Gold & Silver Price Manipulation: The Greatest Trick Ever Pulled

Submitted by Ronan Manly, BullionStar.com

There is probably no other topic in the gold and silver markets which incites heated debate more than the subject of precious metals price manipulation.

That prices in the precious metals markets are manipulated is not speculation, it is fact, a fact made clear again recently by the Commodity Futures and Trading Commission´s (CFTC) ruling against investment bank Merrill Lynch Commodities Inc (MLCI) for spoofing pricing of gold and silver futures contracts on the COMEX exchange.

The number of investigations, legal cases, class actions and financial headlines involving precious metals manipulation are now so pervasive that it’s hard to keep track of which cases are in motion and which investment banks are under scrutiny at any given time.

But beyond the profit and greed driven bullion bank manipulations gold and silver prices, there is also the issue of central bank policy interventions to suppress the gold price by outright gold sales or using the opaque and secretive gold leasing and lending market. This is a less talked about manipulation given the secrecy of everything to do with central banks and gold, as well as a reluctance of the financial media to broach the subject and a reluctance of regulators to ´go there´ by even looking at central bank gold market activities.

That central bank operations in the gold market have existed is also fact, with such operations covering price smoothing and price stabilization, price pegging, and coordinated gold pools. See BullionStar articles “New Gold Pool at the BIS Basle, Switzerland: Part 1” and “New Gold Pool at the BIS Basle: Part 2 – Pool vs Gold for Oil” and “The Bank of England and the London Gold Fixings in the 1980s” for more background. There is also ample evidence about central bank manipulation documented in various places including on the GATA website. The motivations for such central bank interventions include protecting the existing financial system, engineering low real long term interest rates, and preventing gold acting as a barometer of inflation.

But beyond even commercial bank manipulation of gold and silver metals prices and central bank policy manipulation of gold, there is arguably another form of manipulation in the precious metals markets which is far more influential in subduing price discovery and which takes the form of the very structure of how these markets trade vast quantities of futures contracts and synthetic and paper gold and silver positions that are completely unconnected with any underlying physical metal. The home of this trading is of course on the US COMEX exchange and the unallocated gold and silver markets in London. Both venues of which are ruled by the LBMA bullion banks.

Blundering Herd – Merrill Lynch Commodities Inc

Merill ´Spoofing´ Lynch

Turning first to the recent Merrill Lynch case, in late June this year the CFTC announced that it had fined Merrill Lynch Commodities Inc (MLCI) $25 million for manipulating gold and silver futures contracts on the COMEX exchange between 2008 and 2014. This was done ‘thousands of times’ according to the CFTC, by MLCI traders ‘spoofing’, or placing and then cancelling orders before they were executed. By creating artificial demand or supply and thus false prices, this interfered with the (already broken) precious metals price discovery that would have otherwise occurred.

Interestingly though not surprisingly, much of the direct evidence the CFTC used in its verdict was from the myriad log files of trader chat apps which were used to coordinate the spoofing. For example, in one 2010 chat, a trader was quoted as saying “guys the algos are really geared up in here.  [I]f you spoof this it really moves . . .”.

While a lot of money for most people, a $25 million fine is a paltry amount for a global investment bank such as Merrill Lynch and is just a cost of doing business on bank-ruled Wall Street. However, the ruling at least demonstrates that what many always thought about precious metals futures price discovery as being rigged and manipulated is in fact correct. As well as the $25 million fine, Merrill entered into a non-persecution agreement with the US Department of Justice (DoJ), agreed to cooperate with the DoJ investigation into criminal violations, paid a $11.5 million civil monetary penalty to the CFTC, and had indictments against two of its former MLCI precious metals traders, Edward Bases and John Pacilio.

UBS – Precious Metals Spoofers

The Usual Suspects – UBS, HSBC and Deutsche

But the recent case against Merrill is not an isolated event. It follows similar moves by the CFTC in early 2018 where the CFTC chargedinvestment banks UBS, Deutsche Bank and HSBC and a number of their traders for spoofing precious metals futures from as early as 2008, while fining the banks a combined $46.6 million (of which $30 million was levied against Deutsche, and $15 million against HSBC). In those cases, the CFTC worked with the US Department of Justice and the FBI to bring the charges.

Moving forward to this year, in February 2019, the U.S. District Court for the District of Connecticut fined ex UBS precious metals trader Andre Flotron $100,000 for price spoofing and price manipulation in violation of the Commodity Exchange Act (CEA) and CFTC Regulations. In that action, the CFTC found that Flotron had spoofed large orders in the precious metals markets between “at least August 2008 through at least November 2013, while employed at UBS”. This followed the CFTC reopening the case against Flotron in December 2018.

