PERMISSIONLESS

ZERO KNOWLEDGE TECHNOLOGY
https://blog.zencash.io/releasing-the-zen-white-paper/
https://ethereumclassic.github.io/blog/2016-12-28-zero-knowledge/
https://decentralize.today/five-reasons-zcash-is-the-most-corporate-cryptocoin-youve-ever-seen-a77ac430b0e8
https://bittrex.com/Market/Index?MarketName=BTC-ZCL
https://zencash.io/assets/Zen%20White%20Paper.pdf
Zen White Paper
by Robert Viglione, Rolf Versluis, Joshua Yabut, and Jane Lippencott /  May 2017

CONTACT
rob[at]zencash.io, rolf[at]zencash.io, josh[at]zencash.io, & jane[at]zencash.io

ABSTRACT
Zen is an end to-end-encrypted system with zero-knowledge technology over which communications, data, or value can be securely transmitted and stored. It is an integration of revolutionary technologies that create a system over which innovation can accelerate by combining three functions that are traditionally done separately: 1) transactions 2) communication, and 3) competitive governance. This is done in a secure and anonymous manner, using a worldwide distributed blockchain and computing infrastructure. The system integrates multiple best-in-class technologies to form an open platform for permissionless innovation that can evolve with user preferences.

PURPOSE
We live in a hyper-regulated and surveilled world where billions of individuals are deprived of basic human rights, such as property ownership, privacy, free association, and access to information. The technology now exists to solve some of these problems, and Zen’s early implementation will do exactly that. Zen is a collection of products, services, and businesses built around an enabling technology stack employing zero-knowledge proofs and a core set of beliefs. As a distributed blockchain system leveraging the latest censorship-evading techniques, fully encrypted communications, and a social and governance model designed for long term viability, Zen will contribute to the human right to privacy and provide the necessary networking infrastructure for people to securely collaborate and build value within a borderless ecosystem. Our mission is to integrate the latest technologies available post-Satoshi with a decentralized, voluntary, and peaceful set of social structures to improve life for anyone who wants to participate. We believe that this is an idea whose time has come. Zen’s framework is a secure, privacy-oriented infrastructure with a governance system structured to enable participants to collaboratively extend functionality in many dimensions. Opportunities include hosting of individual identification data, selective proof of title for property, decentralized banking services, privacy-preserving p2p/b2b asset exchange, mutual aid societies, p2p insurance, decentralized humanitarian aid mechanisms, or use purely as an anonymous token of value. These functions can be utilized to serve disenfranchised populations currently excluded from vital services such as banking and healthcare due to lack of identification, capital, and secure channels. They can also be leveraged by individuals who desire to take ownership over and monetize their private data, or, for example, by enterprising communities that wish to develop a competitive bidding system on internally generated solar energy. The unique implementations are unbounded, the common link being the belief that decentralization is the engine of moral progress, and that voluntary solutions are the most creative and enduring.

HISTORY
Zen builds on the heritage of the best cryptocurrencies, network architecture, and distributed file sharing systems in existence by incorporating both existing as well as new features to yield a solid foundation designed for long term viability. Just as important as our technology stack, we’re building on the latest ideas in distributed consensus and competitive governance. Some of the foundations of our project come from Bitcoin, Dash, Decred, and Seasteading. Zcash extended Bitcoin with fully anonymous shielded transactions, so that users could choose between normal Bitcoin-like addresses (t-addresses) or shielded addresses resistant to traffic correlation analysis (z-addresses). Then we created Zclassic, a Zcash clone that changed some key parameters our community felt were important: we removed both the 20% Founders’ Reward and the slow start to the money supply. Since launching Zclassic, we’ve formed a vibrant open-source community eager to move the technology forward in a unique direction. Some early accomplishments include developing an open source mining pool application for both Zcash and Zclassic, as well as Windows and Mac wallets. Our team realized that Zclassic could be further extended as a fully encrypted network with an innovative economic and governance model that better aligns with Satoshi’s original vision for a decentralized global community. We view Zclassic as a fundamentally pure open-source, all-volunteer cryptocurrency project, while Zen extends into a platform with internal funding to facilitate a broader set of communications, file-sharing, and economic activities.

ZEN TALK
The Z transactions in ZenCash have the ability to incorporate text-based messages, which are encrypted and included in the blockchain. There is a 1024 character limit for these messages, and they enhance the ability for users to conduct secure commerce. Instead of discussing the transaction in other less-secure channels that may not have the same level of privacy enhancements as Zen, users can communicate via the ZenTalk messages with the other party or parties before and after the shielded transfer takes place with very small z transaction spends. These messages can be sent directly from one z address to another, and they can also be sent to a channel. By generating a z address from the hash of a channel name, users can subscribe to the channel and read anything published by anyone to the channel. For example, the channel #ZenCash announcements would hash to zXXXXXXXXXXXX, allowing any user to send an anonymous message to the channel. Each message would cost a finite amount of ZenCash to send, since it is contained in a z transactions, therefore reducing the amount of non-useful messages on common channels. Official announcements would be signed by private key and would only be displayed if deemed valid. Furthermore, essentially private group messages can be published using z transactions by first creating a complex channel name,and then encrypting the contents of the message with keys only the desired recipients have. ZenTalk messages would be encrypted with algorithms such as AES-256 with Perfect Forward Secrecy (PFS), matching current standards of encryption for secure communication.

ZEN PUB
Zen has the ability to publish documents to the IPFS or GNUnet. This is done by publishing a IPFS or GNUnet address in the text field of a z address. The preferred document publishing system at this time is GNUnet, because it provides the required infrastructure for anonymous publishing and maintains an active database of documents. The system is similarly extensible to IPFS or any other future distributing archival system. By creating an anonymous messaging layer in conjunction with an anonymous publishing layer, ZenPub allows for the creation of truly anonymous publications which can be rapidly distributed to interested readers.

ZEN HIDE
It is possible for regulators in countries hostile to crypto-commerce to block traditional crypto-currencies like Bitcoin and even Zcash. Zen uses Domain Fronting to extend the ability to complete transactions in adversarial network environments, as explained in Blocking-resistant communication through domain fronting abstract: “We describe “domain fronting,” a versatile censorship circumvention technique that hides the remote endpoint of a communication. Domain fronting works at the application layer, using HTTPS, to communicate with a forbidden host while appearing to communicate with some other host, permitted by the censor. The key idea is the use of different domain names at different layers of communication. One domain appears on the “outside” of an HTTPS request–in the DNS request and TLS Server Name Indication, while another domain appears on the “inside”–in the HTTP Host header, invisible to the censor under HTTPS encryption. A censor, unable to distinguish fronted and non-fronted traffic to a domain, must choose between allowing circumvention traffic and blocking the domain entirely, which results in expensive collateral damage. Domain fronting is easy to deploy and use and does not require special cooperation by network intermediaries. We identify a number of hard-to-block web services, such as content delivery networks, that support domain-fronted connections and are useful for censorship circumvention.” The specific implementation of Domain Fronting used by Zen at launch is with a Commercial Content Distribution Network, but as with every aspect of our architecture, flexibility is designed in from the start and the system can extend in many directions as the technology evolves.

