Saturday, August 27, 2011

The Rope By Which to Hang Him

Vladimir Lenin said, "A capitalist will sell you the rope to hang him with." Well last week the COMEX just sold a long piece of the rope, to hang some bankers by."

Acting on behalf of its globalist masters, the commercial banks and central banks, the COMEX radically raised it's margin requirements for silver in May.
The rapid series of five margin increases by the COMEX resulted in raising initial margin requirements for speculators from $11,745 to $21,600 - an increase of 84%. The margin requirements for hedgers also increased by 84% from $8,700 to $16,000. Silver futures traders would now be forced to come up with huge amounts of additional cash or liquidate holdings on price weakness. The collapse in silver prices on Thursday May 5th, triggered by the COMEX margin increases, indicates that many players were forced to liquidate positions.

Exchange operator CME Group Inc. (CME) raised collateral requirements for trading gold futures for the second time this month Wednesday as gold prices climb to fresh records.
CME said gold margins will be raised 27% effective close of trading Thursday, in an email announcement after trading closed Wednesday.

Predictably the leveraged longs were forced to sell in both cases, stopping the ascent of each metal dead in its tracks as desired. But only temporarily.

Silver collapsed by 35% in May, but now is to within 17% of its all-time high. Gold crashed by 20% in just two days, but recovered to within 4% of its all-time high in the same time. Their increasing efforts are achieving decreasing results. The noose is tightening.

But leverage is a sword which cuts both ways. For J.P. Morgan, naked shortselling was the only device by which it had a prayer to whittle away at the 3.3 million ounce silver short position regurgitated up from the rot of Bear Stearns. And while forcing the longs to liquidate was an immediate short-term convenience it was a total non-fix which leaves JP Morgan, still laden with it's short and empty-handed against the next gold and silver surge.

And the next surge will be different form all those which came before.

This time as the gold and silver markets recover they do so without the overhead of possible sellers all the way up to the historic highs, making those highs more attainable and faster. Once the old highs are broken, the would be short-sellers will be left standing naked in the wake of the consequences of the brazen manipulation of their own doing. They will be defenseless in the face of a collapsing currency and the onset of the run on gold began last week by Hugo Chavez.

As the melt up of the precious metals turns into a runaway disaster, the noose can only get tighter faster until with one last final twitch it snaps, leaving the bankers dangling from the short end of their own twisted rope.

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