Deutsche Bank Admits Rigging, Will Expose Other Riggers
Deutsche Bank has admitted it rigged both the Gold market and the Silver market. ZeroHedge has the details in his report Deutsche Bank Agrees To Expose Other Manipulators.
Many asked me to comment. I am shocked?
No. In the wake of admissions of rigged LIBOR and rigged Euribor (bank to bank interest rates in dollars and euros respectively), one would really have to wonder “What isn’t rigged?”
To the Moon, Alice?
While some think gold would have “gone to the moon” without this rigging, I wonder if it got as high as $1900 an ounce because of rigging.
The same applies to silver when it topped over $40.
It’s logical to believe riggers don’t much care about the direction as long as they make money. Hopefully we get more details from Deutsche Bank soon.
This could get interesting.
What Isn’t Rigged?
While pondering the above question, let’s dive into Deutsche Bank’s 2015 Annual Report to investigate other bid-rigging opportunities.
Consolidated Balance Sheet
Detusche Bank has over €515 billion in “positive derivative values” in comparison to €496 billion in “negative derivative values”.
Hooray! Deutsche Bank is about €20 billion to the good. But how much was bet?
Deutsche Bank’s Derivatives Casino
The total size of Deutsche Bank’s derivatives casino is €21.39 trillion, notional.
- Interest Rate: €15.41 trillion
- Currency Related: €4.78 trillion
- Equity Index: €0.90 trillion
- Credit Related: €0.27 trillion
- Commodity Related: €0.08 trillion
How Much Risk on €21.39 Trillion?
Inquiring minds may be asking: How much risk is there on €21.39 trillion?
Perhaps surprising little. After all, interest rate risk could easily be controlled with a few timely phone calls from the Fed and ECB.
What risk isn’t controlled that way can always be controlled other ways (as we have seen).
I am pleased to note Deutsche Bank uses “central counterparty clearing services for OTC clearing” and the bank “benefits from the credit risk mitigation achieved through the central counterparty’s settlement system.”
“Margin requirements for uncleared OTC derivative transactions are expected to be phased in from September 2016.”
And we can all count on the obvious fact that Dodd-Frank reform has fixed everything.
So, nothing can possibly go wrong with €21.39 trillion in casino bets, just as €20 billion in profits (.0935%) shows.
Reader “LongShort” accurately points out:
Mish, with regards to DB’s Annual report page 248, you’ve taken numbers from “Within 1 year” column, while there is “Total” column, summing up different maturities.
The total number of bets is actually €41.90 trillion as shown in the above chart.
Thanks also to reader “Lars” for spotlighting those pages.
Mike “Mish” Shedlock
They are probably used by the Fed to manipulate the futures markets to keep the BS market positive. How can they exist with the leverage on their balance sheet?
Lou Mannheim said:
I might be wrong, but the fair values DB is stating on the balance sheet you provided are most likely market values or the PV of the swaps, and don’t reflect actual P&L – the €20 billion amount would reflect the net cash receivable to DB if they were to close out the entire €21 trillion of swaps on the books (I’m sure that could be done in an orderly way without any major disruption. Well, pretty sure).
You are right. It´s the positive/negative Present Value of the OTC portfolio. Interesting thing is that all banks seem to have a positive net PV. How come? And DB´s net positive of € 20 bn equals the market value of its equity.
Difference of € 20 bn is net PV of positive and negative value. All banks seem to have a net positive. How come? And interestingly the net of € 20 bn is almost equal to the market value of DB´s equity.
The silver & gold buried in your backyard said:
*yawn* no comment.
Mish, with regards to DB Annual report page 248, you’ve taken numbers from “Within 1 year” column, while there is “Total” column, summing up different maturities.
So total number of bets is actually 41.90 trillion.
Thanks LongShort . I added this addendum
Reader “LongShort” accurately points out: Mish, with regards to DB’s Annual report page 248, you’ve taken numbers from “Within 1 year” column, while there is “Total” column, summing up different maturities.
The total number of bets is actually €41.90 trillion as shown in the above chart.
I’m in the wrong business
Thomas Malthus said:
‘Ponzi lending? In China, 45% of new company debt is raised to pay interest on existing debt’
This is a ticking, financial, nuclear bomb
We’ve talked about this in the crypto-currency community because these type of manipulations only exist because of the central banks – and they do nothing for productivity or wealth creation; a large enough institution could buy contracts or the product itself to make it appear there was high demand (or the inverse).
