Stockholm Syndrome And The Precious Metals Price Discovery

The level of fraud in the financial system with utter lack of prosecution or accountability, combined with the ongoing love affair between the largest offenders and collective mainstream, results in financial media being a victim of the so-called Stockholm syndrome.

From Wikipedia:

Stockholm syndrome can be seen as a form of traumatic bonding, which does not necessarily require a hostage scenario, but which describes “strong emotional ties that develop between two persons where one person intermittently harasses, beats, threatens, abuses, or intimidates the other.”

Targeting JPMorgan

The financial mainstream media has an ongoing love affair with JP Morgan and Chase. Many point to the near perfect trading record of the investment banks without considering how it was accomplished.

According to critics, JPMorgan is being deliberately targeted due to CEO Jamie Dimon’s critique of the Obama administration’s economic policies before the 2012 election.

It’s the latest in bad news for JPMorgan, which agreed to pay a record-breaking $5.1 billion to the Federal Housing Finance Authority (FHFA) last week over toxic mortgage securities sold before the financial crisis. An additional $9 billion settlement over the same securities is in the works with the Department of Justice. This situation puts the bank on the hook for an astounding $14.1 billion in penalties.

But although JPMorgan has been relentlessly targeted by federal investigators, its behavior isn’t much different from other American megabanks including Goldman Sachs, which was largely spared by regulators. They are now at the center of a dizzying array of financial fraud prosecutions and have set aside the equivalent of the entire silver market in legal budget.

The Big Silver Short

As identified by Ted Butler years ago, JPM inherited the very profitable and illegal silver corner when it took over Bear Sterns in the aftermath of the 2008 financial crisis. If any one issue reveals the likelihood that this is indeed a politically motivated witch hunt, this would be it.

If a regulator really wanted to punish JPMorgan, they could very easily target the obvious presence in the precious metals futures.

First, the silver market clearly has no political constituency.

Ironically, silver is not only a monetary asset with a price that has been contained for decades, it is a commodity that practically everyone carries or has indirect contact with on a daily basis. Such contact comes in forms ranging from medicine and personal electronics to plastics and household appliances.

Regardless, opening up that issue would risk breaking the market and opening the floodgates of inflation.

Bart Chilton Steps Down

Another example of the Stockholm Syndrome in effect is the bewildering role of CFTC commissioner Bart Chilton. Chilton captured the trust and admiration of the silver investor in 2008 through his personal campaign in support of commodity position limits. He was also the voice of the CFTC when it came to the recently ended 5 year investigation of the silver market.

Many in the precious metals community are quick to offer praise for his tenure but ultimately, his role may be better served outside the system as whistleblower.

What might have been...

While Chilton stepped down this week, perhaps limited by a budget restraints and political pressure, it is worth examining what might have been had he been successful in terms of implementing Dodd-Frank. But it is especially worth the effort to scrutinize the ending of the ongoing downward manipulation of silver prices, which is decades long.

Most likely the inflationary warnings (putting pressure on the dollar) would have lifted all commodity prices, further crushing any chance of real growth and the payment of sovereign debt.

We would have seen the worst of the crisis come and go no doubt with a violent cleansing. Yet we would see in the aftermath the clearing of capital restrictions, allowing wealth to flow where it is needed the most.

Instead, we remain prisoners, the majority captured and comforted by the unsustainable walls constructed around. And we celebrate the captors while symbolically raising benign protest from time to ineffective time.

Indeed, the entire dollar-forced legal tender complex has kept captive multiple generations - to the point where today most people have no idea the identity of the kidnappers. At some point in the near future, the prisoners will be released into a wilderness all too unfamiliar.