Realcent.org

http://kingworldnews.com/kingworldnews/ ... psing.html

"The COMEX inventories have been steadily drained, but it’s accelerated rapidly over the last three months. These mismatched leases are forced to be extended now beyond any historical extremes that I can ever recall, and I talk to other people in the wholesale market and we are all seeing this crack in the system. On April 12th we saw official defense come in (to the gold market) and it was to avert this imminent LBMA bullion bank default. But it was just the way it was executed. It was grossly misjudged. "

This speaks to the discussion that has involved Jonflyfish on and off for the past couple years. Jon's point, I believe, is that the COMEX/LBMA was not constructed to back up every single ounce of gold or silver traded in the options market with the physical metal. It is simply a price discovery mechanism and as long as those few who do stand for delivery are satisfied with physical product the system will work as designed. If this is all true, is this apparent fractional reserve system widely acknowledged?

I suppose this system is workable if its true intent is price discovery and not price manipulation.

When the CME incorporated the Chicago Butter and Egg Board the main purpose was to provide price stability. It's hard for a farmer to budget what he can afford to spend when he doesn't know what his profit margin is for crops he will be selling down the line. Over time this mechanism took defacto control of price discovery as it became widely used, but price discovery is only the goal insomuch as it supports price stability, as of course the two go hand in hand.

I believe it is a fractional reserve system. Some have alleged that while they have serial numbered bars for each contract that those serial numbers are re-used for multiple customers, but since the fox is guarding the henhouse (JPM runs the SLV, and manages the vaults, and holds contracts of behalf of investors) there is no real transparency or accountability in that regard. So the likelihood of a fractional reserve system is plausible, but not easily proveable.

However from the standpoint of leverage (buying on margin) it is most certainly a fractional reserve system, because people are buying and selling contracts with money they don't actually have. The CME uses this to supposedly enforce price stability, by raising or lowering margins as necessary to influence buying or selling in the marketplace to inhibit volatility. However, the most common effect of margin changes is volatility so that claim holds no water. Therefore if price stability is not truly the goal, as evidenced by the results of their actions, then price discovery must be the minimum goal with price manipulation being a plausible end from that means.

The nature of this system is not widely acknowledged IMO. It serves a needed purpose to prevent cornering of markets, and it does this by cornering the market. A conundrum indeed. As physical metal becomes increasingly desirable, hence the recent record outflows of metal from these exchanges the physical market should begin take precedence.

It is impossible for SLV to be fully backed by physical silver, just from a single standpoint alone. There are days when... supposedly... the inflows of silver into SLV number in the tons, when it is widely acknowledged that when Eric Sprott attempted to launch his physical backed ETF's it took him MONTHS to do so. I am as certain as a nutjob can be that JPM uses their silver ( ) that which purportedly belongs to SLV, to back their short plays, and that should force majeure ever be declared at COMEX it shall simultaneously be learned that there remains as much silver in SLV as there is gold in Fort Knox. When the foxes guard the henhouse the only question becomes which do they prefer? Mild or crispy?

InfleXion wrote:When the CME incorporated the Chicago Butter and Egg Board the main purpose was to provide price stability. It's hard for a farmer to budget what he can afford to spend when he doesn't know what his profit margin is for crops he will be selling down the line. Over time this mechanism took defacto control of price discovery as it became widely used, but price discovery is only the goal insomuch as it supports price stability, as of course the two go hand in hand.

I believe it is a fractional reserve system. Some have alleged that while they have serial numbered bars for each contract that those serial numbers are re-used for multiple customers, but since the fox is guarding the henhouse (JPM runs the SLV, and manages the vaults, and holds contracts of behalf of investors) there is no real transparency or accountability in that regard. So the likelihood of a fractional reserve system is plausible, but not easily proveable.

However from the standpoint of leverage (buying on margin) it is most certainly a fractional reserve system, because people are buying and selling contracts with money they don't actually have. The CME uses this to supposedly enforce price stability, by raising or lowering margins as necessary to influence buying or selling in the marketplace to inhibit volatility. However, the most common effect of margin changes is volatility so that claim holds no water. Therefore if price stability is not truly the goal, as evidenced by the results of their actions, then price discovery must be the minimum goal with price manipulation being a plausible end from that means.

The nature of this system is not widely acknowledged IMO. It serves a needed purpose to prevent cornering of markets, and it does this by cornering the market. A conundrum indeed. As physical metal becomes increasingly desirable, hence the recent record outflows of metal from these exchanges the physical market should begin take precedence.

you got a good "pen"....and you been in this "thing" for a while, I can tell...post more. (how do like that imperative?...lolz)