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Ed Steer regularly reminds us “Da Boyz” – (metals traders at the big banks), manipulate the gold and silver market. The big 8 are JPMorgan, Morgan Stanley, Citigroup, Wells Fargo, Bank of America, HSBC, Standard Chartered & Barclays.

In August, he reported:

“‘Da Boyz’ At the Ramparts In Gold Yet Again

…. The Big 8 collusive traders in gold are short 50.8 percent of total open interest in the COMEX futures market….”

Gambling galore! Ed continues:

…. “JPMorgan’s precious metals derivatives rose…to $323.5 billion in Q1/2025…whereas Citigroup’s fell…to $142.8 billion….

But with JPMorgan holding 61% of all the precious metals derivatives…Citibank holding 27% —…it’s only the first two banks that matter.”

Outrageous short positions + $500 billion in derivatives – what could possibly go wrong? They don’t need any stinking controls….

Chuck Butler explains:

“London metals trader Andrew Maguire,…says major participants in the gold market no longer consider the New York Commodities Exchange and the London Bullion Market Association dependable for delivering real metal and are taking their business to Asian exchanges where delivery is quick.

…. He believes that ‘paper’ gold will be finished when the December gold futures contract closes at the end of November and U.S. bullion banks become obliged to comply with Basel III rules and stop selling metal they don’t have.’

Chuck Again… I guess this will depend on whether the Bullion Banks follow the rules, or if they find a way around them…”

Time to ask Chuck for clarification.

DENNIS: Chuck, thanks again for taking your time for our readers’ benefit. Let’s start from the beginning. What is Basel III?

CHUCK: Dennis, thanks again for inviting me.

Basel III is an international committee of central banks that meets in Basel, Switzerland. Basel III was in response to the 2007-2008 financial crisis. Their mission is to reduce risk in the banking sector by requiring banks to have more capital on hand.

Investopedia reports:

“Basel III Endgame is the last stage of U.S. regulators’ implementation of reforms meant to ensure the stability of the banking system. It calls for the country’s largest banks to put aside more capital in reserve to weather financial storms.”

DENNIS: US banks are really fighting this, firing up their lobbying machine. Investopedia continues

“Lobbies including the Bank Policy Institute have taken to the airwaves…warning that the suggested regulations target only about 37 U.S. banks with holdings of $100 billion in assets or more. They would put young families’ dreams of homeownership and small businesses’ expansion plans at risk.”

Every time regulators try to increase capital requirements, casino banks start screaming how it will hurt the little guy? Truth or their normal BS?

CHUCK: BS; business as usual! Before the repeal of Glass-Steagall, commercial banks and investment banks were kept separate.

A commercial bank, as we once knew it, was a financial institution that accepted deposits from the public, and made loans to the local community. They still exist but the number is much lower; they were gobbled up by the big banks – creating “too big to fail” banks.

The law allows “fractional reserve” banking, meaning they only need to keep a fraction of their deposits on hand; the rest is available for lending to the public. The loans were for things like mortgages, automobiles, or small businesses. They were not allowed to underwrite securities or any other high-risk ventures. Commercial bank income was derived from the interest rate spread.

Fractional reserve banking carries risks, such as potential liquidity issues during times of mass withdrawals. In 1934, the Federal Deposit Insurance Corporation (FDIC) was created to protect depositors (up to certain limits) from losing their money if the bank failed.

Glass-Steagall was also passed, separating commercial banks from investment banks. Investment banks were allowed to take all the risk they wanted, but they were not allowed to use depositors’ money, nor did they have FDIC protection for their customers.

The repeal allowed commercial and investment banks to merge – leading to the “too big to fail – casino banks.”

Dennis, in the 60+ years Glass-Steagall was in effect, there were no major bank failures.

Here’s some perspective. You recently reported the top four banks hold over $200 billion in high-risk derivatives. Their trading (gambling???) revenue was over $60 billion.

They pretend to be commercial banks, doing what the small commercial banks used to do, but interest spread income is a pittance to what they make in high-risk trading.

When they make bad bets, like 2008, they hide behind their FDIC insurance, and “Oh my God, they are too big to fail” while the government (us “little guy” taxpayers) bail them out.

Their concern for the “little guy” is an excuse for government bailouts. The only one who benefits from extending excessive credit to a high-risk borrower (likely living beyond their means) is the loan originator who quickly dumps the risk on the taxpayer. As long as the “little guy” depositor is under the FDIC limits, he will be fine.

DENNIS: While lobbying is not considered a bribe, but merely influence, I feel too many members of Congress love the “influence.” Treasury Secretary Bessent advocates keeping capital requirements low.

Do you feel the government will ignore the lobbying and require banks to comply with Basel III?

CHUCK: Dennis, recall the PBS Frontline program about the Long Demise of Glass-Steagall:

“After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts.

…. Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin…raises eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant.