For excellent insights into how these UBS and other investment bank traders operated their spoofing, see the articles by Allan Flynn from April 2018 titled “US Gold and Silver Futures Markets – ‘Easy Targets’” and “UBS and Deutsche Bank gold and silver traders, April 2018”. For example, in evidence at the Flotron trial, Mike Chan, a UBS junior trader to Flotron while they worked in Singapore stated to the court that “during training, I’d seen him spoof and –  enough that I replicated it immediately to do the same thing. And as my career progressed at UBS, the more traders I interact with, the more people I’ve seen spoof.

The Fix is In – Manipulating the Gold and Silver Benchmarks

Beyond the gold and silver futures markets, but interfacing with the futures, a similar group of bullion bank traders are, not surprisingly, also involved in antitrust court cases alleging that these banks manipulated the London gold and silver fixing benchmark auction prices. While these cases are still winding their way through New York courts, and have not yet been fully ruled on, the chat room transcripts on manipulative price collusion can only be described as shocking, chat transcripts which anyone who bothered to think about it knew they existed from at least 2004.

The cases in question have been brought by groups of precious metals investors against the cartelesque London Gold Fixing and London Silver Fixing companies with allegations that Bank of Nova Scotia and HSBC manipulated silver fixing prices from 2007 to 2013, and that ScotiaBank, HSBC, Barclays and Societe Generale manipulated fixing prices from 2004 to 2013. Noticeably absent is Deutsche Bank which settled its way out of both cases, and UBS which successfully dismissed itself from both cases using cooperation and expensive lawyers.

Again we turn to an article by Allan Flynn from December 2016 titled “How to Trigger a Silver Avalanche by a Pebble: ‘Smash(ed) it Good’ which has a host of excellent quotes from chat room transcripts on how traders allegedly manipulated the silver market, for example:

UBS Trader A: “gonna bend this silver lower”; “i will bend it lower told u”; ”hah cool its gonna get ugly”; “use the blade on silver rg tnow it’ll hold it up”, gona blade silver now.

Deutsche Bank Trader B instructing Barclays trader A: “today u smash,

UBS Trader A: “an avalanche can be triggered by a pebble if you get the timing right” and “silver still here, u can easily manipulate silver”

With the cases against the London Gold and Silver Fixing companies still in discovery in the New York courts, expect further revelations later this year, but given the leniency of the system, not a lot of penalties.

For those readers alert to the way trading of precious metals futures contracts and trading around the London gold and silver fixes works, you will see that the pushing around of prices occurs in both ‘venues’, on COMEX and in the London gold and silver market, especially in the lead up to and during the fixes.

The same investment bank precious metals traders trade gold and silver futures contracts and London OTC contracts, and they trade these in the London and COMEX ‘venues’ at the same time. Price movements in one location instantly are reflected in the other. This is all explained in the BullionStar article “Spoofing Futures and Banging Fixes: Same Banks, Same Trading Desks” from April 2018. At the time I said the following, which is even more apt now given the CFTC’s recent prosecution of Merrill Lynch Commodities Inc (MLCI):

Prosecuting banks and traders for price manipulation on COMEX futures while ignoring the far larger London market and its gold and silver fixings looks like a job half done. Trading desks and their traders are agnostic to trading venues and with interlinked markets, the COMEX and the London Fixings are two sides of the same coin.”

Who needs real metal when you can trade ‘Screen’ gold and silver?

Conclusion – The Greatest Trick ever Pulled

Manipulating gold and silver prices by spoofing futures trades and cancelling them is one thing. Central bank intervention into physical gold markets to dampen the gold price is another. But perhaps the most far reaching yet unappreciated method of manipulation is sitting there in plain sight, and that is the very structure of the contemporary ‘gold’ and ‘silver’ markets where prices are established by trading in vast quantities of fractionally-backed synthetic gold and silver credit, be it in the form of vast quantities of unallocated positions that are ‘gold’ or ‘silver’ in name only, or in the form of gold and silver futures which haven’t the slightly connection with CME approved precious metals vaults and warehouses.

By siphoning off demand for real gold and silver and channeling it into unbacked or fractionally-backed credits and futures, the central banks and their bullion bank counterparts have done an amazing job in creating an entire market structure of futures and synthetics trading that is unconnected to the physical gold and silver markets. This structure siphons off demand away from the physical precious metals markets, and in doing so, creates a system of price discovery which is nothing to do with physical gold and silver supply and demand.