APPLICATIONS
Zen is what we consider to be an optimally decentralized open source project, and so we expect applications to be built and contributed to the ecosystem by many parties. Many of these contributions will likely come in voluntary open source fashion, but we expect a robust business community to grow around the platform as well.

GOVERNANCE
Zen is designed with a decentralized governance model incorporating multi-stakeholder empowerment and the flexibility to evolve to optimally suit our community. Fundamentally, our philosophy on governance is that we do not know a priori the best approach, but we have some ideas for how to initialize the system and enable it to evolve with the needs of the community. We believe in governance as a service (GaaS) and aim to efficiently provide value to our direct stakeholders, the broader community, and the world. ”Any industry that delivers poor service for a high price deserves to be disrupted” (Quirk, 2017), governance being a consummate example. In solidarity with other projects and ideas taking root around the world, we reject forced centralization and embrace voluntaryism. Rather than entrusting a minority of the people with power, we believe that all people have the right to be trusted with freedom. The core philosophy of our governance model is that decentralization of power maximizes inclusion and creativity. Practical implementations must recognize that pooling resources and effort provides synergies that should be optimally balanced against full decentralization; optimal points being state and time-varying, best determined through voluntary participation and secession. Importantly, we are implementing a system where competing DAOs can emerge to share resources or even completely subsume less efficient or unpopular versions. There should be no one-size-fits-all structure invariant across environment, function, culture, or time; rather, structures should be fluid, suited to specific problems, and flexible to scale when working and fade when failing relative to alternatives. Such a system of systems would dynamically evolve in such a way that it is antifragile to competitive feedback. Our objective governance state will balance decentralization, implementation efficiency, separation of powers, broad stakeholder empowerment, and evolutionary flexibility. This initial state will be the result of at least a 12- to 18-month R&D effort into game theoretic, political science, and economics research into optimal voting mechanisms coupled with feedback from multiple testnet implementations. The project will be one of our first funded efforts with final deliverables including a comprehensive research report and operational code integrated into the Zen network. Within 6 months of governance implementation we expect to have leadership teams in operation from our first full and open election.

OPTIMAL DECENTRALIZATION
By decentralization we mean that everyone has an equal opportunity to participate, that we are fully inclusive, and that decision-making authority is maximally diffuse such that the system is resistant to capture. Theoretical maximum decentralization means that every individual retains authority to equally influence decision-making; this is difficult to implement in practice when pooling resources to collaborate on a common system. Even if implemented in such a pure fashion, individual decisions naturally pool for collaboration efficiency and resources accumulate to certain stakeholders at unequal rates. We cannot stop these natural forces, nor is there reason to categorically deem them harmful in every instance. What we can do is to design the system such that all participation is voluntary, that decision-making power over resource allocation is balanced across a broad cross-section of stakeholder types, and that a credible mechanism exists to evolve with feedback. A structure infused with flexibility is more important than initially designing the best system to suit all circumstances, especially since we are creating a movement so expansive that predicting all developments is essentially impossible. Implementation efficiency is also a big concern for decentralized organizations. Pure decentralization could suffer decision-making paralysis, voter apathy, or delusions of the herd at the extrema. This is why we initially shy away from a system of pure democracy for all decision-making, and are taking the time to research competing models and test them under varying conditions of stress. Our proposed system of free and open competition for DAOs is designed to encourage groups of high-performing functional area experts and professionals to propose their leadership in specialized domains so that our system-wide efficiency in converting resources to higher-value end products or services is continually evolving to suit user needs and demands.

CHECKS & BALANCES
A key lesson learned from human history is that powers are best separated and competing power clusters should provide some equilibrium state of checks and balances. The balancing should be resilient to unchecked growth in any single power cluster such that the entire system succumbs to capture. To initially prevent this condition, Zen is launching with a Core Team in control of 3.5% of block reward funding, and an initial DAO comprised of industry leaders controlling 5% of resources. In addition, our objective state to be implemented after the 12- to 18-month R&D and test phase will include a hybrid type of multi-stakeholder voting so that a wide cross-section of the community retains power to influence decisions and resource allocations. Every aspect of our governance structure will ultimately be subject to competitive feedback and change. We are taking an evolutionary approach that starts with a simple model that will grow with the community.

DAO : INFRASTRUCTURE, PROPOSALS, and VOTING
The Zen system will have at least one DAO funded by a portion of the mining rewards, and governed by a voting system that brings stakeholders together. This system of governance helps ensure that implementation of changes, improvements, and integrations minimizes contention and reduces the chance that a disagreement leads to a fork in the project. As we unroll our broader governance plan derived from rigorous R&D and testing, the goal is to open the governance landscape to full competition; this means that we could see multiple competing DAOs emerge with different teams working on different problems. Each DAO would emerge with its own proposed structure, processes, and goals, which ensures these attributes are evolving through competition and the wrong initial organizational decisions do not perpetuate. Our DAOs will be responsible for building, maintaining, and improving the infrastructure that keeps the system going. It is also responsible for implementing changes to the Zen software applications, and is flexible enough to accommodate other community priorities,such as community outreach, marketing, training, etc.

As the Zen system grows in popularity, the support structures for users, miners, Secure Node operators, and ecosystem partners will need to grow and scale as well. The DAO structures will have funds, allocated through projects and proposals, with which to assist in the growth and support. The community is encouraged to participate in contributing to Zen in all different ways. The DAOs are responsible for coordinating the community contributions, and have funds to assist in offsetting expenses incurred by the community. One of the purposes of proposals is to repay community members for their expenses in supporting the system. At launch, Zen will have one DAO staffed with respected professionals that span relevant industries. When the governance plan is ready for implementation, this DAO will be one proposed grouping subject to market competition for others who might wish to stand up their own governance structures; the broad community will make that decision.

COMPETITION
Our unique innovation to the cryptocurrency community is our fully competitive and evolutionary governance model to empower a broad cross-section of stakeholders in an environment of optimal decentralization. Bitcoin created the original breakthrough in distributed consensus, but other projects have since taken that further with various voting mechanisms. These projects range from Dash with its simple proposal submission and community voting model all the way to Decred with its embedded community governance; each has contributed positively to the evolution of decentralized consensus, but Zen takes this to the next level by relaxing additional constraints such that our system is set to evolve over time through perpetual competition between providers of governance services within the ecosystem. We are implementing an autonomous system that will change with feedback and trial-and-error innovations in how decentralized systems organize to solve specific problems. In this sense, we believe Zen is groundbreaking in social technology, pioneering a system that has never been attempted at scale. From a broader perspective, Zen competes with incumbent currencies and banking systems, as well as emergent FinTech startups with particular advantage in providing services to the disenfranchised. We choose to make our contribution to this innovative, social welfare oriented space by providing enhanced privacy and security. As a secure messaging and distributed data archival system, we compete with other services, such as Signal, Telegram, and the Tor Project. There are also an infinite number of potential projects that can be built on the Zen platform, increasing our competitiveness exponentially. We view competition as an enabler of healthy processes of growth and therefore welcome maximum competition. We’d rather live in a world with fierce competitors forcing us to accelerate our own innovations than a static world devoid of progress. We hope that Zen adds positively to human welfare by integrating great technologies and communities, morphing governance into a competitive service, and enabling anyone in the world to participate in our system of permissionless, collaborative, and decentralized innovation. We also view incumbents and future startups in this space as potential partners and allies instead of winner-takes-all competitors.

