Financial Alchemy and Fraud in Gold
By Vin Maru
Wednesday, 22 August 2012
The gold bull market is alive and well as the summer doldrums come to a close and gold accumulation and trading starts to heat up going into the fall. As the gold bull market matures and it draws more attention from investors all around the world, it does open up the doors for fraud. By now we have heard many stories and accusations about manipulations by central planners, bullion banks, short-sellers and futures traders. The regulators in the West have largely ignored these accusations and have looked the other way when it comes to oversight and creating a fair and legal market place for precious metals.
Financial Fraud in the Gold Market
When it comes to opportunity for fraud, the East is not innocent either. Last month, police in Central China rounded up 33 people suspected of illegal gold-futures trading. The case involved 5,000 investors and at least 380 billion Yuan ($59.62 billion) in which the suspects claimed to be agents of overseas companies dealing in London gold with the promise of huge returns. They promoted investments in Loco London gold and charged exorbitant consulting fees without warning investors of the risks of these transactions or having a signed detailed contract. This had been going on since October 2008 in a low key operation using private bank accounts, mobile phones and online messaging services. Several suspects were caught and detained since March 2, 2012 while more arrests are expected to be made across China as the investigation continues.
As observers of the precious metals market, we know that many Eastern central banks are accumulating physical gold. It is in their best interest to accumulate the physical metal and diversify out of toxic Western paper assets that were sold to them by the western financial puppet masters. It is obvious that Western cartels like Goldman Sacs and JP Morgan are great at creating and selling financial instruments of mass destruction.
One only has to look at the CDO market or the mortgage backed securities sold in the past decade. These paper products were backed by mortgages from over inflated real estate bought by people who could not afford to buy property and were thus set up to fail. Another example is the derivative market which is reportedly over $600T worth of contracts used for “hedging” all the toilet paper assets sold by Western institutions. This includes derivatives and “insurance” products to protect from default or significant changes in valuation on assets such as government bonds, interest rates & credit default swaps and most other paper assets. There is no way these contracts are backed by any real asset and when they are called to perform, the system will collapse. This is most likely why they changed the name and structure of the recent Greek default on bonds; they cannot afford to trigger the derivative time bomb.