Apart from fractional-reserve banking, precious metals market structure is perhaps one of the biggest cons on the planet. So next time you think of precious metals manipulation, remember that in addition to spoofing and secretive central bank gold loans, the entire structure of the precious metals markets is unfortunately one big manipulation hiding in plain sight.

This article was originally published on the BullionStar.com website under the same title “Gold & Silver Price Manipulation – The Greatest Trick ever Pulled“.

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New Essay: “Originalism and Stare Decisis in the Lower Courts”

Most discussions about originalism and stare decisis are SCOTUS-focused. That is, the Supreme Court established some non-originalist precedent in the past, and now the Justices are considering whether to reverse that precedent. However, scholars seldom discuss how lower-court judges–such as Circuit Court Judges or State Supreme Court Justices–should balance originalism and stare decisis.

My new essay, Originalism and Stare Decisis in the Lower Courts, opens up that discussion.

Here is the abstract:

The tension between originalism and stare decisis is well known. Many of the Supreme Court’s most significant constitutional decisions are completely unmoored from the original public understanding of the Constitution. A Supreme Court Justice may recognize that a given precedent is non-originalist, but follow it anyway because of the doctrine of stare decisis. Or, a Supreme Court Justice may decide to deviate from stare decisis because that precedent is non-originalist. The Supreme Court’s unique status, which is perched atop our judiciary, affords its members leeway to make either decision.

Lower court judges, however, do not have that sort of discretion. Consider a judge on a federal circuit court of appeals. First, she is bound by Supreme Court precedents interpreting the Constitution, regardless of whether those precedent are originalist or not. No matter how wrong a given Supreme Court case is, that precedent must be followed. Second, she is bound by circuit precedent interpreting the Constitution, regardless of whether that precedent is originalist or not. Only an en banc majority can reverse circuit precedent, and those proceedings are quite rare.

An originalist circuit judge would only have free jurisprudential reign in the rare case of first impression, where neither the Supreme Court nor the circuit court had considered a particular constitutional question. Those cases are even rarer. Even then, the circuit judge would still be at a disadvantage. Circuit courts seldom receive the wealth of originalist party and amicus briefs that are directed to the Supreme Court. Here, the circuit judge will often have to do all of her own originalist research—the proverbial law office history report—without the benefit of the adversarial process.

In short, it’s tough for a lower-court judge to be a constitutional originalist. But it can be done. Part I of this essay explains when a lower-court judge can be an originalist. Part II explains how a lower-court judge can be an originalist.

I welcome any suggestions or comments–especially from judges who agree, or disagree with my approach.

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The Erica Thomas Incident Wasn’t National News, But That Never Stops Our Outrage-Hungry Media

Prepare to be outraged: A white male shopper at a grocery store in Cobb County, Georgia, told Erica Thomas, a pregnant black woman and state legislator, to go back to where she came from. His verbal assault echoed the racist remarks of President Trump. “People need to see the hate that is going on in this country,” a tearful Thomas told her Facebook followers in a heart-wrenching video.

Are you angry yet? Well, you were fooled. The above account was one-sided and misleading, and now even Thomas has suggested that she can’t actually recall if the man, Eric Sparkes, literally told her to go back to where she came from, or merely said other unpleasant things. Moreover, Sparkes claims he is a Cuban and an anti-Trump Democrat. This was more than enough new information for some people to file this incident under hate hoaxes and consign Thomas to the status of a Jussie Smollett or Nathan Phillips (whose sins were far greater).

Having read this new information, maybe you’re now outraged about having been driven to outrage in the first place. For that you should direct your ire to local media outlet WSB-TV, which hauled Thomas back to the grocery store over the weekend to film a segment about the episode, and also at The New York Times, which for some reason decided that what is ultimately a trivial argument between two stressed-out shoppers should be turned into a national news story. The Times‘s initial headline, “‘Go Back to Where You Came From,’ Georgia Lawmaker Says She Was Told,” was of course specifically designed to spin this story as an outgrowth of Trump’s poisonous rhetoric. The new headline, “‘The Hate Is Real’: Black Georgia Lawmaker Says She Was Berated at Supermarket,” tries to achieve the same, while tacitly conceding that there’s uncertainty over the back-to-where-you-came-from language.