FUTURE
Forecasting is a challenging exercise, but we see a bright future for Zen and the peaceful and productive ecosystem we’re building. We believe that the decentralized, fully inclusive, voluntary, and flexible organization we’re creating will be seen as obviously superior in the future compared to the static, centralized, one-size-fits all versions perpetuated in the 20th century. The advent of cryptography, voluntaryist philosophy, and blockchain technology make such a thing possible, and we believe many people already do, and will, share our vision for a better world; especially when they see how we can accelerate innovation and improve human welfare by empowering everyone to express their values. The next one to two years will see this vision come to fruition in our early organization by executing our Roadmap. There will certainly be challenges along the way, but flexibility and peaceful cooperation consistently overcomes seemingly insurmountable issues.”

JPMORGAN CORNERING PHYSICAL SILVER MARKET

BUYING on ARTIFICIAL DIPS
http://screwtapefiles.blogspot.com/p/a-proposed-typology-for-silver-stocks.html
http://silverseek.com/commentary/royal-flush-16185
http://silverseek.com/article/another-interview-silver-guru-ted-butler-16218
Jim Cook interviews Ted Butler  /  12.31.2016

Cook: People that have been holding silver for several years are beginning to lose patience. What do you say to them?
Butler: The facts surrounding silver have never been more bullish.

Cook: Such as?
Butler: Over the last few years, enormous changes have recast and transformed the silver market.

Cook: Can we have an example?
Butler: In only a few years, JPMorgan has accumulated the largest hoard of silver in the history of the world.

Cook: How does that compare with the Hunt Brothers in 1980?
Butler: They have five to six times as much as did the Hunts, maybe more.

Cook: How do you prove that to people who doubt you?
Butler: I’ve been watching JPMorgan like a hawk for the past five years. In their COMEX warehouse, where the amounts they hold are made public, they have 80 million ounces. That’s almost as much as the Hunts had or Warren Buffett when he bought up silver in 1998.

Cook: Are they still adding?
Butler: Yes, every chance they get. They are the biggest stopper or receiver of silver deliveries on the COMEX. This month that could be 7½ million ounces. Also 3 million ounces were sold out of the SLV last week which I’m sure they took. They do it in such a way that it doesn’t have to be reported. They are masters of the game and they just keep adding without anybody knowing it but you, me and our readers.

Cook: Where are they keeping all this silver?
Butler: One place would be their London warehouse where they have pushed out all the other entities who used to store there. In addition, there is no shortage of warehouse space around the world. The beautiful thing about owning physical silver is that you don’t have to report it to anyone.

Cook: With all their buying, why doesn’t the price go up?
Butler: They are world champion manipulators. They maintain a large paper short position on the futures market that enables them to keep the price where they want it. It allows them to buy physical silver cheap which they’ve done masterfully.

Cook: How big is their short position?
Butler: Around 90 million ounces. They’ve been reducing it lately.

Cook: That’s a good sign.
Butler: Yes, but don’t get confused by this large short position. When you have 550 million ounces of physical silver, you’re still long 460 million ounces after you subtract the paper short.

Cook: You’re saying they use this short position to manipulate the market so they can buy silver cheaper? Isn’t that a possible violation of commodity law?
Butler: It absolutely is. As you know, I have bombarded the regulators with my newsletter and various correspondence pointing out this manipulation.

Cook: But they don’t move on it?
Butler: No. I’ve also sent hundreds of epistles to JPMorgan; their board, their lawyers and their chief executive accusing them in the strongest terms of wrongdoing. Every newsletter I write accuses them publicly.

Cook: What do they say to that?
Butler: I’ve never heard a word. Let’s face it, if you call a big financial entity crooked their lawyers are going to write you. If you keep it up, they will eventually sue you. I think the fact that they let my accusations ride proves I’m right.

Cook: When is silver going to overcome all this and the price break free?
Butler: When JPMorgan wants it to.

Cook: Are we close?
Butler: I think so. Here’s an analogy. Imagine silver as a poker game. The stakes are in the billions. JPMorgan is holding an ace, king high royal flush. It’s a lock so they can’t lose. Everybody else at the table has four of a kind or a full house. JPMorgan is in no hurry to win the pot. They are sitting back watching the raises and re-raises. They want to win as much as they can so they are patient.

Cook: How do we stay patient?
Butler: One of the biggest financial entities in the world is hoarding silver. They are your ally. If you own silver JPMorgan is your partner. You couldn’t have a better ally.

Cook: People don’t want to sit back and be patient anymore.
Butler: Why not? A price rise is inevitable. If you know you’re eventually going to make a lot of money you should be able to wait if necessary. With JPMorgan in the mix, you know you have a big win ahead. They go for the jugular so it’s going to be an enormous gain.

Cook: Could you give us an inkling as to when?
Butler: Soon I think. A number of things are happening in the futures market that are different. For example, the big hedge funds or managed-money traders have always gone short at these low price levels. For the first time they have not done so.

Cook: What’s it mean?
Butler: We could snap back much faster.

Cook: Anything else?
Butler: JPMorgan may not be the biggest short anymore.

Cook: So?
Butler: I’m thinking JPMorgan may be setting the other shorts up for a double-cross. All that has to happen for a price explosion is for JPMorgan to do nothing. If they don’t go short again, we go up in a hurry. Remember, every time silver goes up $2.00 an ounce, they make a billion dollars.

Cook: If they don’t go short on the next rally, who will?
Butler: I can’t imagine substitute silver sellers stepping forward to replace them except at very high prices. As it stands now, eight commercial traders, many of them banks, hold a net short position of 85,000 contracts or 425 million ounces. There’s nobody to take their place at these low prices. JPMorgan figured all this out long ago and that’s one of the reasons they bought so much physical silver. There was no other way for them to cover without sending silver into orbit. You’re truly looking at the opportunity of a lifetime with silver. You just have to relax and let it play out.

Cook: Anything else you can tell us?
Butler: The big theme, as I see it, is JPMorgan becoming more aggressive in acquiring physical silver and gold while at the same time reducing its COMEX short position in each almost as aggressively. It’s hard to imagine a more bullish backdrop for futures prices.

PSEUDO MARKET MAKING
http://www.perthmintbullion.com/Libraries/Website_Downloads/ETF_Price_Suppression.sflb.ashx
http://thenewsdoctors.com/ted-butler-an-unavoidable-comparison/
http://silverseek.com/commentary/another-opportunity-16489
Another Opportunity
by Ted Butler /  April 12, 2017

“An unusual confluence of seemingly unrelated factors may have created an opportunity to do something about the silver (and gold) manipulation. On Monday, April 10, two new officials assumed key roles with the Commodity Futures Trading Commission (CFTC) – a new director of the Enforcement Division and the first chief officer of the newly-created Market Intelligence Unit. The main mission of both departments is to uncover and terminate market fraud and manipulation, the same overall prime mission of the agency itself. There’s little wonder that price manipulation is the prime regulatory mission, since it is the most serious market crime possible; damaging even to those not directly involved in trading.

