OTC Gold Market Is "Paper Gold" Ponzi: Paper Gold to Gold - 100 to 1

03-28-2010 • ZeroHedge.com

They are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”. For those of you who missed the CFTC hearing, here are two of the must-watch clips. In the first one, Adrian Douglas introduces the underlying concerns about the Ponzi nature of the LBMA hedging situation, in which a wholesale rush to "physical delivery" would result in a one hundred fold dilution of gold holdings, and a 99% result of unsecured creditor claims (good luck collecting on that particular bankruptcy). We also meet Jeffrey Christian, formerly of Goldman and currently of CPM, in which not only does the "expert" state that a bullion bank short is hedged by further shorting, but confirms Douglas' and GATA's previous claims that the "physical" market, as defined, is a joke, as the OTC market treats gold purely as a financial asset, essentially conforming to the precepts of fractional reserve banking. As Douglas notes "He confirms that the LBMA trades hundreds of times the real underlying physical. This is even a higher estimate than I have previously made! It is, as I asserted before the Commission, a giant Ponzi Scheme."

1 Comments in Response to OTC Gold Market Is "Paper Gold" Ponzi: Paper Gold to Gold - 100 to 1

Comment by Ross Wolf

Entered on: 3/28/2010 1:21:52 PM

Are Gold commodities a “Golden Fleece” that might clip investors? After the Bank Holiday in 1933 when U.S. Government shutdown countless failed banks, several banks were printing their own money, “gold backed certificates.” It was subsequently discovered that many banks printed three times the amount in Gold Certificate Paper Money that they had in gold reserves. This article is stating the possibility of reserves of only 1%.

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