Here’s the de-sensationalized version of events: Thomas and Sparkes agree that she had opted to use the express checkout option, even though she had more groceries than the line allows. This irked Sparkes, despite the fact that two other lanes were open and available. He snitched on Sparkes to customer service and was informed that company policy forbade the store from doing anything about it, but that Sparkes could take matters into his own hands if he wished. Ultimately, Sparkes approached Thomas, and the two had words. Which words, precisely, is up for debate.

“This woman, Ms. Thomas, is playing the victim,” Sparkes told WSB TV, telling his side of the story. “I am a Democrat, I vote Democrat party line. All my statements are anti-Trump, anti-Republican, anti-bigotry.”

Sparkes utterly denied that there was anything racially tinged about his comments to Thomas. His strong denial, political affiliation, and the fact that Thomas backtracked slightly are being treated as conclusive evidence by Team Hoax. Of course, it’s easy to go too far in this direction. Sparkes admits, for instance, that he called Thomas “lazy”and a “bitch.” Maybe his comments weren’t racist, but if you’re calling a pregnant lady a lazy bitch, you aren’t exactly the good guy, and it would be a stretch to label your conduct as non-hateful. Perhaps this is a sign of our incredibly politicized times: an accusation of racism must be rebutted at all costs, while mundane cruelty, seemingly tinged with sexism, is considered above board.

In truth, both Thomas and Sparkes seemed like they behaved obnoxiously. Sparkes should have minded his own business, especially given his admission that Thomas’s abuse of the express checkout lane didn’t even inconvenience him—there were other lanes. But Thomas quite clearly chose to escalate—and publicize—the incident, injecting it with political urgency and slotting it into a national narrative the media would find too tempting to ignore.

Thus a minor, trivial encounter between two stressed shoppers—a story so old that it is not actually a story—was transformed into a viral social media moment, and then served up to outrage-hungry readers by national news media. I hope everybody is good and mad.

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Possible Budget Deal Will Add $2 Trillion to the National Debt

It holds true that the only thing pretty much everyone in Congress and the White House can agree on is to spend more money.

The White House and Congress are closing in on a deal to hike spending and postpone a battle over the debt limit until July 2021—eight months after the next presidential election. The agreement includes a paltry $75 billion in budgetary offsets, Bloomberg reports. Though a final deal has not yet been reached, the plan is for Congress to pass the new budget before July 26, when lawmakers will begin a six-week summer recess.

The proposed plan will increase current spending caps by $320 billion over the next two years, with the spending hikes equally split between domestic programs and the military. Depending on the details, the budget could add as much as $2 trillion to the national debt over the next decade, according to the Committee for a Responsible Federal Budget (CRFB), a nonpartisan groups that favors balanced budgets.

In a statement, the CRFB said the budget deal “may be the worst in history,” given the country’s current precarious fiscal condition.

“Members of Congress should cancel their summer recess and return to the negotiating table for a better deal. If they don’t, those who support this deal should hang their heads in total shame as they bolt town,” says Maya MacGuineas, president of the CRFB. “This deal would amount to nothing short of fiscal sabotage.”

If President Donald Trump signs the deal into law, he will have authorized a 22 percent increase in federal discretionary spending during his first term in office—having signed a March 2018 budget deal that similarly jacked up both domestic and military spending.

It’s apparent at this point that there is virtually no political coalition in Washington, D.C., genuinely interested in reducing spending and bringing the national debt under control. Democrats are largely a lost cause when it comes to fiscal responsibility, while Republicans—with few exceptions—are little better, having abandoned decades of lip service to the benefits of smaller government.

We’re not even a decade removed from the moment when every major Republican candidate for president said they would rejecta budget deal that included $1 in tax increases for every $10 in budget cuts. Now, the modus operandi of the GOP is to ignore the threat of what near-record debt levels will do to economic growth in the coming decades. Our Republican president says he doesn’t have to worry about the coming debt crisis because he “won’t be here” when it happens, and conservative talking heads that once blasted President Barack Obama for soaring levels of national debt now argue, as Rush Limbaugh did last week, that “all this talk about concern for the deficit and the budget has been bogus for as long as it’s been around.”

The new budget deal reportedly includes a mere $75 billion in budget cuts—only $7.5 billion per year, less than 0.2 percent of all federal spending, and only half of what the White House originally sought.

The Congressional Budget Office (CBO) projects that the federal government will spend more than $57 trillion over the next decade. In the context of a $50,000 annual household budget, that means the proposed $75 billion in offsets is roughly equivalent to cutting $75 in personal spending every year and expecting that to let you pay off several maxed out credit cards.