The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, ‘You’re buying the government?’

In less than a decade,…lenders recklessly lowered loan standards in pursuit of lucrative securities offerings and marketed bad loans to the public – while Congress authorized some $29 trillion, bailing out ‘too big to fail’ banks.”

Their “lobbying machine” is running full speed again. Lord knows how many millions are involved this time around. That is a lot of “influence!”

Lobbyists know which government buttons to push to “influence” them to get this Basil III thing negated … If they don’t, it will hurt bank profits, and perhaps the “lobbying machine” will reduce some perks.

I doubt the Casino Banks will have to adhere to anything that looks like Basil III as it stands now…. Every time regulators seem to have their hands around the Casino Bankers’ throats they slip away; nothing gets done… It’s very sad for the Middle Class, the ones that suffer the most…

DENNIS: Let’s talk about gold which you mentioned in The Daily Pfennig.

Equifund.com provides some insight:

“Amongst all the controversy surrounding Basel III, it is the potential impact on allocated/unallocated gold that I find most interesting.

• Allocated gold is all gold held in custody – off balance sheet – that belongs to the depositors.
• Unallocated gold – often referred to as paper gold – is attractive to banks because they can leverage on the gold actually held in the vaults, and some estimates put the ratio of unallocated gold to physical gold at up to 400 times, making it potentially very profitable to bullion banks.”

Concluding:

“Under the new rules, banks are required to hold physical gold or other liquid assets for an amount equal to at least 85% of the value of unallocated gold on their books.

A likely, and probably intended, consequence of the Basel III rules will be a drop in the volume of financial transactions linked to gold.”

Chuck, isn’t trading up to 400 times ultra-high risk? Will this have any impact on the metals market?

CHUCK: Yes, it would. Remember Basil III calls for an end to selling metals that you don’t have; if you sell them, you must be able to deliver quickly. This would be a dagger in the heart of the short paper traders who manipulate the metals almost daily…

Think about this. How many investors holding “unallocated gold” might find that 400 other investors also have a claim to the same gold? When the music stops, it could get ugly!

DENNIS: Might the world clamping down do what US regulators refuse to do? While these rules would likely provide an additional margin of safety to the casino banks, what happens if “Da Boyz” don’t follow the rules?

CHUCK: We could very well see all other countries cease to do business with their U.S. trading partners…. But, the Casino Banks are so ingrained internationally, in the end, I doubt “Da Boyz” will have to worry about it; the lobbyists are on it, like stripes on a skunk!

DENNIS: Chuck, thanks again for your time.

CHUCK: My pleasure, Dennis.

Dennis here. The world is on to our casino banks. We will see what happens internationally in December when US banks are required to comply with Basel III. Stay tuned….
 

On The Lighter Side…

Jo is recovering nicely from her rotator cuff surgery. She officially announced I am relieved of all “cat duty.” She got no argument from me.

She is working hard with therapy, but still has a long way to go. Things like raising your arm to get a cup out of the pantry are not a given. She brings me tight lids and caps to open. You don’t realize what all we take for granted until we can no longer function properly.

Last week, we took a drive through the countryside to Carmi, IL. Beans and corn are brown, some is in the bin, and we saw several armadas of combines beginning to gather in the fields. It’s fun to drive in the country; thousands of acres of corn and beans that feeds much of the world.

Last week I got a clean report from the heart doctor. This week is a PET scan. With good results, we will leave the next day for Florida.
 

Quote of the week:

“What has been holding this Wall Street house of cards together this long is the New York Fed’s willingness (even eagerness) to throw trillions of dollars at the problem at the earliest sign of a hiccup. The fly in this ointment is that the New York Fed is literally owned by these same Wall Street mega banks while simultaneously creating emergency bailout programs and then outsourcing the work to the banks being bailed out. If ever there was the perfect design for a replay of the Hindenburg, this is it.”

— Pam and Russ Martens, Market Bubble Set to Explode, June 21, 2021
 

And Finally…

Subscriber Zeus shares some farmer wisdom for our enjoyment:

• Words that soak into your ears are whispered – not yelled.
• Meanness don’t just happen overnight.
• The best sermons are lived, not preached.
• Most of the stuff people worry about, ain’t never gonna happen anyway
• Don’t judge folks by their relatives.
• Remember that silence is sometimes the best answer.
• The biggest troublemaker you’ll probably ever have to deal with, watches you from the mirror every mornin’.
• Don’t pick a fight with an old man. If he’s too old to fight, he’ll just kill you.
• Always drink upstream from the herd.
• Good judgment comes from experience, and a lotta that comes from bad judgment.
• Lettin’ the cat outta the bag is a whole lot easier than puttin’ it back in.
• Life is simpler when you plow around the stump.
• A bumble bee is considerably faster than a John Deere tractor.

And my favorite:

• Do not corner something that you know is meaner than you.

Until next time…

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