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The Powers That Be Don’t Want Sovereign Bonds… They Want Gold

Phoenix Capital Research's picture




 

 

Last week I outlined the issue of collateral and how it is the most critical issue in the financial system today. For a review of that article, click here now.

 

If you want further evidence that the financial elites are already preparing for a default from Spain and a collateral crunch, you should consider that the large clearing houses (ICE, CEM and LCH which oversee the trading of the $700+ trillion derivatives market) have ALL begun accepting Gold as collateral.

 

Gold as Collateral Acceptable for Margin Cover Purposes

 

From 28 August 2012 unallocated Gold (Loco London) will be accepted by LCH.Clearnet Limited (LCH.Clearnet) as collateral for margin cover purposes.

 

This addition to acceptable margin collateral will be subject to the following criteria;

 

Available for members clearing OTC precious metals forwards (LCH EnClear Precious Metals division) or precious metals contracts on the Hong Kong Mercantile Exchange. Acceptable to cover margin requirements for all markets cleared on both House and ‘Segregated’ omnibus Client accounts.

 

            http://www.lchclearnet.com/member_notices/circulars/2012-08-21.asp

 

            CME Clearing Europe to Accept Gold as Collateral on Demand

 

CME Clearing Europe will accept physical gold as collateral, extending the list of assets it’s prepared to receive as regulators globally push more derivatives trading through clearing houses.

 

CME Group Inc. (CME)’s European clearing house, based in London, appointed Deutsche Bank AG (DBK), HSBC Holdings Plc and JPMorgan Chase & Co. as gold depositaries. There will be a 15 percent charge on the market value of gold deposits and a limit of $200 million or 20 percent of the overall initial margin requirement per clearing member based on whichever is lower, Andrew Lamb, chief executive officer of CME Clearing Europe, said today.

 

“We started with a narrow range of government securities and are now extending that,” Lamb said in an interview today. “We recognize there will be a massive demand for collateral as a result of the clearing mandate. This is part of our attempt to maintain the risk management standard and to offer greater flexibility to clearing members and end clients.”

 

http://www.bloomberg.com/news/2012-08-17/cme-clearing-europe-to-accept-gold-as-collateral-on-demand-1-.html

Is it coincidence that this began ONLY when the possibility of a sovereign default from Greece or Spain began? Nope. This actions show that the large clearinghouses see the writing on the wall (that defaults are coming accompanied by a mad scramble for collateral) and so are moving away from paper (sovereign bonds) into hard money.

 

The reason?

 

They know that when Spain defaults the system will be rocked even harder than it was with Lehman in 2008. And they are doing everything they can get access to real collateral (Gold) when paper collateral (Spanish bonds) becomes worthless.

 

Remember, history has shown us time and again that defaults come in waves. So when Spain defaults, it will be only a matter of time before the rest of the PIIGS, the UK, Japan, and then the US do as well.

 

However, for now Spain is the biggest issue. As a result of this, Treasuries, Japanese bonds, German bunds and even French sovereign bonds remain attractive to the big banks as collateral… for now.

 

Indeed, it is the search for high grade collateral that has caused such periodic spikes in Treasuries, German Bunds, French sovereign bonds, and Japanese bonds (all of these have yielded 0% or even negative yields in the last five years). Big banks are moving away from PIIGS bonds into safer havens.

 

This is also why the Fed isn’t touching Treasuries with QE3 and why it won’t touch short-term Treasuries with Operation Twist 2 (this program sees the Fed selling short-term Treasuries to buy long-term Treasuries): the Fed wants to keep as much good quality collateral in the system as possible (long-term Treasuries are problematic because institutions know it’s highly likely the US will default within the next 30 years).

 

However, even this move is problematic because much of the Treasury market is locked up with governments both foreign and domestic.

 

Total US Sovereign Debt

$16 trillion

Foreign Nation holdings

$5 trillion

Intergovernmental holdings

$4.8 trillion

US Federal Reserve

$1.5 trillion

Remaining

$4.7 trillion

 

Again, this is why clearinghouses (which oversee the derivatives markets) are now allowing Gold as collateral: they know that eventually sovereign bonds will be worth less or even worthless. And they want access to their clients’ Gold for when this happens.

This is why I’ve been warning that the 2008 was just a warm-up. It’s why the Powers That Be in Europe are absolutely terrified of what’s happening there. And it’s why those investors who do not prepare in advance for what’s coming will lose everything.