The Republican Study Committee, a coalition that includes most members of the House GOP caucus, has condemned the budget deal as fiscally irresponsible, and the president of the conservative Club for Growth has said the agreement will “propel our country toward bankruptcy and fiscal crisis.”

But as Trump has taken over the Republican Party, the influence of those other groups has waned. And with Democrats now controlling the House, any Republican resistance to higher spending will have a blunted effect anyway.

Meanwhile, the national debt will continue to grow even without lawmakers adding to it this month. The CBO presently projects that the federal government will add another $11.6 trillion to the deficit over the next decade. By 2049, the national debt will be more than one and a half times the size of the entire U.S. economy, breaking a record set during World War II. If a recession hits, those numbers could be worse.

And yet the only thing officials in Washington can agree to do is spend more money. May our children forgive us.

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Giuliani: Epstein Case “Going To Implicate A Lot Of People”

President Trump’s personal attorney Rudy Giuliani said on Monday that the Jeffrey Epstein case “is obviously going to implicate a lot of people,” adding “I can’t tell you who but it’s not going to end up with just Jeffrey Epstein.

Speaking with Hill.TV, Giuliani said that investigators will undoubtedly focus on Epstein’s inner circle, and whether individuals knew or participated in Epstein’s sex crimes. 

If you spent this much time with him and he was so involved with these underaged girls — who did you see him with and what was he doing and what did he tell you and what did he say to you and how could you have missed it,” said Giuliani. “Maybe some were innocent — maybe some weren’t, but I think they’re going to investigate everybody.” 

The new charges against Epstein come more than a decade after the sixty-five-year-old pleaded guilty to sex trafficking and was sentenced to 13 months in prison. They have since renewed scrutiny on a 2008 plea deal that was secured in part by outgoing Trump administration Labor Secretary Alex Acosta, who resigned this month over the backlash.

Acosta was a U.S. attorney at the time of Epstein’s conviction for soliciting prostitution from underage girls, and allowed Epstein to serve 13 months in “custody with work release.” –The Hill

While Epstein’s involvement with the Clintons and other famous liberals is well known (A donor to the Clintons, Epstein bragged about co-founding the Clinton Global Initiative at one point), many have questioned President Trump’s involvement with the convicted pedophile. 

That said, Giuliani’s Monday decree suggests the President is most likely in the clear.  

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Possible Budget Deal Will Add $2 Trillion to the National Debt

It holds true that the only thing pretty much everyone in Congress and the White House can agree on is to spend more money.

The White House and Congress are closing in on a deal to hike spending and postpone a battle over the debt limit until July 2021—eight months after the next presidential election. The agreement includes a paltry $75 billion in budgetary offsets, Bloomberg reports. Though a final deal has not yet been reached, the plan is for Congress to pass the new budget before July 26, when lawmakers will begin a six-week summer recess.

The proposed plan will increase current spending caps by $320 billion over the next two years, with the spending hikes equally split between domestic programs and the military. Depending on the details, the budget could add as much as $2 trillion to the national debt over the next decade, according to the Committee for a Responsible Federal Budget (CRFB), a nonpartisan groups that favors balanced budgets.

In a statement, the CRFB said the budget deal “may be the worst in history,” given the country’s current precarious fiscal condition.

“Members of Congress should cancel their summer recess and return to the negotiating table for a better deal. If they don’t, those who support this deal should hang their heads in total shame as they bolt town,” says Maya MacGuineas, president of the CRFB. “This deal would amount to nothing short of fiscal sabotage.”

If President Donald Trump signs the deal into law, he will have authorized a 22 percent increase in federal discretionary spending during his first term in office—having signed a March 2018 budget deal that similarly jacked up both domestic and military spending.

It’s apparent at this point that there is virtually no political coalition in Washington, D.C., genuinely interested in reducing spending and bringing the national debt under control. Democrats are largely a lost cause when it comes to fiscal responsibility, while Republicans—with few exceptions—are little better, having abandoned decades of lip service to the benefits of smaller government.

We’re not even a decade removed from the moment when every major Republican candidate for president said they would rejecta budget deal that included $1 in tax increases for every $10 in budget cuts. Now, the modus operandi of the GOP is to ignore the threat of what near-record debt levels will do to economic growth in the coming decades. Our Republican president says he doesn’t have to worry about the coming debt crisis because he “won’t be here” when it happens, and conservative talking heads that once blasted President Barack Obama for soaring levels of national debt now argue, as Rush Limbaugh did last week, that “all this talk about concern for the deficit and the budget has been bogus for as long as it’s been around.”