While building in stops in a crypto-currency wouldn’t be wise, making it apparent when there is something or someone trying to engage in manipulation might help those in the market itself.
Please. Let us all grow up. Are you really surprised? It is WE, the stupid public, that allows this. We blame others for doing what they can to get a lot of money (face it, that is NORMAL) and we whine and bitch and complain?
WE are the F’n fools. Want to stop this? Vote in people who WILL stop it and when crooks like this pull off these stunts, WE KILL THEM.
We are not going to stop this with stupid little blogs and comments like mine. It stops when we Kill these crooks. And only then.
Business men and Politicians be honest or we put a bullet into their heads.
Hmm- The revolution will be televised?
Stuki Moi said:
The way all hierarchical organizations, business and government alike, work, is that the less scruples one has about doing “what it takes” to advance, the higher one advances. IOW, the scum will ALWAYS rise to the top. Pretty simple logic.
Apply that recursively, and you quickly realize every organization is not just led by a scumbag, but in fact by THE single scummiest scumbag available. There is no way around it. “Business Men and Politicians” may be honest in Utopia. But never, ever, in the real world. They will forever remain scum. Since the moment they cease to be not just scum, but the scummiest of all available scum, someone scummier than them will take their job.
So, scummy leaders being a given, the question becomes: How do we create institutions that prevent the scum in charge from doing too much damage? The authors of the US Constitution made an attempt at that. Worked kind of halfway for awhile, but obviously no more. Due to the traditionally more voluntary nature of private enterprise, there are some limits to how scummy someone can behave, as long as both his customers, employees and other associates can pick up and leave with little transition cost. Assuming a free, hence competitive market. Of course, the scum are trying to prevent the “pick up and leave” part, by putting in place ever more laws, regulations and restrictions on free.
What the question is specifically not, despite what seems fashionable these days, is: How do we retain institutions that maximize the leverage their leaders (the inevitably scummy ones) have, while somehow imagining we can avoid the inevitable result that people specifically selected for superior scumminess, will use their power in a scummy fashion.
“Propaganda, all is phony,” Bob Dylan
What seems odd to me about all this fuss is that the banks, including Deutsche Bank, were specifically selected to replace the old gold and silver price rigging system. In an era when banking and rigging markets are one and the same, it is the complaints in the media about price rigging, not the price rigging itself, that seem most notable. I consider it highly probable (97% odds) that the price rigging charges against Deutsche Bank are public moves by (or on behalf of) other powerful players who want the lucrative gold and silver price setting racket for themselves. Big money can be made setting the settlement prices for gold and silver price contracts. Perhaps the central banks themselves are doing a bit of empire building, and want to add the lucrative gold and silver price setting racket to their price setting portfolio (along with interest rates & money supply).
Wait and see, there will not be talk of a free market settlement price. But rather new better price riggers to replace the old price riggers; in essence more like a gang war over turf.
Can someone please explain how gold can be rigged? There are lots of banks, central banks, mining companies, consumers, and inverstors, etc, that hold gold. How does “one bank” rig the price? If they falsely make the price of gold go up, Sellers will sell and buyers will sit out. If something is falsely valued, there are plenty of speculators waiting to come in and make money off of the imbalance. So how can the price of gold be rigged?
Thanks, –Alex (BTW – read this website daily -love it!)
Thomas Malthus said:
Grant Williams a Singapore based hedge fund manager has written some good stuff on this.
In a nutshell – paper gold is the mechanism – if the price of gold moves too high you just dilute by issues more paper.
Currently the ration is at a record high
Ron J said:
“How does “one bank” rig the price?”
“Deutsche Bank Admits Rigging, Will Expose Other Riggers”
It wasn’t one bank.
“If something is falsely valued”
How do you know it’s true value? I was told that Tyco was an 80 dollar stock. It was in the 50’s at the time. It went to 8. In 2001, 10,000 real estate appraisers petitioned the government about appraisal fraud.
I was told that Tyco was an 80 dollar stock. It was in the 50’s at the time. It went to 8.
What should gold be worth per ounce? According to the gold hawkers, there is never a bad time to buy gold. The hawkers say gold is worth $5,000 an ounce or more. They were saying that at $1,900. Gold went to $1,080.
“Why we’re all Gaga Over Housing” was the cover story near the peak of the housing bubble. As gold neared the $1,900 peak, the show Gold Rush premiered.
