By Justin O’Connell

The MF Global debacle should not surprise those who have come to terms with the inherent moral hazard present in all markets of the global economy. That massive wealth confiscation, unprecedented in history, is taking place each and everyday at the expense of hardworking people who pay paralyzing taxes to the insurance funds (known as governments) of private elitists is a truism of modern life.

The Occupy Wall Street folks are onto something, but all too often the deeply embedded conology of the economy goes misrepresented in their protestations. They denounce the 1%. Personally, I would love to be of the 1%. Were I, I would certainly be thankful for my blessings and I would certainly do my best to be altruistic where appropriate.

I would, however,  wear a $20,000 gold watch, 18k. I am not sure if it would be Rolex or Breitling, or perhaps another company. But, I would wear it.  And I would be stoked on it. As the economy collapsed, I would move away from the city, far away, so that I could wear my $20,000 watch in relative peace. I would also buy a lot of clothes that I do not need. Maybe I would give my old ones away to the “less fortunate.” I don’t know.

But, to be of the .000001%, where true power resides, I would avoid, for this seems to me to be a sick, psychopathic culture, degenerative to all who play with the devil’s fire. As others have pointed out, Wall Street is already occupied: that is, by psychopaths.

The MF Global story very well could end with a pleasant seeming solution. All of the money might be “found,” but I would bet that the money which was actually stolen has already found its way into profitable, near-term investments, if not into long-term commodity or precious metals holdings. Customers will be repaid in the form of a specialized quantitative easing program. In other words, the Federal Reserve will bailout MF Global, and the customers will receive, if not all of it, X% of their money back,
albeit devalued.

MF Global has segregated  millions of dollars in customer money from the customers. But, breathe easy, for our shepherds at the National Futures Association have been chatting with senior management at CME Group Inc and other market participants about how to safeguard customer funds in future broker bankruptcies.

The most feasible solution, of course, does not bode well for individuals struggling to get by or investing in safer mediums than those who, ofter and ofter, lose their money in the bowels of  financial monstrosities. This most feasible of solutions means government-sponsored insurance funds. Such a proposal
would do little to promote confidence in a shattered industry, such as futures brokerages, where parked money simply is at risk.

What the MF Global crisis will do is undermine confidence in futures markets. For gold and silver this means increased physical investment in markets which periodically become overwhelmed by concentrated physical demand. As Harvey Organ
points out:

The total gold comex open interest fell by a massive 12,293 contracts to 426,180 from yesterday’s level of 438,474.  With gold rising the only explanation that  makes sense is the fact that longs refuse to
play anymore due to the MF Global mess with the commingling of client funds with dealer funds.  Customers refused to put up the entire
purchase of gold and silver contracts fearing confiscation by the dealers.  The CME is slowly seeing their business deteriorate. The front options delivery month of November is now off the
board.

People en masse are rushing for the exits of the futures markets. Many are bewildered at how unsafe there money is, no matter where it is kept. Comex open contracts are at all-time lows. These individuals will be lured to gold and silver,
physical delivery, because there is nowhere else to go in a command-and-control fiat economy.

Both gold and silver seem to be finishing up periods of consolidation—silver especially. Having test the low-to-mid thirties range now for upwards of ten times, it is poised to run 150%-200%.  This analysis does not take into consideration increased demand from scared money hitherto parked in futures markets, et cetera.

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