Morgan Stanley, selling bullion they don't have and getting away with it

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The crooks get fined, never admit guilt and nothing is done to force these villains make good on the damage their bogus bullion sales caused.

I originally caught wind of this case some time ago from the works of Ted Butler and I've blogged, blogged again and blogged more on this and other schemes by banks to sell non existent bullion and unbacked bullion certificates to unwary investors. These scum also got up to other mischief like charging people storage on bullion that was never purchased, cute huh! So after several years in civil court Morgan Stanley has made a deal to pay $4.4 million in fines and remediation but get off without admitting any crime. If you tried this kind of crap you'd be tried in criminal court and go to jail for life.

I'm not only quite disappointed that no guilt was attributed to Morgan Stanley in this case but also the fact that $4.4 million in payouts for 21 years of misleading thousands of investors is considered a reasonable settlement. That's a mere $209K for each of the years they wrongfully charged people for storage of bullion they never purchased, that's $209K for each year they thwarted the market and legitimate price discovery for Silver and Gold by not actually investing peoples money in the product they wanted to buy. This is a $30 Billion dollar company and this settlement is no deterrent but simply the cost of doing dirty business.

With 22,000 people in the class action against Morgan Stanley that's less than $10/year/victim

At bare minimum Morgan Stanley needs to refund all service charges and storage fees for the last 23 years, they need to do submit to an audit to prove they have now obtained the bullion needed to back all the products they sold and they should be required to move all bullion to a independent third party storage facility. Then throw $50 million in fines just to make a point that this behaviour is wrong.

During this court case Stanley admitted that not buying 100% of the bullion to back products was an industry norm. Seeing this statement governments and bank regulators should be issuing a memorandum to all banks that an audit of bullion accounts and certificates will be made mandatory in 6 months time and that they had better step into the market and cover their positions in that time frame or face fines and/or government oversight. This bullshit of selling people things they don't own has got to stop. People need to know that their purchases are real investments and not gimmicks to use their own money to bet against them in the futures market. Purchasing a commodity based investment should actually impact the supply and demand of that commodity and in return support its real price.

For Canadians don't think it's any better here. In the last year or so we've seen TD's unwillingness or inability to redeem silver Certificates and we have seen recent work showing that other Canadian Banks don't fully back bullion based financial instruments they sell, hell most don't even report their bullion holdings in their financials or answer simple questions from customers regarding these products. The MSM and Governments need to investigate this kind of corporate behaviour so I would ask you to complain to your elected officials, write letters of complaint to your financial institutions, letters to the editors of local and national papers, and ask business and crime reporters to investigate these scams.

I've been surprised a few times to find certificate investors among the people I interact with every day. Most of these folks do not consider themselves gold or silver bugs and because of that they don't see the information about manipulation and fraud most of us are saturated with. Go out on a limb and tell all those around you about this case and the likelihood that all other banks selling similar products are either marginally backed or not backed by bullion at all.

Questionable backing for silver certificates.

I'd like my readers, especially the Canadians who hold bullion certificates to read this most recent work by This is the Mad Scientist Speaking for his look at Scotiabank's silver assets(bullion) vs. their liabilities (certificates).


Remember a silver or gold certificate is just as artificial as a fiat note if you can't trust the issuers promise to fully back the certificate with bullion.

Silver and Gold and forgetting ones history

I have a friend who keeps telling me that gold and silver is to pricy to buy, that he can't risk his savings or retirement money, or that it generates no income.

I started to tell this fellow my worries about the economy long before I started to write this blog and for the most part he blew me off, in his mind gold was too expensive at $550 and certainly could not appreciate more from that point. He told me roughly the same things post Bear Stearns and when I bought more gold at $650 or when I came in walking kind of off center because there was 100 oz of silver in one coat pocket. I'd often go across to Scotia at lunch and I'd come back and show him my new purchase of silver which he'd admire and them convinced himself yet again that it would be a bad idea to buy some himself.

Now I'm sure many people have had the same experience (from both sides) so why do I dwell on this one fellow?

The reason this one guys refusal to be convinced really bothers me is because of his family history and the role gold played in keeping his family alive during the second world war. You see my friend's family lived through the Japanese occupation of China in the late 30s until the defeat of Japan and during that time they suffered great hardship. At some point Japan introduced their own money to the occupied areas and as old Chinese script dried up or was seized many vendors refused to accept the new occupation currency. Of course when Japanese soldiers demanded goods for the script vendors could not refuse but among the Chinese themselves a great deal of commerce even for basics like rice were done on the black market and the only acceptable payment was either barter or precious metals.

Much like the hack silver of the Viking age, Chinese who had gold or silver would carve or clip small pieces from coins or jewelry and trade them for staples like rice, oil, spices or medical care when the government script would buy them little.