At the same time and as I discussed in Saturday’s review, the most recent Commitments of Traders (COT) Report for COMEX silver futures featured the largest ever concentrated short position by the four largest traders and a new record large total commercial net short position. As I have been intoning for years, nothing suggests a possible market manipulation being in place than a large concentrated position. This is not my opinion alone; I’ve basically learned this from the CFTC. The only reason the agency calculates and publishes concentration data in every regulated futures market weekly is because an extremely large concentrated position is the first tipoff of potential market manipulation.

A concentrated position is a large market position held by a small number of traders that could grow large enough to overly influence price. Think Hunt Bros. in silver or Mr. 5% in the Sumitomo copper manipulation, where a few buyers caused prices to be much higher than warranted by actual supply/demand fundamentals. While it’s easy for most to understand how a concentrated long position could result in a price considered to be artificially high, it’s harder for many to understand the concept of concentration on the short side, due to the nature of short selling being difficult for most to grasp.

Commodity law does not distinguish between an upward or downward price manipulation and the CFTC calculates and publishes concentration data on both the long side and short side of all regulated futures markets. The problem is that while the CFTC publishes the data that indicate that COMEX silver has the highest level of concentration ever seen on the short side of COMEX silver futures, thus providing the strongest possible evidence of a downward price manipulation, the agency refuses to do anything about it or even acknowledge it in any way.

But thanks to the unexpected confluence of events as described above, there may be an opportunity for you to pressure the regulators to address the concentrated short position in COMEX silver futures. And let me not beat around the bush – silver would be substantially higher in price were there to be no extreme concentrated short position. That’s a personal guarantee based upon simple market mechanics.

So, for anyone with an interest in higher silver prices or who is a believer that free markets, not controlled by large traders gaming the system, is the right way, then there is something you might consider doing. Now is an ideal time to raise these very important issues about concentration and manipulation in COMEX silver. The two officials most responsible for uncovering manipulation at the CFTC just started in this capacity on Monday and should be more open to the facts than otherwise. I can understand how many might feel that contacting these officials and others might be a waste of time, given the agency’s failed record over the years in this regard. Still, I’m not talking about any burdensome effort, just sending a few emails or letters to get straight answers to some very good questions.

I’ve already written to the two new officials (both by email and hard copy) and feel free to use what I sent. I would ask you not to improvise and include other issues, such as gold manipulation. Besides, nothing would impact gold prices more than having the silver manipulation terminated. The best approach is in being as specific and factual as possible so as to pin the agency down.

They may refuse to answer and one way of insuring maximum pressure is to write to them through your elected officials. Here’s the letter I wrote that you are free to copy. I’ll include pertinent emails address at the end.

April 10, 2017

Andrew B. Busch via Email
Chief Market Intelligence Officer

James McDonald
Director – Enforcement Division
Commodity Futures Trading Commission
1155 21st Street NW
Washington, DC 20581

Dear Sirs,

Congratulations and best wishes on your appointments to key positions at the Commission at this critical time in market history.

I’m writing concerning a matter that the Commission has considered on a number of past occasions – allegations of a silver price manipulation on the Commodity Exchange, Inc. (COMEX). The reason the Commission has considered the issue of a silver price manipulation several times in the past is because the agency’s own public data and guidelines point strongly to such a manipulation. Never have the data been more convincing than what was just published Friday, in the Commission’s release of its weekly Commitments of Traders (COT) Report, for positions held as of April 4, 2017.

That report indicates that the concentrated net short position held by the four largest traders in COMEX silver futures hit an all-time extreme in numbers of contracts of 78,021, the equivalent of 390 million oz. of silver. The concentrated net short position of the eight largest traders was indicated at 104,978 contracts or the equivalent of nearly 525 million oz., or more than 60% of world annual mine production. No other commodity comes close to COMEX silver futures in terms of a larger concentrated short position when compared to real world production. On its face, the large concentrated short position in COMEX silver futures would appear to be an artificial price depressant.

As you know, the Commission monitors and publishes concentration data in all regulated futures markets as the prime front line defense against price manipulation. After all, it would be nearly impossible to manipulate any market without a concentrated position. But not only do COMEX silver futures stand out as having the largest concentrated short position of any commodity, in terms relative to real world production, consumption and existing inventories, the concentrated short position in COMEX silver futures is notable for other reasons.

For one reason, the big short traders do not appear to be engaged in any sort of legitimate hedging, since there are no signs they represent actual producers or hedgers of physical holdings. Separate agency data, contained in the monthly Bank Participation Report, indicate that the largest shorts are mostly domestic and foreign banks essentially operating as speculators, in a pseudo-market making capacity against other speculators. Publicly-owned mining companies are required to disclose any hedge activity and few, if any have disclosed any hedging in silver. The big short sellers in COMEX silver futures are financial firms, mostly banks, speculating against other big speculators and have no legitimate economic or hedging purpose in dealing in COMEX silver in the first place. As I’m sure you know, Congress allows futures trading for the purpose of encouraging legitimate hedging, not to encourage excessive speculation.

The largest COMEX silver short seller for the past nine years is JPMorgan. That has been the case ever since it acquired the failing investment bank Bear Stearns, the former largest COMEX silver short seller, according to Commission data and its correspondence with lawmakers. The special manipulative twist here is that since 2011, JPMorgan has engaged in an epic accumulation of physical silver at prices much lower than would have existed if the bank had not also been the largest silver short seller on the COMEX. In the recently completed COMEX March silver futures delivery period, JPMorgan stopped (accepted) 2689 contracts in its own proprietary trading account, plus another 739 contracts on behalf of a client(s), considerably more than the 1500 contracts allowed according to exchange regulations. This while JPMorgan was the largest short holder in COMEX silver futures. It is not possible to imagine a more compelling motive or intent for manipulation than to acquire a massive amount of any commodity at depressed prices, where the acquirer is responsible for the depressed prices.

Almost without fail, on every past occasion where the concentrated short position in COMEX silver futures reached extreme levels, it was only a matter of time before the price of silver gets rigged lower by these big shorts to induce speculative selling from traders operating on technical price signals. In fact, COT report data indicate that JPMorgan has never taken a loss, only profits on every silver short position it has added over the past nine years. Such results would not be possible in a market that wasn’t manipulated in price. In essence, speculators have taken over the price discovery process in silver because there are so few real hedgers trading on the COMEX, only speculating banks betting against other speculative traders. Even assuming the current extreme concentrated short position leads yet again to a sharp selloff in silver, there is another issue that goes to the core of regulatory concern.

In addition to the clear agency data pointing to a silver price manipulation, the presence of such a large and non-economic short position necessarily enhances the likelihood of disorderly market conditions once it becomes clear to enough market participants that unbacked concentrated short positions on the COMEX have been the reason why silver prices are so depressed.

I have communicated all this to the Commission, JPMorgan and the CME Group (owner-operator of the COMEX) for many years, with hardly any acknowledgement or rebuttal. I am hoping you will consider this matter differently and act to finally end the manipulation. I’m sure how you handle this matter will define your tenure. If I can be of any further assistance, please do not hesitate to call on me.