The new budget deal reportedly includes a mere $75 billion in budget cuts—only $7.5 billion per year, less than 0.2 percent of all federal spending, and only half of what the White House originally sought.

The Congressional Budget Office (CBO) projects that the federal government will spend more than $57 trillion over the next decade. In the context of a $50,000 annual household budget, that means the proposed $75 billion in offsets is roughly equivalent to cutting $75 in personal spending every year and expecting that to let you pay off several maxed out credit cards.

The Republican Study Committee, a coalition that includes most members of the House GOP caucus, has condemned the budget deal as fiscally irresponsible, and the president of the conservative Club for Growth has said the agreement will “propel our country toward bankruptcy and fiscal crisis.”

But as Trump has taken over the Republican Party, the influence of those other groups has waned. And with Democrats now controlling the House, any Republican resistance to higher spending will have a blunted effect anyway.

Meanwhile, the national debt will continue to grow even without lawmakers adding to it this month. The CBO presently projects that the federal government will add another $11.6 trillion to the deficit over the next decade. By 2049, the national debt will be more than one and a half times the size of the entire U.S. economy, breaking a record set during World War II. If a recession hits, those numbers could be worse.

And yet the only thing officials in Washington can agree to do is spend more money. May our children forgive us.

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Semis Soar, Small Caps Sink, Silver Surges

Seemed appropriate…

 

Chinese stocks were not pretty. Despite STAR soaring, ChiNext tumbled along with Shenzhen as it appears liquidity moved to the new index…

 

European markets (except Spain) managed to cling to gains on the day thanks to 4 notable impulses…

 

Nasdaq dramatically outperformed led by semis. Small Caps were the biggest losers. Dow ended unchanged (Boeing down vs Apple up)

NOTE – Trannies and Small Caps notably decoupled at around 1400ET only to see a mysteriously large buy program strike at 1500ET

 

Small Caps continue to dramatically diverge from big caps (and mega cap tech)…

 

Small Caps also closed below their 100DMA…

 

 

Volume was low – around 20% below average…

 

There were two ‘failed’ attempts at yet another short-squeeze today…

 

Semis soared on the day following Goldman’s upgrade on Micron…

 

But while Semis spiked, FANG stocks were flat…

 

 

Bonds and stocks remain in their own – buy all the things – worlds…

 

Treasury yields traded in a narrow range today, with yields down across the curve led by the belly…

 

10Y Yield dropped to 2.02% intraday but the yield curve (3m10Y) remains inverted (41st day in a row)…

 

The T-Bill curve remains kinked around potential debt ceiling X-date…

 

The dollar index managed very modest gains, holding above last week’s Williams’ speech plunge levels..

 

 

Cryptos were mixed over the weekend with Bitcoin Cash holding gains but ETH and BTC lower after a leg lower this morning…

 

Bitcoin continues to hover between $10,000 and $11,000…

 

Dr.Copper is lagging as silver resurges…

 

Oil prices managed some gains today as Iran tensions resurfaced in the narratives…

 

Silver continues to rise…

 

Silver has outperformed gold for six straight days (longest streak since June 2018), erasing most of the relative gains for the year…

 

Finally, don’t forget, it’s different this time…

Except it’s all about liquidity, stupid…

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Another Benefit of Legalizing Hemp: It Makes the War on Weed Harder to Wage

Last month Texas legalized hemp, defined as cannabis that contains 0.3 percent or less THC by weight. That change has created challenges for prosecutors in marijuana cases, since the equipment needed to precisely measure THC content is in short supply. The upshot is frustrating to drug warriors but a nice surprise for opponents of pot prohibition.

On July 2, Harris County District Attorney Kim Ogg, whose jurisdiction includes Houston, the state’s biggest city, announced that her office would no longer accept possession cases involving misdemeanor quantities of marijuana (four ounces or less) “without a lab test result proving that the evidence seized has a THC concentration of over .3%.” She added that “felony marijuana charges will be evaluated on a case by case basis by our Office” and “in the proper instances, such charges may be taken while lab test results are pending.”

The next day, Travis County District Attorney Margaret Moore, whose jurisdiction includes Austin, the state capital, said her office was dismissing 32 felony marijuana cases because of the wrinkle created by hemp legalization. “If we can’t prove our case, we need to dismiss,” explained Moore, who estimated that the necessary laboratory equipment would cost $185,000 and would not be up and running for eight to 12 months.

