the economic policy journal06 august 2012Four-Year Silver Probe...

the economic policy journal

06 august 2012

Four-Year Silver Probe Set to be Dropped FT reports:

A four-year investigation into the possible manipulation of the the silver market looks increasingly likely to be dropped after US regulators failed to find enough evidence to support a legal case, according to three people familiar with the situation.

The Commodity Futures Trading Commission first announced that it was investigating “complaints of misconduct in the silver market” in September 2008, following a barrage of allegations of manipulation from a group of precious metals investors.

In 2010, Bart Chilton, a CFTC commissioner, said that he believed there had been “fraudulent efforts” to “deviously control” the silver price.

I have no idea if the silver market has been "manipulated", as I said about the LIBOR "manipulation," there are major players on all sides of these markets and they are all trying to game the system. However, any such gaming would be impossible to do on a long-term basis in a free market. If you are "manipulating" against the free flow of a market, it is going to cost you more money to do so day after day, until you blow yourself up,when other traders figure out what you are up to.

These tales of market manipulations bring to mind what Ludwig von Mises wrote about supposed cattle manipulations:

The socialist authors do not content themselves with depicting the conditions of the victims of capitalism. They also deal with the life and the doings of its beneficiaries, the businessmen. They are intent upon disclosing to the readers how profits come into existence. As they themselves—thank God—are not familiar with such a dirty subject, they first search for information in the books of competent historians. This is what these experts tell them about the “financial gangsters” and “robber barons” and the way they acquired riches: “He began his career as a cattle drover, which means that he bought farmers’ cattle and drove them to the market to sell. The cattle were sold to the butchers by weight. Just before they got to the market he fed them salt and gave them large quantities of water to drink. A gallon of water weighs about eight pounds. Put three or four gallons of water in a cow, and you have something extra when it comes to selling her.” In this vein dozens and dozens of novels and plays report the transactions of the villain of their plot, the businessman. The tycoons became rich by selling cracked steel and rotten food, shoes with cardboard soles and cotton goods for silk. They bribed the senators and the governors, the judges and the police. They cheated their customers and their workers. It is a very simple story.

It never occurred to these authors that their narration implicitly describes all other Americans as perfect idiots whom every rascal can easily dupe. The above mentioned trick of the inflated cows is the most primitive and oldest method of swindling. It is hardly to be believed that there are in any part of the world cattle buyers stupid enough to be hoodwinked by it. To assume that there were in the United States butchers who could be beguiled in this way is to expect too much from the reader’s simplicity. It is the same with all similar fables.



if you can't beat them join them.

hopefully more people will be using 'shorting bots' to dynamically hedge the value there silver investments!