Sincerely yours,

Ted Butler

Andrew B. Busch – abusch [at] cftc.gov
James McDonald – jmcdonald [at] cftc.gov
Acting Chairman J. Christopher Giancarlo – cgiancarlo [at] cftc.gov
Commissioner Sharon Y. Bowen – sbowen [at] cftc.gov

Let me close by telling you that I am very thankful for the unique opportunity created by the new senior appointments at the CFTC, along with the simultaneous publication of the most concentrated data in silver shorting in history. I assure you that I am not holding my breath waiting for the CFTC to finally step up to the plate and do the right thing; not after 30 years of denial and obfuscation. I know full well that the agency’s denials up through today have only hardened it to maintain the façade that nothing is wrong in COMEX silver, despite glaring and growing evidence to the contrary. Still, it would be a waste not take advantage of an unexpected opportunity.”

PAPER SHORT PRICE SUPPRESSION
https://www.butlerresearch.com/archive-free.asp
http://www.goldcore.com/us/gold-blog/jp-morgan-cornering-silver-bullion-market/
http://www.goldcore.com/us/gold-blog/ted-butler-the-biggest-silver-haul-in-history/
The Biggest Silver Haul In History
by Ted Butler / 5.9.2015

“As I’ve mentioned previously, JPMorgan is still stopping (taking) silver deliveries in its own house account. In the May COMEX futures contract, they’ve taken over three million ounces so far. It still looks like JPM will take another million ounces or so before the delivery period is over. This is in addition to the 7.5 million ounces the bank took in the March delivery period.

Another standout development in recent weeks has been the withdrawal of 5 million ounces from the big silver ETF, SLV. This large withdrawal would appear to be a big buyer converting shares into metal for the purpose of acquiring physical silver and avoiding the 5% ownership reporting requirement. I believe this is the work of JPMorgan and represents the mechanism by which the bank has amassed the bulk of the 350 million ounces I claim it has acquired over the past four years.

The U.S. Mint sold 783,500 Silver Eagles in just two days after going 4 or 5 days with no sales. Then the Mint reported a scant 50,000 additional coins sold over the next two days. This is precisely the erratic level of sales that indicates the presence of a big buyer. I can’t certify that the big buyer is JPMorgan, but everything I look at points to them.

The Canadian Royal Mint reported sales last week its 2014 sales of Silver Maple Leafs and the same pattern that has characterized the U.S. Mint was clearly revealed. Sales of silver coins hit a new record, with more than 29 million Silver Maple Leafs sold. The big buyer of Silver Eagles has also been accumulating Silver Maple Leafs. Over the past four years the big buyer has bought, at least 30 million ounces of Canadian Maple Leafs and 75 million U.S. Silver Eagles totaling more than 100 million ounces of silver in bullion coin sales alone. I’m convinced JPMorgan is the big buyer.

How in the world can JPMorgan eventually sell hundreds of millions of ounces of silver without flooding the market and causing prices to crash? This is what JPMorgan does as a regular part of their business – accumulate and then liquidate massive market positions before most people get out of bed every morning. It is second nature to them. In my opinion, this silver will be sold before most people realize they bought it in the first place. Buying 350 million ounces of silver was the hard part, selling it will be a snap.

The big buyer is exploiting a loophole in the law that requires the Mint to produce to whatever the demand might be. So JPMorgan artificially depresses prices via short sales on the COMEX and then requests that the US Mint sell it all the Silver Eagles it can produce. It doesn’t care if it is paying $2 over the spot price, JPM wants all the silver it can get its hands on. But what about selling the coins I claim JPMorgan has acquired? The coins will not be sold as coins, but melted into 1,000 ounces bars. In fact, some of the 100 million+ ounces of coins may have already been melted and cast into good delivery bars. Considering that the coins are the same purity as 1,000 ounces bars, melting is a simple and a low cost process.

At the end of 2007, when the price of silver was less than $15, but close to the highest price it had been in 25 years, Bear Stearns assumed the role of the biggest silver and gold short when these positions were transferred from AIG. From the end of 2007 to March 2008, the price of silver rose to $21 and gold rose from $800 to $1,000. Based upon the size of the short positions that Bear Stearns held the investment bank had to come up with more than $2 billion in margin money. Bear was unable to do so and the U.S. Government arranged for JPMorgan to take over Bear Stearns and its massive COMEX short positions in silver and gold.

With the cooperation from the federal government, JPMorgan was able to turn silver (and gold) prices sharply lower into year end 2008 and made well over one billion dollars as a result of falling metals prices. Thus, they were able to greatly reduce the short positions inherited from Bear Stearns. JPMorgan then repeated the process of selling short great additional quantities of COMEX short contracts on metals price rallies buying back those short positions when prices fell. JPMorgan’s profits from the short side of COMEX silver and gold, amounted to hundreds of millions and even billions.

This process was repeated by JPMorgan in COMEX silver until the fall of 2010, when silver began to rise in earnest due to a developing physical shortage that drove prices to nearly $50 by the end of April 2011. On the run up, it must have become clear to JPMorgan that a physical silver shortage was developing and for the bank to try to fight it with additional paper short sales would be futile. Therefore, two decisions were made; one, it would be necessary to create such a large break in silver prices so as to crush the momentum of the price rise and two, the developing physical shortage proved that silver was destined to blow sky high in time and JPMorgan should position itself accordingly. The big break in prices started on May 1, 2011 and broke the back of the silver price. Less visible is the evidence that JPMorgan began to acquire the biggest physical silver stockpile in history.

In little more than a month, as a result of the big break in silver prices starting on May 1, 2011, some 60 million ounces were liquidated from the big silver ETF, SLV, as a result of plain vanilla selling by investors who sold their shares in reaction to plunging prices. When net selling occurs in SLV, metal is automatically redeemed from the trust on a mechanical basis. The shares were sold and the metal was withdrawn from the trust as prescribed by the prospectus. That doesn’t mean the metal was dumped on the streets of London or ceased to exist. The metal fell into the ownership of someone and the most likely candidate was the entity that arranged for the selloff in the first place. The entity which stood to gain the most by the selloff was JPMorgan. They picked up their first 50-60 million ounces as a result of the May 2011 silver smack down.

Pressed for space to store the silver it planned to acquire, JPM opened its own COMEX warehouse in April 2011 and from zero ounces in 2011, that warehouse has turned into the biggest COMEX silver warehouse of all with nearly 55 million ounces on deposit. The start date proves intent by JPMorgan to acquire silver.

In 2012, JPMorgan physically transferred 100 million ounces of silver from its own custodial warehouse for SLV to the Brinks warehouse in London, leaving ample space in the former SLV warehouse to store 100 to 200 million ounces of silver that would come to be owned by JPMorgan and that would never require public disclosure. This is the most plausible explanation for why JPMorgan would move the silver to the Brinks warehouse. All the movements of metal out of SLV over the years, reeks of JPMorgan converting SLV shares to metal to be stored in its own warehouse in London on an undisclosed basis. An easy 200 million ounces can be accounted for in this manner.

