Wednesday, April 27, 2011

The ride back up and the Silver lease scam

Well... I told you Silver was in for a volatile period and it's not disappointing us.

Yesterday I wrote that Silver's 'correction' will probably end by Thursday (at the latest) and the metal will start a rally back towards $50.

Yesterday Silver was at $45.30. 

Today the US Federal Reserve Chairman held an unprecedented press conference.  And in anticipation Silver started climbing.

When Bernanke spoke, he made it was clear that the Federal Reserve was signalling it is in no rush to scale back its extensive support for the U.S. economy. The Chairman said the run-up in commodity prices that has dented growth should be fleeting (???).

Meanwhile the Fed's policy-setting Federal Open Market Committee said in a statement that it intends to complete its $600 billion bond buying program in June as scheduled and that despite some headwinds, it believed that the economic recovery was proceeding at a moderate pace, with little risk an inflationary psychology would take hold (????).

In other words... "inflation? what inflation?"

The response to this fairy tale outlook sent Silver soaring back up $3.08.  As this is written, Silver sits at $48.38...

... wheeeeeee!!!! And the roller coaster starts it's climb upward again.

They will try and beat the price back down again, but we are probably going to see Silver go to between $50-$52 in the next couple of weeks.

Yesterday I referenced this excellent article over on Seeking Alpha.  It talked about a Silver storage scam that is an important part of the Fractional Reserve Silver system being practiced by the banking cartel as part of their Silver price suppression scheme.

The public is finally becoming aware of this storage scam as a result of a couple of important lawsuits.

The first involved Michigan resident Laurin Ramsey.

In 1984, Ramsey purchased ten 100 ounce pure silver bars from the Swiss bank UBS (or its Paine Webber subsidiary). Since that purchase, he had paid $25 per month for storage fees to UBS to keep the silver.

A few years ago, he tired of paying the storage fees and contacted the bank to arrange delivery.

Instead of delivery, Ramsey only got the runaround. When he finally asked to be given the serial numbers on the bars and the location of the vault where they were stored, he was told that the bars did not have serial numbers (which wasn't true!).

At one point, the bank said his only option was to sell the bars back to the bank for cash... he could not take delivery of his silver bars. But Mr Ramsey did not want to close out his position.

On February 23, 2011, the Ramsey Personal Trust, by Laurin D. Ramsey was the lead plaintiff in a suit filed in the Federal District of Southern New York against UBS Financial Services, Inc., et al. The charges are that UBS had never purchased, segregated, or stored the silver, then had illegally charged storage fees for the phantom silver.

The lawsuit can be found here.

Seeking Alpha detailed the significance of the suit:
  • "According to the lawsuit, customers were charged storage fees every month, even though the bank was not actually storing anything. It never purchased any physical silver. Instead, the bank allegedly used customer cash for its own purposes. In effect, customers ended up buying a non-interest bearing silver bond. Such bonds, based on a promise of repayment in precious metals, were typically issued in the late 19th and early 20th century. Back then, they bore a nice interest rate, payable in gold or silver. Today’s version of the precious metal bond is unallocated storage, which takes money from investors but pays them nothing at all."
S.A notes that a very similar lawsuit was filed in 2007 against Morgan Stanley.

In that case, small investors were also claiming they had been defrauded into participating in unallocated metals storage. The bank defended itself by alleging, among other defenses, that it was simply following standard industry practices.

In other words, the amount of information given to customers, the unallocated nature of the scheme, as well as the charging of “storage fees” for imaginary metal were “standard industry practices”.

In light of what we now know, maybe they were telling the truth. Morgan Stanley did eventually settle for a multi-million dollar payout, but it continued to deny liability.

UBS has not yet answered the allegations put forward by Ramsey. We don’t know yet what their response may be. The law firm representing Ramsey is Schoengold & Sporn, P.C. The individual attorney handling the case is Samuel E. Sporn and Sporn was the attorney who won the $4.4 million judgment in 2007 against Morgan Stanley.

But it begs the question... what happened to the silver that was supposed to be in storage?  If it is "standard industry practice", what have they been doing with the silver that was 'supposedly' stored?

It is clear to any rational person that the leasing scam has been an important component of the fractional reserve silver system that the banking cartel has been employing for years.

The cartel has been taking that silver that many depositors believe is being stored on their behalf and has been using that silver elsewhere to deliver on paper shorts they have issued on the COMEX.

The key element here is that the whole system is starting to unravel.

