Thursday, June 24, 2010

Dr. Patrick Byrne of and His Crusade Against Naked Short Selling

Due to the importance of the need to continue to expose the incredible corruption in the financial markets and after having obtained permission from the host of this interview, I believe it is in the public interest that the provided audio be heard far and wide by the investing public (audio embedded below with an MP3 link to listen offline). For the purpose of stating the obvious, I use the term "investing public" to include those who work for and hold paper money as representative of wealth despite their belief that they are "out of the market." No.. far from it. They are invested in the currency market, US dollars, the common stock of the USA, Inc., which is openly and legally sold short and very nakedly so.

This interview caught my attention after having looked into the practice of 'naked short selling' or simply, the counterfeiting of publicly traded shares by large players in the market place. To a great extent, this is just an extension of fractional reserve banking, but by Wall Street. Today, the threat isn't so much that investors and depositors would liquidate individual accounts, a problem in a fractional reserve system of representative paper wealth, but that the value of paper assets, whether they be cash, equities or bonds, are continually diminshed in value by large institutional speculators who sell without ever having to settle. A free lunch. The shocking part of all of this, is that this naked short selling is prevalent even in the US government bond market as exposed by researchers, including Deep Capture, a blog associated with Dr. Byrne.

An example of openly admitted naked short selling is the trading of unallocated precious metals. Recently Jim Puplava of Financial Sense covered the topic of the manipulation of the gold price and also clearly defined the difference between allocated and unallocated precious metals accounts. Allocated accounts are accounts where the metal is numbered and specific bars or coins are assigned to owners and storage fees are charged. Unallocated metals are metals where dealers act as brokers do, purchasing the assets for clients, but often without any specific metal held in segregated accounts and where no delivery of the physicial metal is expected. Unallocated metal is normally a way of trading the swings in price in the short term for cash profits and the more sophisticated speculators buying and selling in this market are aware of the difference. Unless specifically disclosed that a physical pooled account of some sort is maintained, no physical gold is actually taken off of the market and such accounts have no backing whatsoever and delivery of physical metal would require locating the metal on the open market. Either way, the investor of unallocated metal has more exposure to the credit risk of the firm. The problem not addressed by Mr. Puplava, in my opinion, is theoretically, how many tonnes of unallocated gold can be purchased or sold worldwide, for example, until the transactions might exceed any available gold in existence, mined or to be mined, on the planet? Where do you draw the line and is the price of gold (and silver) today reflective of physical reality? Unlike electronic blips or paper certifcates representative of equity stakes, physical assets might eventually be required to somehow manifest in 3-D reality when the 'game over' sign flashes.

The most important term to understand, as financial deleveraging accelerates, or basically as we arrive at the end game in a fractional reserve world, is "counterparty risk (or default risk)." In the broadest sense, this includes "counterparty risk" in the holding of cash which derives its value completely at the whim of the ruling class and ultimately in the confidence that the public might have in these buffoons. The example of the precious metals market above is just for illustration purposes as free and clear ownership of tangible assets will be crucial as we approach and arrive at a tremendous financial event horizon, guaranteed by the the laws of the universe.

As Alan Greenspan once stated, "...the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset."

The audio file above is posted by its original creator at:

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