The unusual and unprecedented turnover of physical silver in the COMEX-approved silver warehouses that began in April 2011 suggests to me that JPMorgan has been causing the movement in its quest to acquire physical silver. An easy 100 million ounces acquired by JPMorgan can be deduced from the more than 750 million ounces turned over in the COMEX warehouses over the past four years. How hard would it be for JPMorgan to “skim” 100 million ounces off a turnover of 750 million ounces?

The recent acceptance of more than 10 million ounces on COMEX futures deliveries and the physical movement of most of that metal into the JPM COMEX warehouse is a mere fraction of the total amount of silver JPMorgan has acquired over the past four years, but it is clearly the most transparent and may point to JPMorgan reaching the maximum amount of physical silver it intends to acquire, indicating we may be close to when the bank decides to let silver prices rise.

I’m using the number of 350 million ounces as what JPMorgan has acquired, but the real amount may be in excess of 500 million ounces. I’m being somewhat conservative in saying 350 million ounces because I’m worried that those who deny that JPM has acquired any physical silver heads might explode if the number is closer to half a billion ounces. I’m not looking for anyone to lose their minds, but to understand what these facts mean.”

PREVIOUSLY on #SPECTRE

JUNK SILVER
http://spectrevision.net/2016/05/05/junk-silver/
CHINA REPOS JPMORGAN’s GIANT EMPTY GOLD VAULT
http://spectrevision.net/2014/03/28/the-new-boss/

EXCHANGE STABILIZATION SLUSH FUND
http://spectrevision.net/2015/04/17/exchange-stabilization-slush-fund/
BLACK GOLD SLUSH FUNDS
http://spectrevision.net/2014/12/19/black-gold/

DOLLAR-A-YEAR MEN


Son of Goldman Sachs royalty, Steven Mnuchin was tapped into Skull and Bones at Yale

GOVERNMENT SACHS (cont.)
https://en.wikipedia.org/wiki/One-dollar_salary
http://dealbreaker.com/2016/08/trump-steven-mnuchin-bloomberg-profile/
http://www.mintpressnews.com/steve-bannon-says-joining-goldman-sachs-is-like-joining-the-jesuits/222677/
http://www.crainsnewyork.com/article/20161114/POLITICS/161119937/trump-advisers-recommend-ex-goldman-banker-steve-mnuchin-for
https://www.bloomberg.com/news/articles/2016-12-22/goldman-is-back-on-top-in-the-trump-administration
http://wallstreetonparade.com/2017/01/heres-how-goldman-sachs-became-the-overlord-of-the-trump-administration/
http://wallstreetonparade.com/2017/01/law-partners-of-trumps-sec-nominee-gave-huge-sums-to-elect-hillary-not-trump/
by Pam Martens and Russ Martens / January 5, 2017

“The rationale for Donald Trump’s selection of Jay Clayton, a law partner at Sullivan & Cromwell which has represented Goldman Sachs since the late 1800s, to be the next SEC Chairman grew exponentially fuzzier after Wall Street On Parade reviewed political donation records at the Federal Election Commission. FEC records show that 59 of Clayton’s fellow lawyers at the firm made over $900,000 in donations to the Hillary Victory Fund while one lone lawyer, Donald Korb, made two $2700 donations to Trump’s primary and general election campaign. Donations from three other lawyers at the firm, Justin Decamp ($2700), Robert Giuffra ($25,000), and Diane McGimsey ($5,000) to the Trump Victory committee came after Trump was already elected President, according to images of receipts filed with the FEC.

Donors to the Hillary Victory Fund included Sullivan & Cromwell Senior Chairman, H. Rodgin (Rodge) Cohen, who donated $250,000 on May 12, 2016 and another $35,000 the following month. During the Wall Street panic and crash in 2008 and 2009, Cohen darted from representation of one failing institution to another. The Wall Street Journal dryly noted in the midst of the crisis that Cohen was “in demand because he helped mold the financial system that is now under assault. He helped draft the rules that led to the emergence of powerful national banks, waged the first hostile bank takeover in the U.S. and lobbied, in the early 1990s, to expand the Federal Reserve’s power to provide the emergency loans now being employed by the government.”

Why would President-elect Donald Trump discredit himself further by nominating a Goldman Sachs outside counsel to run the already discredited SEC when the law firm’s partners were funneling serious money into his opponent’s campaign to make sure he didn’t win. Trump has already earned the wrath of the public by stocking his administration with Goldman Sachs alumni. Steven Mnuchin, a 17-year veteran of Goldman Sachs and operator of a foreclosure mill bank has been nominated by Trump to be Treasury Secretary; Stephen Bannon, another former Goldman Sachs banker, will be Trump’s Chief Strategist in the White House; and Gary Cohn, sitting President & COO of Goldman Sachs, has been tapped to head the National Economic Council.

Jay Clayton’s nomination for SEC Chair also raises the question of what kind of vetting is being done by Trump’s transition team – or is it simply taking its marching orders from power brokers on Wall Street, which has now become the norm regardless of which political party is in power. Not only has Clayton been Goldman Sachs’ outside counsel for years but Clayton’s wife, Gretchen, has worked at Goldman for the past 17 years, currently holding the title Vice President, according to her LinkedIn profile.

Under 18 U.S.C. § 208, the basic criminal conflict of interest statute, an executive branch employee is prohibited from participating personally and substantially in a government matter that will affect his own financial interests, as well as the financial interests of his spouse. This effectively means that the SEC Chair will have to recuse himself permanently from any matter involving Goldman Sachs, one of the largest investment banks and holders of derivatives in the world.”

POPULIST CENTRAL BANKERS
https://www.mises.ca/the-federal-reserve-a-populist-movement-puhhhlease
https://www.washingtonpost.com/opinions/matt-miller-a-breakthrough-plan-to-make-central-banking-populist/2014/10/22/fc79c966-591f-11e4-b812-38518ae74c67_story.html
http://www.livemint.com/Opinion/NRu3YhaAbxzinY8UPOYNlI/Lucrezia-Reichlin–Populism-and-the-future-of-central-banki.html
http://www.ft.com/intl/cms/s/0/625a4122-cbff-11e5-a8ef-ea66e967dd44.html
http://www.irishtimes.com/business/economy/dangerous-precedent-of-populist-german-banking-1.2525958
Dangerous precedent of populist German banking: Parallels with Germany in the 1930s
by Wolfgang Münchau  /  Feb 8, 2016

“Rereading John Weitz’s biography of Hjalmar Schacht, Hitler’s Banker, I noted some interesting parallels between the 1930s and now that I had not considered before. It is well-known Hitler relied on Schacht, his central banker, to help fund his rearmament plans. But Weitz also pointed out – and this is potentially relevant to the situation in the euro zone today – that Schacht was only able to pursue his unorthodox policies at the Reichsbank because he had the backing of a dictator. If an extremist leader came to power in a large euro zone country – France or Italy, say – what would happen if they were to appoint a central banker with the acumen of Schacht? And what would be the chances that such a team could succeed in increasing economic growth in the short term? I am not comparing anyone to Hitler – or indeed to Schacht. My point concerns what an unorthodox central banker can do if he or she has the political support to break with the prevailing orthodoxy.