 

If you do not want to be one of them, you need to get moving.

 

We have produced a FREE Special Report available to all investors titled What Europe’s Collapse Means For You and Your Savings.

 

This report features ten pages of material outlining our independent analysis real debt situation in Europe (numbers far worse than is publicly admitted), the true nature of the EU banking system, and the systemic risks Europe poses to investors around the world.

 

It also outlines a number of investments to profit from this; investments that anyone can use to take advantage of the European Debt Crisis.

 

Best of all, this report is 100% FREE. You can pick up a copy today at:

http://gainspainscapital.com/eu-report/

 

Best Regards,

 

Graham Summers

 

PS. We also offer a FREE Special Report detailing the threat of inflation as well as two investments that will explode higher as it seeps throughout the financial system. You can pick up a copy of this report at:

 

http://gainspainscapital.com/gpc-inflation/

 

 

 

 

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Wed, 11/21/2012 - 00:03 | 3001089 Likstane
Likstane's picture

Graham thinks he has info thats fresh

but its staler than Bartiromos cocktail dress

that she wore to the mike tyson fight

when even then it was too tight

back when jim willie told us this mess

Mon, 11/19/2012 - 16:41 | 2996803 Angry White Dude
Angry White Dude's picture

"Remember, history has shown us time and again that defaults come in waves. So when Spain defaults, it will be only a matter of time before the rest of the PIIGS, the UK, Japan, and then the US do as well."

So tired of people saying the UK, Japan, US, other issuers of debt in currency they control are going to default. They will just monetize. The question is how badly each of those countries will fare, both domestically and internationally, once they've gone Zimbabwe on their currencies. 

Mon, 11/19/2012 - 15:47 | 2996652 Bansters-in-my-...
Bansters-in-my- feces's picture

Hey everyone,heres a whats up with silver...

I see that the silver lease rate chart at Kitco silver site all of a sudden has not been displaying the silver lease rate on the chart,just the data(which is propably faslseified).

I have e:mailed numerous time to notify them of this and the chart still shows NOTHING ....Been that way for at least a few days.

I e;mailed Jon Nurdler but he wern't home.

.....Did they stop leasing...?

Check the chart,I think something is up in the silver lease rates.

Watch your Ass....

Mon, 11/19/2012 - 15:03 | 2996443 Fuh Querada
Fuh Querada's picture

This stuff is older than Betty Liu's makeup.

Mon, 11/19/2012 - 14:54 | 2996418 Madcow
Madcow's picture

gold and gold receivables 

cake and ate it

pregnant and still a virgin

living and deceased

Mon, 11/19/2012 - 14:37 | 2996383 JamesBond
JamesBond's picture

From the Urban Dictionary:  PUMP MONKEY

A member of the press who intentionally exaggerates the current state of affairs to satisfy a personal political bias. A relentless self-serving cheerleader for financial markets generally motivated by an ulterior motive...

"Experts" who promote their own "book," or investment strategy with an aim toward personal gain.

Mon, 11/19/2012 - 14:14 | 2996319 Vince Clortho
Vince Clortho's picture

Will they also accept gold plated tungsten?

Mon, 11/19/2012 - 14:08 | 2996304 TrumpXVI
TrumpXVI's picture

Gee, gold is the only worthwhile, reliable collateral?  Really?

Thanks for the heads up.  Whodahthunkit?

Mon, 11/19/2012 - 14:09 | 2996296 SheepDog-One
SheepDog-One's picture

'U.S. likely to default within next 30 years'....well hell most of us probably wont even be alive by then. Best plan I guess is borrow as much as you can, use it to buy booze, say 'fuck it' and get drunk till your liver fails like the Russians.

Mon, 11/19/2012 - 13:59 | 2996285 Chief KnocAHoma
Chief KnocAHoma's picture

DOOM DOOM DOOM... FEAR FEAR FEAR... Run mother fuckers before this thing blows!!!!

Here is my investment strategy and it is has put me millions in debt... first - don't knock up the wrong little piece of ass... she may look good and move it just right, but there is always a pay day.

Second - invest heavily with the most bizarre sounding product you can find... a derivative based on whale semen count... give me some of that. Gold... no fucking way... too heavy to carry around.

