CFTC Response to Silver Problem
Jason Hommel
Editor's Note: The following communiqué
exchanges between Jason Hommel and the CFTC about the Silver Problem.
Open Letter To the Authorities of the Silver Markets
In reply to David Kass, Senior Economist, CFTC.
Date: January 8, 2003
From: "Kass, David" dkass@CFTC.GOV
Dear Mr. Hommel,
Mike Gorham has asked me to respond to your recent
email. It is clear that you have read and considered Mr. Gorham's
response to Mr. Butler's allegations concerning manipulation of the
silver market, so I will not repeat the lengthy discussion of the
various regulatory tools and Programs that we have in place to monitor
futures trading. Rather I will note that the Commission has responded,
as recently as last month, directly Mr. Butler (as well as to others
like yourself that have been monitoring the exchange of
correspondence). We have carefully examined his allegations and found
them to be not credible and not supported by facts. Nonetheless, we
take very seriously our responsibility for regulating the commodity
futures and option markets and will remain vigilant with respect to
every such market.
If you or anyone else has any, specific, first-hand
evidence concerning violations of the Commodity Exchange Act, please
forward it. The Commission staff, however, will be unable to provide
you with any specific information about alleged violations or about any
individuals that may be mentioned, because of prohibitions in the Act
concerning disclosure of confidential information about the business
dealings of any specific trader and because it is the Commission's
policy not to disclose whether it is investigating a specific matter,
unless and until such time as a legal action is taken.
I hope this information is helpful to you.
Sincerely,
David A. Kass
Senior Economist
Date: January 12, 2003
To: "Kass, David" dkass@CFTC.GOV,
mgorham@cftc.gov,nwolkoff@nymex.com
Dear David A. Kass & Michael Gorham,
Thank you for responding and showing that you have
read my "Open Letter To the Authorities of the Silver Markets."
So that you know, my open letter to you was
published at GOLD-EAGLE.com, which has as many as 164,000 daily
visitors from 174 countries. It was also published at
www.silver-investor.com, goldseek.com, thebulliondesk.com,
goldismoney.info, goldismoney.com, the Yahoo! Message boards, as well
as a few other message boards on the internet. So, I'm giving you fair
warning that this issue is in the broad public record and that many
people are concerned about this issue, (I received 18 supportive
emails) and that many people know that you, the COMEX, and the CFTC are
informed of the issues. Therefore, you will not be able to continue to
avoid this issue for very long.
Just so that there is no confusion, my letter was
not about allegations made by Ted Butler. My letter was about the
comments by Mike Gorham that clearly show that the silver market would,
indeed, be manipulated by the large short positions if they don't have
silver to back up their positions, and if they cannot deliver silver to
the longs who intend to take delivery.
And you did not answer my key question, which is,
"Do they have the silver to back up their short positions and deliver
silver?"
I understand that it is your policy to not divulge
whether you are investigating, and I understand that you will not
divulge the specifics of my previous request, which was how much silver
do they have to back their short positions, whether it's 2% or 90%, and
that you therefore refuse to define what "substantial percentage"
means, given that this would be "confidential information about the
business dealings of any specific trader".
But I am not asking about the identity and positions
of specific traders. I'm asking about the integrity of the market that
you oversee, and I'm asking what you intend to do to see that the
shorts do not default on their delivery obligations. If they default,
it would be proof of manipulation, fraud, and probably negligence on
the part of the regulators such as yourselves (and perhaps willful
negligence since you are now clearly informed of the issues) that could
be grounds for civil and criminal lawsuits.
I am curious about another statement in your
response, which was this, "If you or anyone else has any, specific,
first-hand evidence concerning violations of the Commodity Exchange
Act, please forward it."
Now, I mentioned that it was public knowledge that
Warren Buffet was prevented from investing in any more silver, and that
it is currently still discussed among silver investors as to whether or
not he was thwarted from taking full delivery of his 130 million
ounces. Therefore, since you are asking for "first-hand evidence", then
let me ask specifically, are you now asking for Warren Buffet to
testify on this matter, and/or forward evidence of his experience in
1997 to the CFTC? This is a specific question, and I expect to receive
an answer directly related to this question, either a simple "Yes, we
want Warren Buffet to forward evidence and testify," or "No, we do not."
Also, you did not address my second most important
concern of my previous letter, so I will ask a direct question. Does
the CFTC intend to enforce position limit requirements that are
currently being violated? It is my understanding that you do not need
any evidence from anyone outside your own organization to handle and
enforce this issue, since you know the position limit requirements, and
only you know the identities of the traders with the large short
positions. The short positions are simply larger than the laws allow,
if I'm not mistaken. If you don't do anything, again, I believe this
could be grounds for future civil and criminal lawsuits against the
individuals at the CFTC who refuse to do their jobs.