Schacht had two stints as president of the Reichsbank – in the 1920s, when he brought an end to the hyperinflation then crippling Germany, and again from 1933 to 1939. It is hard to identify him with a single economic outlook: in the 1920s he was in favour of the gold standard but then, in the early 1930s, he opposed the consensus that promoted the policies of austerity and deflation. Schacht argued, rightly, that Germany was unable to meet the reparation payments specified in the Young Plan, which was adopted in 1929. On returning to the Reichsbank, Schacht organised a unilateral restructuring of private debt owed by German companies to foreigners. The German economy had already benefited from withdrawal from the gold standard in 1931, and Schacht piled stimulus upon stimulus. One reason for Hitler’s initial popularity in Germany was the speedy recovery from the depression, which was no doubt helped by a loose fiscal and monetary policy mix.

The current policy orthodoxy in Brussels and Frankfurt, which is shared across northern Europe, has some parallels to the deflationary mindset in the 1930s. Today’s politicians and central bankers are fixated on fiscal targets and debt reduction. As in the early 1930s, policy orthodoxy has pathological qualities. Whenever they run out of things to say, today’s central bankers refer to “structural reforms”, but never say what such reforms would achieve. In principle, the euro zone’s economic problems are not hard to solve: the European Central Bank could hand each citizen a cheque for €10,000. The inflation problem would be solved within days. Or the ECB could issue its own IOUs – which is what Schacht did. Or else the EU could issue debt and the ECB would buy it up. There are lots of ways to print money. They are all magnificent – and illegal.

There are no Nazi parties in the euro zone today, except in Greece. But France and Italy have populist parties on the right that are clearly outside the current policy consensus. Imagine a scenario in which Beppe Grillo, leader of Italy’s Five Star Movement, were to win the Italian election in 2018. The term of Ignazio Visco, governor of the Bank of Italy, expires in November that year. Mr Grillo would be in a position to appoint his own central banker. Perhaps he would choose someone as resourceful and ruthless as Schacht and able to plot Italy’s way out of the euro, via a parallel currency regime for a transitional period, defaulting on foreign debt in the process. The devaluation and the increase in public sector investment possible under a new regime could bring instant growth.

Modern scenarios
If Marine Le Pen were to become president of France in 2017, she might have to wait four years before she could seize the Bank of France. The term of François Villeroy, the governor, does not expire until 2021. Given the power vested in the French presidency, however, Le Pen might not need the support of her central banker to do whatever she wanted. I have no doubt any populist government in Europe would end in disaster but they might succeed in raising growth, and this makes them so dangerous. We should not expect an exact rerun of the past, however. As Karl Marx put it, this will be history repeating itself first as tragedy, then as farce. Even this cuddlier version of the 1930s would be a tragedy of sorts. The period of ever-closer union in Europe would be over and the euro experiment would have ended in failure.”

APOLITICAL BANKING
http://www.nakedcapitalism.com/2013/12/philip-pilkington-hjalmar-schacht-mefo-bills-restoration-german-economy-1933-1939.html
http://www.slate.com/blogs/moneybox/2011/12/21/perverse_reputational_incentives_in_central_banking.html
https://marketmonetarist.com/2012/05/08/hjalmar-schachts-echo-it-all-feels-a-lot-more-like-1932-than-1923/
https://www.lewrockwell.com/2008/12/michael-s-rozeff/the-american-collective-dictatorship/

“To understand what is happening now [2008] in the U.S., it is useful to compare the parallel developments that occurred in Nazi Germany. The German central bank, the Reichsbank, was far more restricted by law (before 1939) than our central bank, the Federal Reserve (Fed) in the kinds and amounts of loans it could make. The Fed, in this sense, is far more powerful than the Reichsbank was before 1939. The Reichsbank was, like the Fed, independent of the government. The German government could not order it to make loans to the government, for example.

This situation changed in 1939 when the Nazi government needed more funds to finance its armament build-up. At that point, the government basically absorbed the Reichsbank. It helps to read the words of Hjalmar Schacht, who headed the Reichsbank between 1933 and the time of his dismissal in early 1939. Schacht is something of a controversial figure in history. In 1946 he was tried as a war criminal at Nuremberg where he testified. Dr. Schacht, who was acquitted, had ended up in a concentration camp. An extended discussion of Schacht’s activities that brings out the negatives is contained here. A less critical account is here.

Schacht makes crystal clear that the central bank was essential for the government to be able to arm the country and make war. Without the bank, Hitler “could not go on.” He would not be able to use the bank “for any future financial purpose” such as paying for armaments. Furthermore, if the bank would not cooperate, then “an end had to be put to the independence of the Reichsbank from governmental decrees.” That having been done by Hitler, the president of the bank “became a mere bank teller for the credit demands of the Reich or, that is to say, of Hitler.”

These observations about the role and necessity of the central bank in supporting the government, usually in its war efforts, and of the threat to the bank’s independence are as true of the United States as they were of Nazi Germany. As bad as the Fed is, our liberty declines even more when, as, and if the Fed becomes a direct arm of the government. This has happened before. The Fed supported the U.S. government bond market during World War II, which laid the foundation for the resulting inflation:”The Federal Reserve System formally committed to maintaining a low interest rate peg on government bonds in 1942 after the United States entered World War II. It did so at the request of the Treasury to allow the federal government to engage in cheaper debt financing of the war. To maintain the pegged rate, the Fed was forced to give up control of the size of its portfolio as well as the money stock.”

Central banks are brought into being and allowed extraordinary powers with the overriding aim of supporting government borrowing, often for purposes of making war, and with inflation being the accompanying method by which this support is rendered. I quote: “Many on the Board of Governors, including Marriner Eccles, understood that the forced obligation to maintain the low peg on interest rates produced an excessive monetary expansion that caused the inflation.” Similarly, we are told concerning Schacht: “Schacht had always feared an inflation in Germany. As early as 8 May 1936, he emphatically stated that he would never be party to an inflation’ (1301-PS). In January 1939, Schacht was convinced that ruinous inflation was, in fact, imminent (EC-369). There was, it appears, ample basis for his fear. The Finance Minister, von Krosigk, had already recognized the situation in September 1938, and had written to Hitler warning that we are steering towards a serious financial crisis…”

Because Schacht’s official central banking powers were not as great as the Fed’s, he hid what he did to get around the law and help finance Hitler. In the U.S., the Fed has so much power that it can do openly what Schacht did secretly. In that sense, we are further along the path of collective dictatorship than Germany in the 1930s. Schacht set up a dummy corporation, called MEFO for short, that “bought” arms from the arms manufacturers. It accepted the (mefo) bills of these manufacturers who then were able to discount them at banks and get paid. The banks then discounted them with the Reichsbank. Lo and behold, inflationary finance paid for the arms production in huge amounts, circumventing the law’s prohibitions.

Bernanke makes Schacht look like a piker. In the U.S., the Fed has no statutory limits on its finance. It is openly financing whatever institutions it pleases. It has extended $56 billion to AIG, another $298 billion for the commercial paper of various companies, and $407 billion to banks using its own holdings of Treasury securities. The critics of these loans are vastly outnumbered by those applauding the Fed’s inflation as the means of saving America. The sycophants eagerly await the Fed’s next moves. The Fed is preparing the way by leaking to the press hints of “unconventional steps.”