Third - Borrow borrow borrow... you can never have too much debt.

Now quit whinning and get out there and give me a solid effort bitches.

Mon, 11/19/2012 - 16:00 | 2996683 centerline
centerline's picture

Is an affinity for fast cars, boats and a coke habit allowed?

Mon, 11/19/2012 - 16:32 | 2996784 MillionDollarBoner_
MillionDollarBoner_'s picture

Who are you?

Crockett or Tubbs?

Mon, 11/19/2012 - 13:57 | 2996281 strannick
strannick's picture

Phoenix Capital said there would never be QE3. Now here they still are giving advice, flogging their financial service.

Mon, 11/19/2012 - 13:43 | 2996238 sitenine
sitenine's picture

Yes, it's about time reality starts to set in.  Everyone is waking up to what an asset is and what is not an asset.  Real assets are preferred as collateral for obvious reasons, and there will be more and more nashing of teeth as fiat procures fewer and fewer real assets.  We used to call it inflation, but I understand we're not using that word anymore for whatever reason.  Summed up, would you prefer gold or a promise of gold, and what faith do you have left in promises?  It's that simple.

Mon, 11/19/2012 - 13:27 | 2996197 SAT 800
SAT 800's picture

Bullionvault.com; which will come up on Google; is well worth your study. it's a unique business. licensed in England all they do is warehouse the customers metals, (gold or silver); it's all 100% allocated; serial numbered bars. period. that's a period. You can understand the whole thing in a half hour of reading on their web site; they offer storage of Gold in Zurich, and Silver in London. It's all real; they.re honest people who make a tiny, tiny, commish. off of your storage and trading; it's like three or four times cheaper than any comparable way to actually own the metal; and that;s exactly the case; you own the metal; in ounces, or kilograms; there are no shares of anything. look it up; it's well worth your time.

Mon, 11/19/2012 - 15:23 | 2996508 holdingontomypants
holdingontomypants's picture

somewhere I heard "possession is 9-10ths law" he who holds it owns it. Zurich is more then happy to hold your gold and England feels the same way about your silver. Matter of fact, I would be more then happy to hold anybody's gold or silver or any other precious metal and anytime you want to know if its still there or not just ask me and I will e-mail you a digital picture of it so you can rest assured I am still holding it..wink..wink

I will accept any gold or silver 1 ounce or higher for safe keeping and since my desert hole in the ground in Arizona has no address you can know it will be really safe. Just send me a fed ex or ground UPS of your precious metals and I promise to "keep" hold it for you. When you want it just come and get it.

 

Mon, 11/19/2012 - 16:08 | 2996708 boogerbently
boogerbently's picture

What happens when the world discovers the USA SOLD all the gold we were "holding" for them?

Mon, 11/19/2012 - 13:22 | 2996181 No Euros please...
No Euros please we're British's picture

"the rest of the PIIGS, the UK, Japan, and then the US do as well."

You must have your head up your ass if you think France will come out of this intact.

 

Mon, 11/19/2012 - 13:11 | 2996147 OutLookingIn
OutLookingIn's picture

If you fly with crows?

You die with crows!

Mon, 11/19/2012 - 13:08 | 2996137 Racer
Racer's picture

15% charge to hold your gold? You must be F*&^ing mad and have no brain cells left if give them any physical ... they will lose your gold and still charge you 15%

Mon, 11/19/2012 - 14:08 | 2996305 SheepDog-One
SheepDog-One's picture

I have no problem holding my own gold, I dont even understand why someone would pay someone else a 15% vig to hold it for them? If they cant even hold their own gold then whats the point of even buying it in the first place?

Mon, 11/19/2012 - 16:35 | 2996790 MillionDollarBoner_
MillionDollarBoner_'s picture

My shotguns cost me way less than 15% of the value of my gold ;o)

Mon, 11/19/2012 - 16:05 | 2996700 boogerbently
boogerbently's picture

Gold being bought "hand over fist".

It only becomes valuable after the price is allowed to rise, again.

When does THAT part happen?

Mon, 11/19/2012 - 13:11 | 2996150 PrintingPress
PrintingPress's picture

I'm sure though if you pick up a few of these 100% FREE special reports they will tell you how to overcome the 15% fees and still have your gold when time comes to take delivery.   Win/Win all around!

Do NOT follow this link or you will be banned from the site!