Let me give you fair warning that if you are acting
as part of any high level government aided conspiracy to suppress the
silver price, you should greatly fear being brought to justice. This is
the United States of America, and we still have elections in this
country. Political winds can change, particularly after a default on
silver that could cause the price of precious metals to skyrocket and
cause people to lose confidence in the currency and wipe out the
savings of grandmothers who are bondholders. People would very likely
be elected who would appoint persons of integrity to office and judges
to the Federal bench who will not be afraid to bring to justice those
responsible for allowing the corruption of our free markets to take
place. It would be far better to allow the free market to move prices
up gradually and orderly to the fair market price.
According to the Coin Act of 1792, those who debased
the currency, "or otherwise with a fraudulent intent" were to suffer
the death penalty:
Penalty of Death for de-basing the coins. Section
19. And be it further enacted, That if any of the gold or silver coins
which shall be struck or coined at the said mint shall be debased or
made worse as to the proportion of the fine gold or fine silver therein
contained, or shall be of less weight or value than the same out to be
pursuant to the directions of this act, through the default or with the
connivance of any of the officers or persons who shall be employed at
the said mint, for the purpose of profit or gain, or otherwise with a
fraudulent intent, and if any of the said officers or persons shall
embezzle any of the metals which shall at any time be committed to
their charge for the purpose of being coined, or any of the coins which
shall be struck or coined at the said mint, every such officer or
person who shall commit any or either of the said offenses, shall be
deemed guilty of felony, and shall suffer death.
Political winds could change to bring such a penalty
back in fashion, especially if people are hurt severely by the CFTC's
actions or lack of actions. I strongly suggest you do a little history
research and see how the public treated officials in France after they
debased the currency.
And if the pressures of doing your jobs is too
overwhelming and you if you have trouble sleeping at night, I suggest
you quickly resign, perhaps for "personal or health reasons" and let
someone else take responsibility when the short positions blow up.
Finally, to David A. Kass, I understand you cannot
answer certain specific questions. I also understand that you are a
Senior Economist, and not a lawyer or prosecuting attorney. So let me
ask a general question, directly related to your area of expertise,
that might help me to determine what is going on over there at the
COMEX and CFTC. Economically speaking, can deficits in a commodity last
forever? At www.cpmgroup.com, they highlighted in a press release in
2002, "The physical silver market operated in a deficit for the twelfth
consecutive year in 2001, with newly refined supplies falling short of
industrial demand by 83.8 million ounces." In your view, as a Senior
Economist, giving me your personal view, given the information that is
available to the public, such as what the CPM group says, do you feel
that now is a good time to invest in silver?
Sincerely,
Jason Hommel
Jasonhommel@yahoo.com
Goldismoney.com
BCC, (blind carbon copy) to the rest of the people who emailed me in support of my original open letter.
Other essays by Jason Hommel:
25 Reasons To Support The Sound Money Bill - 08 July 2004
I'm Insanely Bullish On Silver - 19 June 2004
Silver Stock Evaluations - 22 May 2004
The Silver Bull Is Back - 04 May 2004
Late April Silver Update - 22 April 2004
Silver Juniors With Cash Flow - 04 March 2004
Major Frauds of the U.S. Monetary System - 26 February 2004
Market Perspective & Cabo Mining - 12 February 2004
Usury Enslaves - 19 January 2004
Sterling Mining - 29 December 2003
The U.S. Trade Advantage With China - 17 December 2003
Rising Gold Prices Will Help The Economy - 02 December 2003
Miners to Use Silver as Cash - 27 November 2003
Private Placements in Silver Companies - 20 November 2003
Is the Silver Market Too Small to Buy? - 13 November 2003
Inflation & Deflation During Hyperinflation - 06 November 2003
Silver Price Expectations of Silver Stock Investors - 30 October 2003
Buying & Tracking Canadian Silver Stocks - 29 October 2003
Canadian Zinc--Silver Potential - 23 October 2003
Silver Stocks--Comparative Valuations - 4 - 13 October 2003
Silver Stocks--Comparative Valuations - 3 - 06 October 2003
Silver Stocks--Comparative Valuations - 2 - 29 September 2003
Silver Stocks--Comparative Valuations - 1 - 22 September 2003
Silver and Cardero Resource - 08 February 2003
The Moral Failures of the Paper Longs - 22 January 2003
CFTC Response to Silver Problem - 14 January 2003
People Talking About $32,567/oz - 10 January 2003
Letter To Authorities of Silver Markets - 06 January 2003
Why no talk of $32,567/oz ? - 02 January 2003
Refuting Myths about Gold - 28 October 2002
Controlling Gold with Paper - 10 June 2002
Impending Gold Futures Default - 29 May 2002
Certain gold stocks are still cheap - 07 May 2002
A Few Supply and Demand Fundamentals of the Dollar and Gold - 06 May 2002
New DROOY Institutional Holdings - 21 February 2002
Hommels View of Gold - 23 March 2001
Gold Price Under Differing Scenarios - 24 June 2000
Goldismoney.com
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