Peter Stout, president of the Houston Forensic Science Center, which does testing for law enforcement agencies, told The New York Times he was able to locate just two American laboratories, both privately run, that currently have the capability to distinguish between hemp and marijuana. “Prosecutors would need to pay the labs to run the tests—sometimes hundreds of dollars for each sample—and to testify about the results at trial,” the Times reports. “Sending all of the state’s suspected marijuana to a small number of labs would likely overwhelm them, prosecutors have said, and would result in severe backlogs.”

While critics of the war on weed should welcome this side effect of hemp legalization, Gov. Greg Abbott, Lt. Gov. Dan Patrick, House Speaker Dennis Bonnen, and Attorney General Ken Paxton are not pleased. “Some of you have recently dismissed marijuana possession cases or announced you will not prosecute misdemeanor marijuana possession cases without a lab test,” they wrote in a letter to Texas prosecutors last Thursday. “Marijuana has not been decriminalized in Texas, and these actions demonstrate a misunderstanding of how H.B. 1325 [the hemp bill] works. First, a person claiming to transport hemp must have a certificate. Failure to have the required certificate while transporting hemp is a separate crime. Second, lab tests are not required in every case and are more affordable than initial reporting indicated. Failing to enforce marijuana laws cannot be blamed on legislation that did not decriminalize marijuana in Texas.”

Among the top prosecutors for the state’s 10 most populous counties, The Texas Tribune reportsonly El Paso District Attorney Jaime Esparza “has stated definitively that the new hemp law won’t affect marijuana prosecution in his office.” Esparza said “we weren’t even using lab reports” before hemp legalization, suggesting his office relied on circumstantial evidence and the physical resemblance between seized plant matter and marijuana. But it’s hard to see how a marijuana case can be proven beyond a reasonable doubt now that two samples of cannabis can look and smell the same even though one is contraband while the other, because of its low THC content, is not.

“Even before the passage of H.B. 1325, companies and labs were already developing THC concentration tests,” Abbott et al. wrote. “As more companies enter the testing marketplace, the costs of the tests will certainly decline, and you may weigh which prosecution method is appropriate. In short, lab tests are not always needed, and they are not as costly as some initial reporting indicated.”

There would be even less need for such lab tests if Texas legislators came to their senses and decriminalized marijuana use, a change that Moore, the Austin County D.A., favors. But in the race between marijuana reform in Texas and technological innovation in the forensic testing industry, I suspect the latter will win.

 

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Papers, Please! DHS Wants Power to Deport People Faster with Less Judicial Oversight

Quick: Do you think you can prove to the satisfaction of an immigration officer that you have the right to be in the United States right now? Can you prove that you’ve been living in the United States for at least two years?  If not, you risk getting deported under a new policy being pushed by President Donald Trump’s administration.

Today, the Department of Homeland Security (DHS), under Acting Secretary Kevin McAleenan, released a notice announcing plans to dramatically expand the “expedited removal” process.

This process generally bypasses judicial review hearings, meaning those subjected to it don’t get the typical due process mechanisms of those facing deportation (which can normally take months or years). Expedited removals already exist, but with restrictions: The process can be applied only to those who arrived to the United States by sea and have been in the country for less than two years; or to those who crossed the United States border by land, and are still within 100 miles of the U.S. border, and were in the United States for less than 14 days before encountering immigration officers.

The new policy would erase many of the geographic limitations. McAleenan says the DHS is “exercising its statutory authority” under a 1996 law to cover immigrants anywhere within the United States who have been here less than two years, regardless of how they arrived. So that 100-mile limit would go away under this new system. Any immigrant found anywhere in the United States would risk expedited removal if they “have not affirmatively shown, to the satisfaction of an immigration officer, that they have been physically present in the United States continuously for the two-year period immediately preceding the date of the determination of inadmissibility.”

The burden then is put on the immigrants to prove they’re here legally—or, if they can’t do that, that they’ve been here for more than two years. Otherwise they risk rapid deportation with little to no recourse.

Part of the justification for expanding the policy, the order explains, is the massive logjam in immigration enforcement procedures, which has caused a growing humanitarian crisis at several detention facilities near the border. McAleenan explains that the new policy would “help to alleviate some of the burden and capacity issues currently faced by DHS and [the Department of Justice] by allowing DHS to remove certain aliens encountered in the interior more quickly, as opposed to placing those aliens in more time-consuming removal proceedings.” They calculate that more than a third of the aliens they have detained from the interior of the United States (deeper than that 100-mile limit) would potentially qualify for expedited removal if immigration had been following these guidelines.

