So who are the The Liars and Cartel Apologists?

Craig Hemke (TF Metals Report) had a recent post where he asked:

"Who is Jeffrey Christian and what is his business? How about his pals ErikT, Bron and Kitco? What are their motives? What about sites like Screwtape and "personalities" like Kid Dynamite? Who supports them and what drives their interest? ... Who is Kid Dynamite? Who really are Jeanne d'Arc, the crew at Screwtape and the bloggers of the Kitco boards? What are their names and what are their real jobs? What is Jeffrey Christian's background and who are CPM Group's clients? Who are his sources and from where does he get his information? What is CPM's business model and how do they profit? How about Kitco and The Perth Mint? Perhaps they can explain how pooled, unallocated accounts work. I'm not alleging fraud or malfeasance but I do think that folks need to know where there might be conflicts of interest in this fight."

I responded to Craig's questions in respect of the Perth Mint here, and a copy of the text is appended to this post for the lazy. The other people mentioned can answers for themselves if they care, but for what it is worth, below is what I know of who they are. As an overarching comment, none of them are related to each other/co-ordinate/work together or have "support" from shadowy forces as far as I know.

I suppose I should also "confess" that I am in email contact with the people below from time to time. This may be confusing to some, but I don't have a problem corresponding with people even though I may disagree with some of the things they say/believe - and I don't agree with everything Erik, Kid, Warren or Jeff say. Everyone has different experiences and thus brings different facts to the table, so I am happy to engage with people I disagree with as I may learn stuff. In fact I seek out people who disagree with me as I think that is an important way to ensure one does not fall into group think and make sure you are getting to The Truth.

Erik Townsend

I suppose Erik was mentioned because of the editorial "Debunking the Post-CFTC Precious Metals Fearmongering Campaign" on Financial Sense and for the comments on this Peak Prosperity article (in which Jeff also comments).

There is nothing secretive about Erik from what I can tell from his website, he "is a retired software entrepreneur turned hedge fund manager. Erik has actively traded energy, grains, and precious metals futures markets since 2008."

Erik interviewed me on arbitrage in June 2012 for Financial Sense. Since the Perth Mint doesn't trade futures, I see Erik as one source for information on gold futures from a traders point of view, which he provides on Financial Sense each week.

Kid Dynamite

Kid was a "a trader at a major Wall Street investment bank" for eight years and appears to have retired I guess. Traders aren't known for being shrinking violets, hence Kid's sometimes aggressive blogging style when "trying to correct erroneous hype all over the internet" which gets under the skin of most of his targets.

Kid is not a goldbug and just sees gold as a trade, and I value that non perma-bull non perma-bear agnostic approach when everyone seems to be in one camp or the other. His trading experience at a big bank is also useful to understand how trading desks work, which helps in working out what the bullion banks are/could be doing.

I'm not sure how Kid got on to precious metals BS, but my take is noob investors getting mislead by BS into positions that aren't right for them is one of his hot button issues.

Warren James (Screwtape Files)

Firstly, Screwtape is a group blog but that doesn't mean that they all agree with each other or endorse each other's blog posts. I don't know the other Screwtape bloggers much, but have met Warren in person a few times.

Once can best understand Screwtape Files by their work on Wynter Benton, which they say "was a defining moment for this blog - at first we were believers of the message" but they came to the conclusion that it was a fraud and "could be considered one of the most successful silver pumpers of 2011". The Screwtape Files bloggers were initially driven by a theory that a number of websites were part of a coordinated pump and dump scheme, which is similar to what Craig implies with his question of "who supports them"? Screwtape eventually came to the conclusion that the websites were just run by regular people.

Warren originally contacted me about the ETF bars lists as he had seen the claims the bars lists were fake and thought he could prove it via statistical analysis of a history of all the bar lists. I didn't think they were fake and I suppose I could have ignored him as I disagreed with him, but he was serious enough to come to Perth on his own dime to talk about it, so I thought I should meet him. We spent a few hours on it and I went through what signals/trails the data should show up if they were fake, what Warren called vectors for investigation.

I kept and open mind on it and thought well if he can find evidence than that will be huge news, so was happy to give him as many vectors to look at. While Warren didn't find any evidence of fakery, his bullion bars database has provided some very interest insights into the way bullion bank run vaults and I his work on it is essential reading for anyone trying to understand how bullion banks work.

Warren is a real person (see his photo in this post) and just an average guy working in IT and I'm four nines (ie 99.99%) sure he has nothing to do with The Cartel.

Jeffrey Christian

Craig has a lot of questions directed at Jeff, which I find puzzling as the answers are all available on his website, such as his background, his clients (producers, consumers, investors, governments), his business model (consultants/advisors fee-based). The funny thing is that Jeff is far more closely aligned with Craig and other goldbugs than with bullion banks. Hard to believe? Consider these examples:

Against conflicts of interest: "commodities research and advice is best delivered by independent experts who do not work for banks, brokers, mining companies, or any other entity that has interests that could conflict with the best interests of the clients"

Alerting people to the fractional reserve bullion banking system (Feb 2000): "Banks treat their metal deposits in much the same way as they do deposits denominated in money, as the reserve asset against which they lend additional money to borrowers."

