court in New Haven, Connecticut, serving that office with distinction from 1766 until 1788. He served as Treasurer of Yale University from 1765 to 1776. He was renouned for his high intelligence and unswerving honesty and was described by John Adams “as honest as an angel and as
firm in the cause of American independence as Mount Atlas.” He served in the U.S.Senate from 1791 until his death in 1793.
Why is Roger Sherman*s name unfamiliar? HE WAS AN ENEMY OF PAPER MONEY!! In 1751, Roger Sherman and his brother William sued James Battle for paying a debt to their shop in New Milford, Connecticut, in depreciating paper currency. Over a period of 15 months, Battle had charged “divers wares and merchandizes” amounting to 129 pounds of what
Sherman assumed were pounds of Connecticut “Old Tenor”, a stable currency whose value were well preserved by taxation taking it out of circulation. But Battle assumed the debt was denominated in pounds of ever depreciating Rhode Island currency, tendered in same, and the Shermans took a beating in the payment and sued for recovery of loss by depreciation. The Shermans lost when Battle argued that he was merely following the accepted custom of the day. In 1752, Sherman wrote his book “A Caveat Against Injustice or An Inquiry into the Evils of a Fluctuating Medium of Exchange” indicting UNBACKED PAPER MONEY.
It was this experience that Sherman brought to the Constitutional Convention and prompted him to rise on August 28,1787 and propose new, more restrictive wording to Article 1,Section 10. The standing version under consideration was worded this way: “No state shall coin money; nor grant letters of marque and reprisal; nor enter into any Treaty, alliance, or confederation; nor grant any title of Nobility.” (From Madison’s Notes of the Convention) “Judge Sherman and Mr. Wilson moved to insert the words *coin money* the words *nor emit bills of credit, nor make any thing but gold and silver coin a tender in payment of debts* making these prohibitions absolute, instead of making the measures allowable with the consent of the Legislature of the U.S. Mr. Sherman thought this a FAVORABLE CRISIS FOR CRUSHING PAPER MONEY. If the consent of the Legislature could authorize emissions of it, the friends of paper money would make every exertion to get into the Legislature in order to license it.” Mr. Sherman*s and Mr. Wilson*s motion was quickly agreed to and became the supreme law of the land.
Some additional quotations to ponder:
“All the perplexities, confusion and distress in America arise not from defects in the constitution or confederation, nor from a want of honor or virtue so much as from downright ignorance of the nature of coin, credit and circulation” (John Adams in a letter to Thomas Jefferson, 1787)
“I deny the power of the general government to making paper money, or anything else, a legal tender.” (Thomas Jefferson)
“You have been doubtless been informed, from time to time, of the happy progress of our affairs. The principal difficulties seem in great measure to have been surmounted. Our revenues have been considerably
more productive than it was imagined they would be. I mention this to show the spirit of enterprise that prevails.” (George Washington in a letter to the Marquis de LaFayette, June 3, 1790 AFTER the United States Constitution prohibited unbacked paper money at Article 1, Section 10)
“Since the federal constitution has removed all danger of our having a paper tender, our trade is advanced fifty percent. Our monied people can trust their cash abroad, and have brought their coin into circulation.” (December 16, 1789 edition of The Pennsylvania
Gazette)
“Our country, my dear sir, is fast progressing in its political importance and social happiness.” (George Washington in a letter to the Marquis de LaFayette, March 19, 1791)
“The United States enjoys a sense of prosperity and tranquility under the new government that could hardly have been hoped for.” (George Washington in a letter to Catherine Macaulay Graham, July 19,1791)
“Tranquility reigns among the people with that disposition towards the general government which is likely to preserve it. Our public credit stands on that high ground which three years ago would have been
considered as a species of madness to have foretold.” (George Washington in a letter to David Humphreys, July 20, 1791)
“It is apparent from the whole context of the Constitution as well as the times which gave birth to it, that it was the purpose of the Convention to establish a currency consisting of the precious metals.
