If everything's manipulated, does that make it OK?

10:25p ET Thursday, April 1, 2010

Dear Friend of GATA and Gold (and Silver):

Commentary posted today by Brady Willett, editor of FallStreet.com, headlined "What Isn't Manipulated?," suggests that GATA's work has gone from outrageously radical to old hat overnight without ever having touched revelation in between.

"We all know," Willett writes, "the price of gold is manipulated in the same sense that currency prices, interest rates, mortgage rates, and even stock prices are indirectly and directly 'manipulated' by powerful interests."

We all do?

Does Willett really presume to speak for, say, Kitco's Jon Nadler, Martin Wolf of the Financial Times, International Monetary Fund Managing Director Dominque Strauss-Kahn, British Prime Minister and former Chancellor Gordon Brown, and most of the members and staff of the U.S. Commodity Futures Trading Commission?

Maybe Nadler, Wolf, Strauss-Kahn, Brown, and the CFTC do know and it's just not their business to tell. But those who have been part of GATA for any substantial part of its 11 years have been disparaged enough in that time to imagine that preaching to the choir feels very different.

To mock the market manipulation witness about whom GATA informed the CFTC and the world at last week's CFTC hearing, Andrew Maguire, Willett makes a serious factual error. Maguire, Willett writes, "provides no evidence of collusion and he names no names (except his own)."

Wrong. In his e-mails to a CFTC investigator, which Maguire provided to GATA and which GATA in turn presented at last week's CFTC hearing, Maguire specifically and repeatedly accused traders for JP Morgan Chase:

http://www.gata.org/node/8466

Thus Willett could not have been paying very close attention, but he dishonestly mocks Maguire twice. He writes: "How can anyone cry manipulation when it took the price of gold less than a week to recover from its February 5 selloff?"

Well, Maguire can cry manipulation because its purpose and effect were, as he wrote to the CFTC investigator, to "trip stops" around "key support levels," flushing out weak long position holders, something fully within the power of any trading entity that has access to huge amounts of money, amounts far greater than competing traders have access to, amounts capable of being generated by, say, JPMorgan Chase's business partners, the Federal Reserve System and the U.S. Treasury Department, for which the investment house is a registered agent.

Willett himself used to recognize as manipulative and objectionable the practice of which Maguire complains, as Willett did in his Fall Street commentaries on the silver market in April and May 2004:

http://www.fallstreet.com/apr704.php

http://www.fallstreet.com/may1204.php

While Willett acknowledges that this manipulative practice continues, he seems not be be bothered by it as much now as he is by Maguire's and GATA's complaining about it.

But Willett concedes perhaps the bigger point to GATA when he joins us in marveling at the admission made at the CFTC hearing by establishment gold market analyst Jeffrey Christian of CPM Group. "Who needs the Maguire angle," Willett asks, "when Christian -- who is supposed to be against the manipulation theory -- is more than willing to admit that the price of Comex gold is determined by massive unbacked paper promises? ... According to Mr. Christian, that paper gold can be traded hundreds of times (why not thousands of times?) beyond the underlying physical asset is not cause for concern. Mr. Christian also added that position limits are not required because those with large concentrated positions are actually hedged with OTC contracts. (The notion that everything in this world is perfectly hedged in OTC Land long ago left the realm of comical and has become simply absurd.)"

Returning to minimizing mode, Willett concludes, "Price manipulation does not constitute market control."

Maybe not, but as Silver Stock Report editor Jason Hommel, who attended last week's CFTC hearing, notes in his commentary tonight, headlined "CFTC: Obey Your Plaque" --

http://silverstockreport.com/2010/CFTC-plaque.html

-- even a little manipulation is against the law, quaint as the law may seem to Willett these days. It says so right on the plaque on the wall of the CFTC's hearing room, of which Hommel took a picture.

You can find Willett's commentary, "What Isn't Manipulated?," at Fall Street here:

http://www.fallstreet.com/april110.php

And at GoldSeek's companion site, SilverSeek, here:

http://news.silverseek.com/GoldIsMoney/1270170340.php

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

To contribute to GATA, please visit:

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