Regardless of how one feels about immigration levels and border enforcement, any fan of human liberty should be concerned when an arm of the executive branch proposes expanding the scope of how much it can enforce regulations without judicial review. It’s bad enough to deny aliens here due process. (Yes, the rights guaranteed by the Constitution are generally supposed to apply to noncitizens.) But what’s worse is what we already know from how DHS treats American citizens and legal immigrants within that 100-mile zone—with intrusive, unwarranted searches. This authority will most certainly be abused.

Just last week U.S. Customs officials detained three children, who are U.S. citizens, at O’Hare International Airport in Chicago, in the hopes of luring out their parents, who they believe are illegal immigrants. Expanding the power to remove people quickly is almost sure to hit people that it shouldn’t, and to be used to threaten immigrants and minorities even when they’re here legally.

The American Civil Liberties Union is already announcing plans to sue:

Read the order for yourself here.

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Another Benefit of Legalizing Hemp: It Makes the War on Weed Harder to Wage

Last month Texas legalized hemp, defined as cannabis that contains 0.3 percent or less THC by weight. That change has created challenges for prosecutors in marijuana cases, since the equipment needed to precisely measure THC content is in short supply. The upshot is frustrating to drug warriors but a nice surprise for opponents of pot prohibition.

On July 2, Harris County District Attorney Kim Ogg, whose jurisdiction includes Houston, the state’s biggest city, announced that her office would no longer accept possession cases involving misdemeanor quantities of marijuana (four ounces or less) “without a lab test result proving that the evidence seized has a THC concentration of over .3%.” She added that “felony marijuana charges will be evaluated on a case by case basis by our Office” and “in the proper instances, such charges may be taken while lab test results are pending.”

The next day, Travis County District Attorney Margaret Moore, whose jurisdiction includes Austin, the state capital, said her office was dismissing 32 felony marijuana cases because of the wrinkle created by hemp legalization. “If we can’t prove our case, we need to dismiss,” explained Moore, who estimated that the necessary laboratory equipment would cost $185,000 and would not be up and running for eight to 12 months.

Peter Stout, president of the Houston Forensic Science Center, which does testing for law enforcement agencies, told The New York Times he was able to locate just two American laboratories, both privately run, that currently have the capability to distinguish between hemp and marijuana. “Prosecutors would need to pay the labs to run the tests—sometimes hundreds of dollars for each sample—and to testify about the results at trial,” the Times reports. “Sending all of the state’s suspected marijuana to a small number of labs would likely overwhelm them, prosecutors have said, and would result in severe backlogs.”

While critics of the war on weed should welcome this side effect of hemp legalization, Gov. Greg Abbott, Lt. Gov. Dan Patrick, House Speaker Dennis Bonnen, and Attorney General Ken Paxton are not pleased. “Some of you have recently dismissed marijuana possession cases or announced you will not prosecute misdemeanor marijuana possession cases without a lab test,” they wrote in a letter to Texas prosecutors last Thursday. “Marijuana has not been decriminalized in Texas, and these actions demonstrate a misunderstanding of how H.B. 1325 [the hemp bill] works. First, a person claiming to transport hemp must have a certificate. Failure to have the required certificate while transporting hemp is a separate crime. Second, lab tests are not required in every case and are more affordable than initial reporting indicated. Failing to enforce marijuana laws cannot be blamed on legislation that did not decriminalize marijuana in Texas.”

Among the top prosecutors for the state’s 10 most populous counties, The Texas Tribune reportsonly El Paso District Attorney Jaime Esparza “has stated definitively that the new hemp law won’t affect marijuana prosecution in his office.” Esparza said “we weren’t even using lab reports” before hemp legalization, suggesting his office relied on circumstantial evidence and the physical resemblance between seized plant matter and marijuana. But it’s hard to see how a marijuana case can be proven beyond a reasonable doubt now that two samples of cannabis can look and smell the same even though one is contraband while the other, because of its low THC content, is not.

“Even before the passage of H.B. 1325, companies and labs were already developing THC concentration tests,” Abbott et al. wrote. “As more companies enter the testing marketplace, the costs of the tests will certainly decline, and you may weigh which prosecution method is appropriate. In short, lab tests are not always needed, and they are not as costly as some initial reporting indicated.”

There would be even less need for such lab tests if Texas legislators came to their senses and decriminalized marijuana use, a change that Moore, the Austin County D.A., favors. But in the race between marijuana reform in Texas and technological innovation in the forensic testing industry, I suspect the latter will win.

 

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