These were adopted by a permanent rule excluding the use of a perishable medium of exchange, such as certain agricultural commodities recognized by the statutes of some States as tender for debts, or the still more pernicious expedient of PAPER CURRENCY.” (Andrew Jackson, 8th Annual Message to Congress, December 5, 1836)
DESPITE WHAT YOU WERE TAUGHT IN SCHOOL, THE HISTORICAL RECORD IS CRYSTAL CLEAR: AMERICA WAS TO HAVE BEEN SPARED THE DESTRUCTIVE EFFECTS OF AN UNBACKED PAPER MONEY SYSTEM. MOST OF THE PROBLEMS WE FACE TODAY CAN BE TRACED TO WHAT ANDREW JACKSON CALLED “THE PERNICIOUS EXPEDIENT OF PAPER MONEY”.
HISTORY TEACHES THAT AN “ARTIFICIAL” MONEY CREATES AN “ARTIFICIAL” WORLD WHERE THE PRICE FOR SOME ITEM...EVEN OUR MOST POPULAR WELFARE “PROGRAM”...CAN BE DEFERRED TO FUTURE GENERATIONS (OUR $11 TRILLION
NATIONAL DEBT) OR PAID WITH A “MONEY” CREATED OUT OF THIN AIR WHICH ROBS THE VALUE FROM THE MONEY WE MIGHT BE UNFORTUNATE ENOUGH TO HAVE IN OUR POCKETS AT THAT MOMENT (INFLATION). AND ONE THING YOU MUST REMEMBER ABOUT INFLATION IS THAT IT IS NOT AN “EQUAL OPPORTUNITY” DESTROYER: THOSE FIRST IN LINE TO GET THEIR HANDS ON THE NEW MONEY ROLLING OFF THE PRESSES (THE MODERN FRIENDS OF PAPER MONEY) HAVE A CHANCE TO SPEND IT BEFORE IT LOSES ITS VALUE. THE LITTLE PEOPLE (THAT’S US, FOLKS!) FARTHEST DOWN THE LINE ARE THE ONES WHO FEEL THE FULLEST EFFECTS OF THIS DESTRUCTIVE PROCESS.
How can an exchange give privileged info to cetain firms?
Basically, folks who sold things they don't own are being advised to buy enough to cover what they sold, before the price goes any higher. As the end of the month nears, more and more of the folks who sold what they don't own will be bidding the price up so they can cover their positions.
Now, if you or I went around selling a lot of stuff we don't own, we'd be accused of fraud. But in the financial markets, it's called shorting a position, and it's the way a bunch of the 'pros' make money.
However, you should the great deal for scape goats down at our farm store. Prices are WAY down for new, virgin scape goats.
“The price of copper has collapsed. Hope you didn’t buy too much at those high prices.”
Yes it has. But what the poster states is not surprising. All metals have crashed; yet I am paying the same high prices for metal t-posts for my farm. And before I hear “yeah - because your are buying old stock that was when metal was high” - I say BS. The same BS was pedaled about oil prices too.
Thanks for the quick reply djf. The eggs analogy helped. It gets even more dicey for me as additional methods get added into the mix, as the post by rellimpank demonstrates.
For the little guy, is the answer to by some gold to protect your cash or to wait? For those of us who don’t trade in the stuff, the complexity of trading and its language obscures the bottom line.
Anyone shorting gold in this environment has b@lls of titanium. (note the precious metals metaphor)
you are probably right. makes me to sick to my stomach how govt AND Wall St has screwed up.
Miracle is what we need.
I’m not an expert and will not recommend you buy metals, I mean I could, but I won’t.
I would, however, recommend that you get your hands on as much non-perishable food, water, and fuel that you can stock.
And have two months or so of cash laying around for bills and expenses.
LOL.
The Comex, in their entire history, has never advised anyone to do anything. They set margins. They raise them, they lower them. They don't give advice. Ever.
Anyone who believes this clap-trap is an utter tool.
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