Fixing The Silver Fix: The Corruption Continues by Jeff Nielson, Sprott Money
My name is Tommy Flanagan, and I’m a member of Pathological Liars Anonymous. In fact…I’m the president of that organization. Yeah, that’s who I am.
I didn’t always lie. No, I used to tell the truth. Then one day I told a lie, and I got away with it. Yeah, I told my parents that I had a brother that they had never met…
-Jon-the-Liar Lovitz, The Johnny Carson Show, March 28, 1985
As the character Jon Lovitz explained on The Johnny Carson Show, lying is habit-forming. If perpetuated, it becomes compulsive conduct. Lying is a form of deviant behavior that (in the eyes of the liar) makes problems go away. Of course such problems never disappear permanently, because a lie can never solve anything. At some point the problem resurfaces, and because it never was addressed, often the problem has grown even larger.
The response from the liar is to tell another lie. But, because the problem is now almost inevitably larger, the new lie tends to be bigger or worse than the original. The process repeats. As the lies become larger and more numerous, eventually some of the new lies begin to openly contradict the old lies.
At this point, the proverbial “jig is up” for the liar. At least that is how things are supposed to work, as illustrated by the fable The Boy Who Cried Wolf. Which brings us to the “silver fix.”
The most obvious starting point is a question: why do we need a “silver fix”? In an era of electronic, instantaneous communication, and with (supposedly) “free and open markets,” why do we need someone to tell us what the price of silver is supposed to be at a particular moment in time? Why can’t market participants simply observe for themselves the current spot-price in our “free and open markets”?
The bankers (playing the role of Jon-the-Liar) have their answer at the ready.
We need an official “fix” of the price of silver, because the settlement of a number of a different types of contracts is based upon the prevailing price of silver, at particular times in the daily trading. If we didn’t have an official “fix,” then traders could attempt to manipulate the price at those particular times, and cheat the system. That’s right, someone else could cheat the system.
How would “fixing” the price of silver (a process which even sounds corrupt) help to prevent corruption in the marketplace? The Liars again have their answer.
We’ll get some ‘honest people’ to tell us what the price of silver should be. These ‘honest people’ will meet behind closed doors, and then tell us the honest price for silver. Yeah, that’s the ticket! Honest people, meeting behind closed doors.
And thus ‘the silver fix’ was born. Who were these ‘honest people’ who were going to provide us with the honest price for silver via their secret meetings?
As regular readers know, the Big Banks of the West have been convicted of every form of financial crime in the books, most involving fraud (i.e. lying) in one form or another. The only reason that these fraud-factories haven’t been convicted of far more crimes is because our corrupt governments have erased many of our former laws and simply stopped enforcing many others.
The Pathological Liars were handed the responsibility of providing us with the honest price for silver. But wait, it gets better. The silver fix was supposedly created to prevent corruption in the silver market. However, not only are the Pathological Liars allowed to trade in the same market where they are providing this quasi-regulatory function, but they are by far the largest traders in these markets.
The Pathological Liars, who have the largest financial motive to rig the price of silver, are the people to whom we handed the responsibility of providing us with the honest price for silver. This is not merely a matter of “putting the Fox in charge of the henhouse.” Rather, putting the hungriest fox we could possibly find in charge of protecting the hens.
However, we were told for many, many years that this system worked just fine. Then one day the Pathological Liars themselves told us that the silver fix was no longer working. Of course this was far less than a voluntary admission. Instead, it came as a consequence of several of the Pathological Liars being sued for – surprise, surprise – manipulating the silver fix.
The bankers, as always, had their next lie ready.
We’ll fix the silver fix, and make it better than ever. That’s the ticket!
And so, we got the bankers new-and-improved silver fix. How was it “improved”? The particular Pathological Liars who were being sued for manipulating the silver fix would no longer be involved in “fixing the fix.” Instead, only those Pathological Liars who were not being directly sued would be allowed to provide us with the honest price for silver.
Then January 28th, 2016 rolled around, and Bloomberg Media released the following:
A daily silver price used as a benchmark by traders, miners, and jewelers risks losing credibility with investors after it was set beyond levels traded on the market. One said the system seemed “broken” and another that clients had adopted alternatives.
The London Bullion Market Association Silver price was set at $13.58 an ounce Thursday, 3.5 percent less than the intraday low on the Comex in New York.
That came from the mainstream media, meaning that (at most) it contains half the truth. Here is what was left out. The phony “honest price” produced by Pathological Liars Anonymous on January 28 th was not merely 3.5% less than the intra-day low. It was 6% below the current price.
Also conveniently omitted by the mainstream media was the significance of that date, which was the “options expiry day” in the futures market. All of the options trading for that month was settled based on the price set by the silver fix on January 28 sup>th – the “honest price” produced by the Pathological Liars. This means that all of the options traders who would have cashed in if the honest price reflected the actual price of silver were, instead, blatantly cheated out of their rightful gain.
When Bloomberg and other mainstream propaganda outlets reported that some traders accused the London Bullion Market Association (LBMA) of operating a “broken” system, it was referring to some of those cheated options traders. What was also omitted was that the silver fix tended to conveniently dip below the actual price of silver on most option-expiry days.
Prior to January 28th the Pathological Liars had not engaged in the fraudulent rigging of the silver fix in such blatant terms, not even before the fix was “fixed” the first time. But even more troubling was the latter part of the quote from Bloomberg: “ …clients had adopted alternatives.”
The Pathological Liars lie to us (among other reasons) for profit. If market participants choose to simply tune out the Pathological Liars, then they could “fix” the silver fix at any fraudulent, outrageous price they chose, but there would be no profit in doing so. You can’t cheat the other children if they won’t play in your sandbox.
Alarmed, Pathological Liars Anonymous called another meeting, where the bankers in attendance quickly cobbled together their next lie that would have gone something like this:
We’ll “fix” the silver fix…again, and this time, it will really be better than ever!
Thus, now the Pathological Liars have presented their new new-and-improved silver fix, designed to replace the old new-improved silver fix, which was only put into place last year. What did the Liars do to make the new-new fix better than the old-new fix?
The first of the new measures is the introduction of a blind auction. The aggregate bid and offer volumes will no longer be disclosed during the auction round. This information will only be made available after the end of each round.
The second measure is a “sharing of the imbalance” in the auction. In other words, after the auction is complete, the remaining buy and sell orders will be equally shared among the participants.
Finally, the calculation agent will now be able to increase the imbalance threshold during the auction within an approved range.
In short, today the CME Group and Thomson Reuters (the other Pathological Liar associated with this particular fraud) announced that they are taking action to prevent it from being extraordinarily easy for the Pathological Liars to manipulate the silver fix. They are doing some of the things they should have done when they fixed-the-fix the first time, if they had actually wanted to make the system less corrupt.
Why continue this farce at all? Why would the Pathological Liars risk shredding their near-zero credibility even further? Why not put to death this now thoroughly exposed financial fraud? Why don’t the Pathological Liars content themselves with their 24/7 manipulation of silver trading, in their paper “bullion” markets, which as everyone knows, are already more than 99% paper, and less than 1% bullion?
It’s all about control. Clients had adopted alternatives. These are words which strike fear and hatred into the hearts of the Pathological Liars, such as only a few other words or phrases in the English language are capable of doing. Words like “competition” and “law enforcement.”