Competes against bullion banks, highlights their conflicts of interest (Oct 2002): "A producer should use an advisor such as CPM Group, which is not trading against the producer. Banks and dealers have a conflict of interest between their own trading positions and the hedges they advise their clients to take" and (Jan 2000) "Hedgers should not rely on their trading counterparts for hedging strategies. These entities take the opposite side of the hedge transactions, have inherent conflicts of interest, and always keep their own best interests in mind, even if these are the short-term best interests and arguably not in the banks’ own long term best interests."

Jeff also says in this discussion forum that he has sued Goldman Sachs, "testified on four continents and written extensively about the need to regulate OTC derivatives" (see here and here), "denied re-entry into their home country as a form of harrassment, had their computers hacked into and files deleted, and their phone tapped".

 

I would bet that if I gave Craig the above quotes without mentioning it was Jeff, he would be very interested in interviewing the guy. Seems to me like there is common ground between the two. If Craig is after The Truth, then surely he can ignore/put differences aside to interview Jeff on bullion banks' conflict of interest and what regulations are needed, his suing of Goldman Sachs and harassment. I know there is zero chance of that, but at least I tried to build some bridges.

 

Appendix: Response to Craig's questions in respect of the Perth Mint

You asked what the Perth Mint’s “agenda” is and to explain our Depository accounts. First up, the Perth Mint was created by the West Australian government to (key bits from section 10 of Gold Corporation Act):

• to recover, extract, process, smelt, sample, refine, assay and work gold and anything containing gold;
• to mint, make, issue, buy, sell, distribute and otherwise deal in coins
• to provide storage and safekeeping facilities to international standards for gold and other valuable objects;
• to maximise the value added to and export income derived from gold production through the development and marketing of things containing or relating to gold;
• to promote and develop markets for gold in Australia and elsewhere;

Those are our motives. We sell more gold and make more profit if the gold price is going up, that is our conflict of interest. We have been government owned for 114 years because gold mining employs a lot of voters, and thus our job is to do the above to keep the industry strong. We are also state government owned, not federal, so neither Australia’s federal government or central bank controls us or tells us what to do – we exist to benefit the state of Western Australia.

Unfortunately, the Perth Mint’s government ownership means we are public servants and thus cannot comment on policy matters or be critical of our own or other governments policies or actions – as public servants should not be using what are the public’s assets as a platform to advance their own political beliefs – and in the end holding gold as reserves and using it and other currency reserves to manage exchange rates and the economy is a policy decision, politics. This is why you don’t see us commenting on these matters or being involved in organisations like GATA. Indeed my personal blogging activities push this line somewhat and have on occasion caused angst internally.

You may legitimately be cynical about this, but as the only truly commercially focused West Australian government entity, with not one bureaucratic government appointment in the organisation, be assured that we are aware we would sell a hell of a lot more coins and bars if we were privately owned and could do and say the things Eric Sprott does, for example. We keenly feel that restriction on our ability to market gold (as there is a modest bonus if we exceed budget), but know it is not our role to advocate policy and thus we focus on adding value to Western Australian gold production.

As to the Depository, it is but one part of the Perth Mint and we make more money from our refining and coin/bar businesses, but it seems to attract attention. We offer three storage types:

Allocated – this is the real deal. As I said in an earlier comment, you can come in and look at your bars and if you want to be sure we aren't just doing a switch, scratch or write on them with a texta so you can tell if you get to see your exact bars back again. Few allocated services will allow you to do that.

Pool Allocated – this is the same as GoldMoney, a pile of bars backing client accounts with a published bar list.

Unallocated – this is our working inventory backing client accounts, 100% backed and not lent our, explained on our website here:

“Unlike other depositories, which are merely warehouses, The Perth Mint is a manufacturer of precious metal products and one of the world's largest refiners. Accordingly, the Mint has a substantial requirement for physical metal to support these operations.

To fund this work-in-progress inventory, the Mint traditionally borrowed metal from bullion banks, at cost. At the same time, there were investors storing metal with bullion banks and others, at cost.

The Mint realised that if it took deposits directly from investors, it could cut out the intermediary and create a win-win situation: the Mint wins by obtaining free funding for its inventory and investors win by getting free 100% backed storage.”

So our unallocated cuts out the bullion banks and denies them leasing revenue from us and storage fees from investors. Maybe you might now understand why I get confused when people think I’m part of “the cartel” especially since anyone bothering to read my blog, where I’ve covered fractional bullion banking, confiscation and manipulation for years, will see I’m far from an apologist.