Who Is Spoofing Who With JP Morgan’s Record $1 Billion Fine?
Corruption From The Top In The Precious Metals Markets
The recent announcement that JP Morgan Chase & Co. will be paying a record-breaking fine of nearly $1 billion has made headlines around the world, but what does that mean for precious metals? This development is positive as it casts a spotlight on the corruption in our markets but it neglects to address some of the core issues at the root of this deception.
Perhaps we can glean some insight directly from the man whose eponymous corporation is being blamed for this spoofing scandal. John Pierpont Mogan Sr. can always be relied upon for quotes that hint at the true nature of finance and power.
“A man always has two reasons for doing anything: a good reason and the real reason.” — JP Morgan
JP Morgan had a curious life which is still shrouded in controversy. As the son of a banker, he profited handsomely from arms trading during the US civil war while avoiding any fighting by paying a substitute to take his place. During his ascent to power, JP Morgan asserted his company into steel, gold and railroads amid criticism and rumours of corruption. He agreed to fund Nikola Telsa to build a transatlantic wireless communication system that would outperform Marconi’s telegraph in exchange for a 51% control of the patents. When Tesla expanded his plans to include terrestrial wireless power transmission JP Morgan cut his funding.
Many have conjectured that delivering free power to the people went against JP Morgan’s monopolistic perspective. Some researchers have even claimed that JP Morgan was himself only an agent of the Rothschild banking dynasty and intimately connected to the private Federal Reserve bank. As with many of the oligarchs in his time, JP Morgan’s life is riddled with corruption and sets the foundation for the numerous scandals at JP Morgan Chase & Co.
The recent fraud at JP Morgan Chase & Co was “spoofing” the silver markets. Spoofing is a disruptive algorithmic trading activity used to deceive markets. It was made illegal by the Dodd-Frank Act of 2010 because it allows big players to manipulate markets for their benefit. JP Morgan Chase & Co has been spoofing the silver markets for years and in one example their traders flooded the derivatives market with orders they had no intention of executing. This artificially pushed prices in the preferred direction for JP Morgan Chase & Co to the detriment of smaller investors. How could this be allowed to happen for so long?
One of the few grains of truth taught in higher business education is the concept of regulatory capture. Although Wikipedia classifies regulatory capture as a theory, it is a real process whereby the government body tasked with regulating an industry becomes captured by the businesses it is supposedly regulating. This corruption happens through revolving doors which transition high ranking officials of the regulator into the companies they are regulating and vice versa. Eventually, the regulator is so deeply aligned with the interests of the businesses it should be regulating that it lobbies on behalf of those businesses. This happens in all major industries and should be illegal.
Both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been investigating JP Morgan Chase & Co in connection with spoofing for a number of years. Their spoofing of the silver market was extremely profitable for them at the expense of other stakeholders. It is fascinating to analyse what is actually going to happen to JP Morgan Chase & Co. Bloomberg News is reporting that:
“JP Morgan Chase & Co. is poised to pay close to $1 billion to resolve market manipulation investigations by U.S. authorities into its trading of metals futures and Treasury securities”
The company is paying $1 billion to “resolve” the investigations. This implies that the investigations will be dropped and we are left with more questions than answers. Did JP Morgan Chase & Co. make more than $1 billion from their spoofing schemes? If so then the bank could consider the $1 billion fine a cost of doing business. What were the real losses in the market from this spoofing scam? Why are no employees of JP Morgan Chase & Co going to prison to deter similar scams in the future? Reuters is reporting that this settlement “is not expected to result in any restrictions on the bank’s business”.
So it’s business as usual for JP Morgan Chase & Co. This settlement reminds us of the famous line in George Orwell’s Animal Farm: “All animals are equal, but some animals are more equal than others.” There is one rule book for the financial markets and another for the few big players in the game. This infuriating situation does, however, provide us with valuable insight into the corruption and manipulation that takes place within our markets.
Our commodities markets like our fiat currency systems are manipulated and corrupt. Precious metals have been proven as a hedge against inflation and the collapse of financial systems but we must have access to those metals and be prepared to buy and hold them regardless of what value the markets assign to them. Sadly only a minority of investors will learn this lesson but it is this segment who will hold the advantage when fiat currencies collapse and cease to hold value.
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