These will involve interventions in markets such as mortgage markets. Bernanke and Company seem to have none of the fear that Schacht had of inflation or being held responsible for inflation. When a dictatorship obtains the unlimited ability to finance its purposes, there is no stopping it except by restraining its powers; and that takes a revolution or, at a bare minimum, the deposition of persons from the government and replacement by those willing to abridge the government’s powers, if such a thing is possible.”

Hjalmar Schacht (left), Hitler's finance minister, with his close friend Montagu Norman, Governor of the Bank of England from 1920 to 1944
Hjalmar Schacht (left), Hitler’s finance minister, with his close friend Montagu Norman, Governor of the Bank of England from 1920 to 1944

SEE ALSO : BANK of INTERNATIONAL SETTLEMENTS
http://www.bankofengland.co.uk/archive/Documents/archivedocs/wwh/2/p3c9p1292-1301.pdf
http://www.telegraph.co.uk/finance/bank-of-england/10214541/Was-Montagu-Norman-a-Nazi-sympathiser.html
http://www.telegraph.co.uk/finance/bank-of-england/10212234/Bank-of-England-helped-the-Nazis-to-sell-plundered-gold.html
http://www.telegraph.co.uk/finance/bank-of-england/10213988/Never-mind-the-Czech-gold-the-Nazis-stole….html
http://www.independent.co.uk/news/the-nazis-british-bankers-1275885.html
Secret war documents may reveal that Germany had staunch allies at the Bank of England
by Chris Blackhurst  /  29 March 1997

“In a vault in Basle, Switzerland, lie some of the most politically sensitive documents of the Second World War. Historians uncovering the story of the gold trade that financed the Nazi war machine would love to have sight of them – not because they will provide further evidence of Swiss guilt in the trade but because they could expose other countries involved, including Britain. In the saga of Nazi gold, it is always the Swiss who are to blame; the Swiss who were prepared to accept bullion looted from the victims of German oppression to the extent that the war was prolonged longer than necessary. But if the historians are right, these papers will go to the heart of the British financial establishment and raise questions about the allegiance of one of the most powerful figures of his day, former Governor of the Bank of England, Sir Montagu “Monty” Norman. Academics believe the archive will show that the Bank, led by Sir Monty, bent over backwards to help the Nazi war machine. In an age without television and media access, Norman’s was a household name. Famed for his supercilious manner, bad temper and contempt for the political leaders of his day, he was a banker’s banker, whose aim was to create a network of central bankers like himself, free of the control of governments.

That, at least, is one explanation for Norman’s behaviour in the years before the Second World War. There is another: that Norman was a German sympathiser, who wanted to ensure the German economy could fuel the country’s war machine and that the Nazis had an outlet for their looted gold. So concerned were the Americans about Norman that in the summer of 1942 President Roosevelt sent a report on his activities to Sir Winston Churchill. The British Prime Minister asked Anthony Eden, his Secretary for War, to look into the American concerns, in particular the allegation that Norman had met Hjalmar Schacht, a senior German official in neutral Sweden, in May 1941. Herr Schacht was thought to be trying to broker some sort of peace deal. Norman was his chosen conduit. Papers filed in the Eden archive at Birmingham University reveal what must have been an unprecedented exchange: Churchill’s right-hand man quizzing the Governor of the Bank of England about his allegiances. Norman denied seeing Herr Schacht for over a year.

For Churchill, this was not good enough. In a memo to Eden, the Prime Minister pointed out the war was now three years old, not one year. Norman’s answer, thought Churchill, was inadequate. He instructed Eden to dig deeper. But at this point, the file goes dead: what further details Eden extracted from Norman are not recorded. Typically, Churchill did not want the Americans to know of his concerns. They were sent a bland reassurance that all was well with Norman. So what was the Governor up to? Scott Newton, lecturer in modern history at Cardiff University, says there is “nothing in the file to clear Montagu Norman of the American charge”. He was rightly suspected, says Newton, of being involved in “an unsavoury peace deal behind the government’s back. Bearing in mind the report came from the US President, it would have relied upon good intelligence.”

Norman, says Newton, “was trying to prevent the war developing to the point where the Bank of England was in danger of losing the prestige it had built up between the wars. Norman had a view that the world ought to be run by central bankers. He was not in any sense a democrat and he was worried the war would undermine the contacts he had created.” Churchill, says Newton, “could not stand him; he distrusted him enormously”. The extent of the Bank of England’s involvement has still not been disclosed. Documents from the period have convinced several historians that the Bank, through its redoubtable Governor, played a pivotal role. But the records which could reveal the detail remain inaccessible to historians in the Bank of International Settlements based in Basle, Switzerland.

Established after the First World War to smooth the system of compensation by Germany to the Allies for the conflict, BIS is a bank for central banks. It is more than a mere mechanism for moving money between governments, however. The meetings of its board are talking shops for the world’s most powerful financial figures, a club where they can talk without interference from politicians and government officials. One of its most influential members in the years before the Second World War was Sir Montagu Norman. On 15 March 1939, Hitler completed his rout of Czechoslovakia, making a triumphant entrance into Prague. One of his first acts was to order the directors of the Czech national bank to hand over the country’s gold reserve. For Hitler, the Czech gold was a vital replenishment of rapidly dwindling reserves. An increasingly isolated Germany needed gold to barter for raw materials.

The Czech directors told the Germans it was too late; the gold had already been deposited via BIS in the Bank of England. The Germans ordered them to retrieve it. BIS did not deal in physical transfers of money or bullion – most of them took place on paper, by central banks adjusting their accounts with each other. The Czechs called BIS, which contacted London. Norman obliged, instructing BIS to deduct the gold’s value, some $40m (pounds 24m) at 1939 prices, from the Bank of England’s account in Basle. The gold went back to Czechoslovakia, and to the Reichsbank in Berlin. News of the trade did not leak out for two months. Then, in May 1939, prompted by a tip from a journalist, George Strauss, the Labour MP, asked Neville Chamberlain, the Prime Minister, if it was true that the national treasure of Czechoslovakia was being given to Germany.

The Government, advised by Norman, said it was impossible to determine who was the real owner of gold that passed through BIS; that the Basle institution was heavily protected by international protocols; and that as a banker for central banks, its dealings had to remain confidential. In fact, Norman knew all along who was the rightful owner of the gold. He had told a Whitehall committee on 22 March 1939 that he had received a call from the Governor of the Bank of France, on behalf of BIS, asking for the return of the gold. “We did absolutely nothing,” says historian Scott Newton. “Here was Czechoslovakia that had been invaded, and here was Monty Norman approving the transfer of its gold to the Reichsbank.”

Norman’s agreement, says Newton, was no surprise. “Monty Norman and the leading merchant banks in the City were up to their necks in helping to prop up the German financial system. The Germans owed a lot of money to British banks.” The bankers did not want the Americans to emerge from the war with the upper hand, economically. Dr Neville Wylie, research fellow in Modern History at Cam- bridge University, says “there was a strain of German sympathy within the Bank and the City. The alternative – of dealing with the rampant capitalists across the Atlantic – did not appeal.” How far that sympathy went, beyond the Czechoslovakian deal, will only be revealed when the BIS records are finally opened.”