The collapse of Lehman Bros, the 2008 financial crisis, and the massive money-printing under Quantitative Easing has triggered a rush into precious metals which is intensifying with each passing month.

Central Banks around the world are now net buyers of Gold and Silver, not net sellers.

Individual investors are starting to pour into Gold and Silver in unprecedented numbers.

And intense upward pressure is being placed on silver prices because physical silver is being purchased as never before and actual physical silver is becoming incredibly difficult to source. The fractional reserve silver system has sold out paper silver at a 100-1 ratio to physical silver.

Upward pressure is not stemming from trading on COMEX. In fact, deliveries at COMEX have been relatively small for several months. The process that is now ongoing is one that no performance bond committee can stop... an overwhelming demand for the delivery of the actual metal. COMEX could declare liquidation-only, as they did in 1980 to stop the Hunt Brothers, but the only result would be to catapult the demand for the price of physical silver even higher.

COMEX is now irrelevant except as a way for banks to bankrupt themselves if they continue to try to reduce the price of physical silver by manipulating futures prices and taking on more short paper positions to do it. They can crash the paper futures price as much as they wish. It won't stop buyers from demanding physical silver in the real market outside COMEX.

The price of silver for the past 40+ years were a result of a naive market, overwhelming short positions at the futures exchanges, manipulative trading techniques and a deceitful unallocated storage arrangement.

The current silver pricing surge may look like a typical short squeeze, but it is nothing of the kind. It represents a permanent change in market perceptions. That is not to say that silver prices cannot fall, but the pressure to buy physical silver will continue to mount.

When silver prices finally reach equilibrium, the bellwether level of $50 per ounce will be the floor, rather than the ceiling.

Tomorrow we will look at another evolving story of the COMEX suddenly losing over 20% of it's "registered" silver over the past week.

Was it actually there? Or is the short squeeze  and the demand for physical silver forcing the COMEX to admit that much of the 'supposed' silver they have in their vaults is nothing more than a paper entry and isn't actually there?

More tomorrow.


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  1. Hey Whisperer-

    So I went into my bank (TD) and tried to get some physical silver Maple Leafs this morning after making an appointment yesterday. They informed me it was $4-500 shipping to YK. Ouch. The nice lady then smiled and said I could buy certificates and that "they would not sell certificates if there wasn't physical silver to back them." Uh huh.

    Thanks for the tips. My hunt continues. Maybe I will have to grab some on a trip south and transport them back myself.

  2. Try calling up Scotia Bank. My understanding is that they will deliver to the branch without a shipping fee. This may only apply to the large urban centres but it's worth checking out. Let me know how you make out.

  3. Buy silver is the best deal of this decade.-robert kiyosaki ritch dad poor dad.
    Its every where you can miss it, get up and go, buy some silver right now, dont wait before its to late. Keep informing the world whisperer.

  4. 500$ 1oz silver--------> its coming!

  5. I was at my local Scotia Bank today trying to buy a monster box of silver..they do not have one ounce in B.C.!I was told to call back next week!
    They do charge shipping to Victoria..$250 for 500 oz.
    I will call them next week...hopefully the price doesn't jump til then.

  6. I didn't even ask about certificates...not interested.paper is paper.

  7. Anyone else had experience trying to buy in-branch at Scotia Bank lately?

    I see online they have silver available in 1oz, 5oz, 10oz, 100oz, 1kg and Silver Maples (which is the first time in a while all have been in stock).

    I also know that direct purchases from First Majestic Mining Company are currently limited to 300oz per month per customer.

  8. I'll have a post for you on Inflation at around 6:00pm PDT and then another post on the COMEX losing 20% of it's silver later this evening.

  9. Scotia said I could only order online if I don't have an account with them...and I don' I tried to confirm my address online and it gave me the run around, which led me to ask TD. Maybe I will dig deeper with Scotia. I am going to be in Toronto in June and they said I can go to a TD branch there and in 3-5 days I could have my physical silver. I don't want to wait till June though. They also won't let me order it from my branch here today and ship to a branch somewhere else for me to pick up later.

  10. and I should have mentioned, I am only looking to buy about 100 ounces for now. I would hate to see shipping charges on a monster box! She said they have to pay Brinks or some security company to get it into YK. TD, or whoever, will only subsidize shipping as far as Edmonton.

  11. Soon as you see prices drop on silver, you buy more, because its man made 100% sure. So when they lose control and they will lose control, the prices of silver will go to the roof. And the roof will be on fire!!! So get up and go buy some right now, may be just one are two silver maple leaf, be part of this fantastic ride to the top.