A Run on The Building & Loan

Fri, Jun 21, 2013 - 4:20pm

Before we study this week's Commitment of Traders report, we first need stop by Bedford Falls, circa 1933.

So your first assignment this weekend is to watch this clip. On one level, it's a wonderful explanation and indictment of fractional reserve banking. For this discussion, it's a great metaphor for the global paper charade, derivative leveraged and rehypothecated gold and silver markets.

What is the evil Mr. Potter doing in the clip? He instituted a bank run by calling the loans of the Bank of Bedford Falls and the Bailey Brothers Building & Loan. Once the cash on hand was gone (illiquidity), there was no money left over to pay out to depositors. Mr. Potter then offers "50¢ on the dollar" to anyone so frightened as to take whatever they can get. As Tom says after hearing that Randall has taken Potter's offer, "better to get half than nothing". Then, later in the clip, George Bailey offers the true explanation:

"Can't you understand what's happening here? Don't you see what's happening? Potter isn't selling, Potter's buying? And why? Because we're panicky and he's not, that's why."

As we relate this to the precious metals, what do we see? The collection of Bullion Banks, primarily JPMorgan, are today's "Mister Potter". (In fact, many cinema historians believe that Capra broadly based the character of Mr Potter on J.P. Morgan himself.)

When QE∞ was announced, the Bullion Banks were net short 737 metric tonnes of paper gold. As of today's CoT report, The Banks are now short 44,000 contracts or just 136 metric tonnes. That's a staggering drop of over 81%! I'll go one further for you...since the CoT-cutoff last Tuesday, total gold OI has risen by over 16,000 contracts while price has fallen by $75. Clearly, the vast majority of those new 16,000 contracts were fresh Large and Small Spec shorts. If that's the case, then right now...right this very instant...the total net short position of The Gold Cartel is around 30,000 contracts or just 93 metric tonnes. An incredible reduction 87%, all while price has fallen nearly $500.

Specs have sold, motivated by either fear or greed, and The Bullion Banks have bought. Just like Mr. Potter, The Banks aren't selling, they're buying. Using the fear and greed of the public at large to position themselves to dominate in the future.

The same is obviously true in silver, too. From a net short position last autumn that nearly exceeded 50,000 contracts, today's CoT showed a Silver Commercial net short position of just 6,000 contracts. This is a drop in excess of 90%! Just like gold, the total silver OI has increased since Tuesday, rising 4,000 contracts on a price drop of nearly $2. If The Silver Commercials absorbed all of this selling through buying longs and covering shorts, the total Silver Commercial net short position as we head into the weekend is likely under 2,000 contracts. That's incredible! While silver has fallen from $35 to $20, the Banks have been buying, not selling, and this has helped them to decrease their net short position from 7,800 metric tonnes down to just 311 metric tonnes.

Again, like Mister Potter, the Cartel Banks are using the public panic to BUY, not sell. They are positioning themselves for the next move up. So, are you Randall? Are you Ed? Are you Ms. Thompson? Or are you George Bailey, willing to stand against Mr. Potter and hold firm, keeping your emotions in check and remaining rational.

Those who remain steadfast now, defiant against the naysayers, will ultimately be proven correct. More importantly, they will have safe harbor from the coming storm and a position of strength preserved for when the storm finally passes.


About the Author

turd [at] tfmetalsreport [dot] com ()


ancientmoney Gold Dog
Jun 24, 2013 - 11:11am

@GoldDog re: deflation half-off sale . . .

"Those that are sitting on a pile of cash could have a field day during a deflationary period.....THIS YEAR ONLY! HALF OFF EVERYTHING IN THE WORLD!!!!"


Already happened in silver. Not much more REAL deflation in silver, though more to come in paper silver.

ancientmoney zman
Jun 24, 2013 - 11:14am

@zman . . . re: Bernanke statement . . .

He didn;t exactly say that, but his wording intimated that, and so we got the big sell-off last week.

I agree fully that more QE is coming, and will come until it can't. There will then need to be a reset, and the dollar and other currencies devalued vs. gold.

Jun 24, 2013 - 11:16am

Gold Dog

I will go, work for food and shelter. I am like Mr. Fix, good with my hands, good fisherman and I can hunt.

Gold Dog
Jun 24, 2013 - 11:24am


Who knows?

At some point I may need good people to care take some of this stuff......I see no reason to not start looking here.

Boss Dog

Hammer Gold Dog
Jun 24, 2013 - 11:29am

That sounds superb Gold Dog.

That sounds superb Gold Dog. I have many happy memories of learning to fly fish at The Orvis Fly Fishing School in The West Country (UK). Gorgeous village by the wonderful name of Nether Wallop !!! (there was also a nearby village called Middle Wallop and Upper Wallop if I remember rightly). The school had a large pond to be able to train at reeling in trout and so forth. Good luck with the purchase if you go ahead with it and it suits your needs.

