What about the Dodd - Frank bill?

This is only an excerpt near the bottom of an article posted at Casey's Gold & Silver Daily by silver expert Ted Butler on the Dodd - Frank bill. For the entire article click here


Emphasis added by me.

"A good number of subscribers have asked me about the retail gold and silver trading ban on many leveraged transactions, effective July 15. The ban was built into the Dodd-Frank Act, signed into law last year by President Obama. It seems some misperceptions about the intent and potential impact of the ban were spread by early Internet blog posts. Other commentators have attempted to set the record straight and are to be commended for their efforts. In terms of any harm to the public or negative impact on the silver market, this trading ban was all much ado about nothing.

"Briefly described, these transactions are highly leveraged (as much as 100 to 1) and usually very short term bets on the direction of gold and silver by individuals operating through foreign exchange trading companies. They don’t involve the actual metal, but are quick bets in a trading environment separate from any exchange or wholesale OTC (Over the Counter) market. With such low margin requirements, this trading was almost exclusively reduced to day trading, where few overnight positions were held. These transactions are as far removed from long-term investment as is possible. No one invests long term on a one percent deposit. About the closest example I can give you about this highly leveraged day trading is the infamous “bucket shops” that existed before the great stock market crash of 1929. These bucket shops involved stock market bets that never found their way to any stock exchange or actual security, but were strictly trading bets between customers or the house.

"The early Internet reports on the retail OTC precious metals trading ban concluded, among other things, that the trading ban was an example of the government intruding on our basic rights or as a precursor to a ban on actual purchases of precious metals. I would disagree. Others suggested that the ban would result in a price smash for silver, as traders rushed to unload positions. That seems unlikely as little real metal was ever purchased. Instead, this was clearly an instance of the government doing the right thing. The only thing wrong was that it took so long for the ban to come into effect. This retail OTC gold and silver trading is strictly gambling; nothing more, nothing less. I am not opposed to it on moral grounds...nor am I happy if some are deprived of trading income...but society has come to demand that any type of gambling be licensed and regulated (and taxed) by a government entity. You can’t open a casino or a horse track or a betting parlor in the US without some type of government approval and regulation, usually at the state level. There was no government approval process for these retail OTC precious metals trading arrangement; they just sprung up.

"What about the CFTC regulating these modern day bucket shops? The problem here is that there is an underlying economic justification to commodities futures trading, namely, to allow real producers and consumers the opportunity to hedge price risk. Our commodity futures markets were not created so that speculators could gamble. Speculators are certainly needed for our futures markets to work, but it is the hedging function that gives our markets their legitimacy. To my knowledge, there was no real hedging that occurred in retail OTC gold and silver trading. That makes it pure gambling, no different than a sudden Three Card Monte game set up on a city street. I know those trading these markets successfully (including subscribers) will mourn the ban and I can empathize with them. But in the bigger picture, this was a market devoid of economic legitimacy."