No one can know exactly what will happen in the future but like buying life, car or house insurance, we all know that hedging one bets may cost us a little up front but should the need arise the protection is priceless. History however, either from a book or perhaps the verbal tales of ones own family tribulations tells us that crises do happen, wars do happen, natural disasters do happen, inflation happens, fiat money always fails and that gold and silver have been considered real money since the Lydian's began to strike their first coins of Electrum around 650 BC.



Sure you can ignore a bunch of goofs on Youtube yelling at you to buy metals. You can certainly ignore the salesman whose livelihood depends on convincing you to make a purchase. You can even ignore a guy like me who's only motivation is helping people and the meager (and seriously it is meager) revenue from my ads but you cannot ignore what 2600 hundred years of history says about the value of real silver and gold money, neither can you discount the personal tales of people who survived and even thrived living in an occupied country because of a small nest egg of sound money.

I'm not going to tell you that you have to have 5-10% of your worth in metals like some advocates do. If you've never bought metals before I undertand it will seem quite different and perhaps even scarey, especially if you're asked to move that much money suddenly. I am asking you to buy something, anything from your first silver round or two, to a single fractional gold coin. Compare your new bullion to a stock certificate or a twenty from your wallet. Consider the fragility of that paper , the fact that a stock, a 20 dollar bill or a bond is simply a promise and as we've seen in the recent GM fiasco a promises, legal liabilities and even contracts are hollow when the state no longer enforces them.

Just one small purchase, then you will understand and you will be on the side of history.

Ask the Germans, they know!

What do they know you may ask?

They know about the reality of a destroyed currency having suffered greatly from the hyperinflation of the early 1920s. At its worst inflation caused prices to double ever 2 days and by the end of 1923they had an exchange rate of 4,200,000,000,000 Marks to 1 US dollar compared to a modest 4.2:1 ratio from just a few years earlier. They know that aggressive monetization of debt is a good way of stoking inflation and if not corrected could mimic what we’ve more recently watched in Zimbabwe, where shelves were empty because of price controls and they could not print new notes fast enough to keep up with the need for more zeros.


German Chancellor Angela Merkel so understands the need for sound monetary policy that she has openly spoken out against quantitative easing criticizing the central bank of England, the U.S Fed and the ECB despite the long standing precedent giving these banks independence from political interference. Merkel knows the practice of buying ones own dept is wrong and can lead to heavy inflation and destruction of currencies; any perceived benefit is simply postponing and compounding the carnage.


Germans also remember the value of having real assets like gold and silver as seen by extreme retail shortages last summer when most dealers where not only out of bullion but were also being unable to assure future deliveries, stopped taking orders. While shortages in the market were not just a German problem one company TG-Gold Super Markt.De
apparently saw a market niche for an easier way to access small purchases of gold and have created the worlds fist bullion ATMs for the German, Austria and Swiss markets.


The first machine recently had its premiere and one day test at Frankfurt’s train station, future plans call for 500 units to be placed at other train stations, airports and busy malls this year

The premiums on the small 1,5,10 gram bars offered from the machine are quite high and might impact sales but as a promotion and educational tool for bullion and the companies other online products these ATMs should be invaluable.

I’m actually scared these things will come here and I’ll have to fight temptation each and every time I to to the mall or Toronto’s Union Station which I pass through 10 times a week. While I would normally refuse to pay such premiums the sizes offered in these ATMs could be purchased with the kind of cash I often have on hand, making impulse control an issue. If these machines pumped out silver I’d probably never have spending money in my pocket again.

It would seem that Germany is somewhat more savvy than rest of the western nations, still it’s too bad they took part in years of Central Bank gold sales to suppress the price.

I think the biggest issue with the German position is how it will destabilize the EU. Do the Germans know that? Could their sound money policy cause the inevitable break of the union or at least a return to their own currency? Eventually I think it will.

Interesting stuff!

Bullion Porn

It’s not a great week for metals so I thought maybe you would like to see some of the bullion that others have collected, so here are some examples of Youtube Bullion Porn, enjoy!







I’ll have to think about bringing all of mine together (or at least a representative sample) and do my own little porn movie for my readers.

These little videos create interest for both collectors and wanna be collectors/investors, they also stoke your greed to have more, help you believe that you're doing the right thing with your money and that you are not alone.

Me, I just like to see all the different products because when I'm buying I try to mix it up so get a variety shapes, sized and mint marks. I find this it makes it a little more interesting and when you are showing it off to others they sometimes understand the collectability aspect of getting all different bars more than just simple accumulation. Now given a big difference in premiums I won't go out of my way for most bars but I would love a Wall Street Mint silver bar, the 10 oz Maple, other sizes in Bache bars, more of the 2, 2.5 and 5 peso Mexican gold coins and a gold Sovereign or two.

What are the favourite pieces of your collection? What do you want?