Trading Places: Fraud in the Commodities Market

In the past six months a huge fraud concerning manipulation and racketeering in the silver market (and now it seems also gold) looks like the making of a horror film.
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In the brilliant 1983 film Trading Places the WASPish commodity-trading brothers of Philadelphia's Duke&Duke, decide to teach Billy Ray (Eddie Murphy) about the Commodities market:

Little does Billy Ray know both he and the fallen frat-boy character played by Dan Aykroyd, have been set up by the fraudulent pair, who are trying to corner and rig the markets by buying inside information. Their big trade is in frozen orange futures juice and they bribe/pay a shady character to receive the Department of Agriculture report a few days before its public announcement, thus providing them time to place their trades. But by then, Murphy and Akroyd's characters, along with a butler and a prostitute, have swapped the briefcases, the Duke brothers end up not only losing everything, their almost century-old trading firm wiped out, they end up going to jail.

This is called MORAL HAZARD. It is what should happen when those "playing" in the financial markets have access to inside information, and manipulate the markets. It means that the markets are rigged and the rest of us innocent investors, or even those of us with simple retirement and savings accounts, get, well... you know... %#*ed over! The moral hazard should also extend to the Fed and those inside the government who knowingly rub shoulders with and pass on the juicy tidbits to their former colleagues in the financial industry!

Now one might further analyze this film by remarking that the Murphy and Aykroyd characters who also use the insider information to invest the retirement savings for the butler and the prostitute, to help them all win big, but... who cares? They did not hurt anyone (except the manipulating Duke brothers), and took their winnings and retired to the Caribbean and were happy! In fact the pensions of the average workers won! Unfortunately for us, the banks are more like the Duke brothers who were so greedy they played with people's lives, manipulated the markets, thus hurting normal humans even more, AND they did not even have the good sense to retire, but rather spent their every waking moment thinking about and maliciously trying to earn even more and more money, mostly illegally with inside information. Symbolically, they belong to an elite men's club, and they dine with regulators, receiving information others do not have.

This is precisely what has been going on for way too long not just in the US, but around the world. While reading both Too Big to Fail and the recent French book, Goldman: Comment Goldman Sachs Dirige le Monde, I was horrified to learn about preferential treatment of clients, and of the banks' own funds based on inside information linked to underwriting and the crossover between the Fed, the government and the bank. Though I knew a lot about those invited into as early investors in questionable IPOs, especially in 2000, in biotech and other areas. Those investors made a killing. The suckers who bought shares soon after the IPO watched the prices crash after the insiders got out. Many of those who were "invited in" also tend to be huge donors for political parties... hmmm... a novel way of fundraising? Unfortunately it has been going on for decades! You had to have a half a million dollars to invest (and win big) in the GM IPO! That alone eliminated the average investor. Take a look at who made money off of that and you will see all kinds of I'll scratch your back you scratch mine! (Let's look even further into how our pension funds were being trafficked by pay to play. GM is just one of many many of these kickback-paying scenarios).

But now another huge insider scandal is brewing. And foreign hedge funds and some pretty angry billionaires are well aware of it. In the past six months a huge fraud concerning manipulation and racketeering in the silver market (and now it seems also gold) looks like the making of a horror film (in which the monster just never dies and keeps coming back again and again... we just cannot kill those to big to fail) movie thriller, less like the 80s friendly and funny Trading Places and more like Saw III or The Firm or even The Da Vinci Code. Substitute monsters, chainsaws, Opus Dei or corporate lawyers for a few of the inside circle who dine at the Four Seasons in New York, or these days, in their private dining rooms in fear of being confronted by those who have lost out.

A whistleblower, an independent trader in the Commodities Market in London, communicated what he had heard from JP Morgan and HSBC silver traders, to the CFTC and the next day he and his wife were almost killed when a car ran them down while shopping.

A few weeks ago a new lawsuit, brought by the Southern District of New York against JPMorgan and HSBC for racketeering was filed.

A few people out there are calling for the naked short selling and manipulation of these banks to be exposed by asking citizens around the world to simply purchase one silver coin and thus take physical delivery of silver as opposed to the manipulated paper market. This would create a situation in which the "naked shorts" would be exposed and could undermine their manipulation. One well-loved blog in the financial industry, Zerohedge, is calling for everyone to expose this lie of too big to fail.

Send them to jail, the real culprits not the secretaries and lower down the hierarchy folks, but those who tacitly approved this undermining of the trust in our markets and thus in America itself. We need to bring back Moral Hazard in a big way, and President Obama is the man to do the job. But it won't be easy. Whenever a president confronts the mob, he takes huge risks. And these folks aren't going to disappear without taking down a lot more with them (or creating a terrorist threat or bring us to war!). Funny how they will learn who their true friends are when they have to testify against one another. Oh, and make sure the judges are clean please. We the People, the consumers who have been hurt by this rigging of our markets need people such as Elizabeth Warren to help us clan things up and restore trust. Like yesterday. We've had enough, they're doing it right under our noses, stealing our money, our pensions, and our futures!

America, let's do some serious Trading of Places and help benefit the nation and not the elite few! It is only through being bound to one another's good fortune and acting in solidarity that we as a great country will rise to provide some kind of leadership in this world.

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