Adrian Douglas: CFTC should bar manipulation by shorts, not just longs

Tuesday, August 11, 2009

Gary Gensler, Chairman
U.S. Commodity Futures Trading Commission
3 Lafayette Centre
1155 21st St. N.W.
Washington, D.C. 20581

Dear Chairman Gensler:

Your hearings on position limits in the commodity futures markets have presupposed that the issue is speculation on the long side. You will not correctly regulate markets if your inquiries and hearings are being conducted from the conclusion you want to make and then work backwards.

The fundamental problem is not with finite resources but with infinite production of dollars. You are turning a blind eye to the manipulation of markets on the short side (and the massive OTC derivatives markets) that is undertaken to mask the uncontrolled creation of fiat dollars backed by nothing.

The price suppression is rampant and is making finite commodities even more finite as it becomes uneconomic to produce them. The paper promises to supply commodities from stocks that do not exist suppresses prices.

The CFTC has been investigating price manipulation in silver and gold for almost a year. The manipulators here will be drawing a pension before you recognize manipulation. Meanwhile the U.S. Senate can apparently recognize long-side manipulation of wheat and even crude oil in a flash.

Why have your hearings focused on how oil rose to $147 per barrel and not equally how it fell to $35 per barrel and how the dollar made a magnificent rise in the middle of a credit crisis, a feat never before achieved?

Federal Reserve Chairman Ben Bernanke testified in response to U.S. Rep. Alan Grayson that the rise in the dollar was a total coincidence even though it occurred even as half a trillion dollars of currency swaps were executed with foreign central banks. Really? And was it an equal coincidence that as a result of the dollar's rising from the dead the entire commodity complex cratered, including the most time-honored safe-haven asset, gold?

Any limits you put on trading must be applied equally to short sellers. But the CFTC's investigation needs to dig into how markets are being manipulated at the behest the U.S. government to maintain dollar hegemony so that imports can be purchased for free and so the United States doesn't have to compete in the global marketplace to manufacture anything anymore except a torrent of greenbacks.

My guess is that you will aid and abet the continuation of this Ponzi scheme because that is so much easier than doing what is right and what you are paid to do as a servant of the American people.

Regards,

Adrian Douglas

-----

Adrian Douglas is a member of GATA's Board of Directors and publisher of the Market Force Analysis letter (http://www.MarketForceAnalysis.com).

* * *

To contribute to GATA, please visit:

http://www.gata.org/node/16