I appreciate the comments. I see a difference between the words “rigged” and “hyped”. Anything can be hyped, and everything does indeed get hyped. That does not mean you and I do not have a choice of buying, selling, or doing nothing. While it is true the “paper certificates” can always be printed, just like our dollar bills, physical gold cannot. So if DB and other banks “talk down the price of gold”, someone else who is big and smart will take advantage and perform arbitrage. I agree, its true, its hard to know the “real” value of a commodity or a stock, unless you have researched it to death, but there are people who do just that for a living.
I’ll never forget the infamous Steve Roach of Morgan Stanley saying that oil would hit $150 a barrel when it was at $100. Of course, Mr. Roach gets plenty of attention and media coverage even though he is either lying through his teeth (likely) or just talking through this ass. Like Mish says, when Goldman Sacs makes a public recommendation, usually the opposite is true.
After watching “wolf of wall street” and “the big short” I don’t know if I can ever put my faith and funds in the hands of wall street or our central bank. Speaking about rigged, our money is totally rigged. The central back decides in secret which way they will go, how much they will print, how much they will pay the banks for their crappy “junk assets”, and other clever ways of directly bailing out the banksters. Since the central bank is owned by the big banks, how hard would it be for them to share their secrets ahead of time with the banksters. To me, that is the definition of rigged. Price of gold, well, its hard to rig that in my opinion, especially since people can survive without having to buy or sell gold. The fair price is what people are willing to pay for it.
Some “invest” in gold, ie; buy and sell to profit. Others store value in it,,,like buying insurance against uncertainty. Sure, paper prices can be influenced by rigging procedures described above, but the quantity in existence can’t be changed much by manipulation.
That said, given any risk factor perception at any particular point in time, the number of ounces one holds might be more important than the price per ounce. Odds on that in most any scenario, an ounce would get one a meal, bed, bath and a suit of clothes, whether it’s $300 an ounce or $3000.
What is rarely explained is that this gold fix is just a means of generating a price useful for settlement of futures and other gold contracts coming due on a given day. This used to be called the London fix, and it was something the Bank of England did for about a hundred years with little complaint. Then for some reason it was thought that having a group of banks doing the fix would be a better idea. Then a group with a news agency sponsor won the concession.
Private contracts for gold are under no obligation to use the “fix” price, but apparently many (but not all) gold producers and others routinely have used the London fix and out of habit adopted the new “fix” price for contract settlement and to determine delivery prices. Though lots of contracts use a closing price or spot price, the big banks find it easier to use the “fix price.” The latest system generating the “fix price” had multiple participants involved in an artificial auction that supposedly balanced supply and demand. The new system suddenly and quite unexpectedly began generating a “fix price” several percentage points out of whack with every other gold price measure (e.g. spot price, closing price). The obvious presumption was that the fixers had a financial interest in generating a bogus fix price; for contract settlements; though as Mish readers would know, idiocy and incompetence are also staples of modern banking.
The out of whack “fix” prices were never corrected. Plus the “fixers” stood firm in their insistence that the bogus “fix prices” were correct; and, of course, stubbornly refused to disclose any details. So, now we may get the truth, and a new set of price fixers. The take home lesson: beware of contracts specifying the “fix” price for settlement; though the big banks continue to insist on a “fix price” out of convenience and to save labor. But the $40 trillion of derivatives on the books of just one bank is truly a bigger story; and indicates a number beyond imagination if multiplied by all the banks in the derivatives business; and one could postulate that a minor event swinging something a few percentage points could generate trillion dollar moves in excess of anything yet known.
K. Mitchell said:
Here is the .details – http://www.amazon.com/dp/0986036269/ref=cm_sw_su_dp . A book called Gold Wars: the Battle for the Global Economy.
It doesn’t seem that they manipulate the price up just as often as they manipulate the price down. James McShirley of GATA produced an amazing graph that showed that in the period from, I think, 2001 to 2011, while the price of gold was going up around 600% that the price had, on average, dropped in that period from the time of the AM London gold fix to the PM London Gold fix.
How astronomical are the odds against that?
Looked at the new collateral rules to be introduced September 1 2016. Given the enormous size of these portfolios banks will struggle to come up with cash/quality collateral?
It’s all by design. As long as folks walk in the door of the casino, the house wins,,,
“Since the central bank is owned by the big banks, how hard would it be for them to share their secrets ahead of time with the banksters.”
Thanks for that. Where there is motive there is corruption. I would further posit that the scenario you mention above is in high likelihood practiced often,,,because in the eyes of omnipotent bankers, the ends must surely justify the means 😉