I have a feeling there will be a lot of fishing going on going forward.............excellent source of calcium. As a boy I still remember taking my codliver oil !!! Many years later, the doctors still recommend it along with fish eggs etc etc and I still take it daily........

Jun 24, 2013 - 11:32am


Used to think half-off was a deal.

After 26+ years in business.........10 cents on the dollar for those accounts in good standing has become THE DEAL over the last couple of years. I can & can't believe the pricing/terms I'm seeing offered by top wholesalers/manufacturers in my business. Every day plenty of e-mails/calls with the NEW best deal and further price reductions with terms.

Amazingly there are still retail buyers buying; abet less than 5 or 6 yrs. ago; but the margins/some creative pricing and actually having product to sell can enable one to net close to the same margin. Regardless of my views of the world I'm not about to tell them to stop buying.

Besides; Everyone needs a hobby; it can be much more cost effective than therapy in the short & long run.

Gold Dog
Jun 24, 2013 - 11:38am


I have been a trout bum since my college days. Don't get me wrong, I still love bones, muskies, northern, permit, dolphin, salmon, but it's those wild browns that have stolen my affections, and I can't break free!



PS- I cheat on the browns with Rocky Mountain cut-throats! SShhh

EDIT- As a matter of fact a fellow Bum is supposed to call this morning with plans to float/camp the Black Canyon this summer.

Jun 24, 2013 - 11:38am

Aye, there is something about

Aye, there is something about em that's for sure. Catch and take em home to cook well with a choice of fresh herbs and veggies etc etc.....nothing like it..........in the fishing world anyway.

Only thing that came close was seeing the salmon run in Sakhalin island in Russian Siberia ....holey moley !!!

Jun 24, 2013 - 11:40am

Gold Dog

Don't hunt or fish but wife and I grow one heck of a garden and she is a cook extraordinaire; build a tribe dog, one heck of a pool to draw from here

edit: not many have the resources to do so but it seems you do; build the gulch

Jun 24, 2013 - 11:44am

If Everyone is Selling

everything, where is the money going?

Jun 24, 2013 - 11:46am
Jun 24, 2013 - 12:05pm

@Turd TITS Index

At an all time low? Must be close. Very quiet here and the prices are certainly in the tank.

How low can it go? Guess we are finding out. While it is certainly headed towards zero I have to believe that something will "break" before we get there. Please keep the LCS reports coming (and include at least a general idea of where you are) because if the plan is to smash the price and make the real thing impossible to get it will show up at the LCS first.


Gold Dog
Jun 24, 2013 - 12:21pm


Many lifetimes ago I spent time here...


Still keep in touch with a couple of people.

If anyone runs into Erica America tell her I still love her!

Dirty Hippy Dog

EDIT- Indian Mound's correct name is Princess Fall.

Jun 24, 2013 - 12:32pm

Gold Dog - Grand Poobah of NewNebraska

Leverage massive fiat gains of stack after collapse, buy Nebraska, put small number of psychopath banksters there to work at hard labor, import productive Turdites and stackers (oxymoron), kick back and rule like benevolent despot.

Don't know if psychopaths can be reformed, or rehabilitated, but would be fun to kick em around, if not.

I'll come join you, to keep your Gulfstream flying tickety-boo.

Jun 24, 2013 - 12:34pm

Gold Dog

Thanks for the memory trip; special times indeed.

Gold Dog
Jun 24, 2013 - 1:04pm


Let's go back to Needmore.....good bottom land and I believe that Dan and Diane are still running the place.

Great campfire fun AND naked wood-nymph games up and around Princess Fall!


Jun 24, 2013 - 1:22pm

Where's the money going? ...

Margin calls. The dreaded margin calls.

Still shopping in Wisconsin, Dog? You will trade those frying pan trout for walleyes in a heartbeat.

Just my humble flyoverland opinion.

wax off

Gold Dog
Jun 24, 2013 - 1:33pm

Eat a trout?

That's just evil!



waxybilldupp Gold Dog
Jun 24, 2013 - 2:44pm

Eat a trout? Nay, nay!

Too much fun; too "cute". They really don't taste that good, anyway.

Lake Michigan steelhead ... my wife calls 'em "salmontrout". Turns up her nose. Real salmon stay in the boat, though.

Walleye, however, yummmmm.

wax off

Jun 24, 2013 - 8:14pm

Brown Trout is native to The

Brown Trout is native to The UK and is utterly delicious

Baked Brown Trout is yummy :)


Jul 3, 2013 - 9:41am


If you dig older chicks in sport cars,

Beach Boys-(The little Old Lady From Pasadena)


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