Interview: Bailins May Cause Bank Runs and Capital Controls In Western World - Russia, China Opt Out

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Today’s AM fix was USD 1,300.25, EUR 948.33 and GBP 775.20 per ounce.                

Yesterday’s AM fix was USD 1,292.75, EUR 939.91 and GBP 766.67 per ounce.


Gold climbed $15.53 to $1308.83 at about 8:25AM EST before it edged back lower in late morning New York trade, but it still ended with a gain of 1%. Silver surged to as high as $19.987 before being capped at that level but ended with a gain of 1.23%. Euro gold rose to about €952, platinum jumped $30 to $1478.

The historic 120-year old daily silver fixing process will cease as of 14th August this year, the London Silver Market Fixing Limited company announced today. The company that administers the daily silver fix currently consists of three member banks, Deutsche Bank, HSBC and Scotia Bank.



Silver in US Dollars - Weekly, 10 Years (Thomson Reuters)

An informational letter released this morning by the company and signed by Simon Weeks of Scotia Bank, current chairman of the silver fixing, attempts to address a number of concerns that users of the silver fixing data may now have.

In answer to the question of what happens after 14th August for those market participants who have contracts and terms and conditions referencing the Silver Fix, the Chairman states that "The Company is not in a position to comment on such matters, but market participants can speak to their contractual counterparties."


The reason for the ending of the fix is due to increased regulatory scrutiny of the gold and silver market due to allegations of price rigging and manipulation. Many analysts believe that market manipulation has contributed to sharp sell offs and price weakness in recent months.

Platinum and palladium added to sharp gains made overnight on worries that increasing labour tensions in major producer South Africa and tensions with Russia could hurt supply. Gold edged up and broke above $1,300/oz on escalating violence in Ukraine and heightened geopolitical tensions.


Mark O’Byrne with Max Keiser on Russia Today

Ukrainian troops were attacked and seven were killed by pro-Russian separatists yesterday, in the heaviest loss of life for government forces in a single clash since Kiev sent soldiers to put down the revolution in the country's east.


East-West relations are being poisoned by the day and this should support gold prices.

Russia retaliated against U.S. sanctions by hitting strategic aerospace projects, including refusing to extend the life of the International Space Station, a showcase of post-Cold War cooperation.

After four deaths over the weekend, South Africa upped security in the platinum belt to protect miners who have decided to ditch a 16-week strike that has halted 40% of normal global output.

Hundreds of stick-wielding miners barricaded roads and torched roadside vegetable stalls near Lonmin's South African platinum mine on Tuesday, in an attempt to block fellow strikers from breaking rank and going back to work.

Platinum surged 2%  to $1,480.00 an ounce after jumping about 1% in the previous session to its highest in a month. Palladium also rose another 1.5% to $827.50/oz after rising 1.1% overnight to a one-week high.

Platinum stockpiles having been reduced and this should lead to higher platinum prices. South Africa is the top producer of platinum and second biggest producer of palladium after Russia.

Max Keiser Interviews Mark O’Byrne, GoldCore Director of Research on Bail-Ins

Keiser: Mark, you have a new report on bail-ins - From Bail-Outs to Bail-Ins: Risks and Ramifications  ...  Ok so the era of bondholder bailouts is ending and that of depositor bail-ins is coming. Tell us about your report.


O’Byrne: The risk of bail-ins has been coming in a very stealthy manner and under-the-radar way. Most people aren't actually aware of it. It is very much on the radar now and is coming from the very top and the Bank of International Settlements, through the various central banks, and the legislation is there.

Only last week, the European Union and Dutch Finance Minister, Dijsselbloem, the Chairman of the Eurogroup Finance Ministers, confirmed that in the EU, they are ready to go in 2015 … The concern is, the legislation is there but if something happens and you have a ‘Black Swan’ event, you have a Lehman Brothers type of event, the legislation could be expedited and you could see them happen sooner rather than later.

That’s just the EU, it is also coming in the UK through the Bank of England, they have legislation  in conjunction with the FDIC and so the bail-ins are coming in the UK, in the U.S. and indeed throughout most of the western world. Most G20 nations have signed up for bail-ins - not all of them but most of them.

So it is a real risk and it has happened in Cyprus. And in Cyprus when it happened, the authorities said it was a once-off, because of all of the hot Russian money that is in Cyprus, and this will not happen anywhere else...but meanwhile they are planning for that scenario in most of our countries and people need to be aware of that and they need to prepare.

Although they said that Cyprus was a one-off, most G20 countries are all legislating and preparing for a similar scenario in their home countries.

Keiser: Yes. Just this past weekend, David Cameron, UK Prime Minister, here in the UK was making some interesting comments, can you talk about that a little bit?

O’Byrne: Yes. It was just yesterday, actually. Cameron was talking on Sky News and in the recent UK Budget, again it was quietly put in there, almost  in the p.p.s, down the bottom in the small print, they basically brought in new powers whereby HM Revenue can actually go in and raid people’s bank accounts, on the basis that they may not have paid taxes but the authorities do not have to prove it. So it is simply the word of the Revenue versus the individual and they don’t have to have any proof whatsoever.


There are various people in the UK Parliament, opposition MPs, have begun asking questions about this and indeed people in the financial services industry in the UK, including the Chartered Accountants body, they are asking questions about this and saying ‘hang on a second’, this goes against basic principles of law.

It creates a new power that is quite a dangerous power for a government to have. We have seen throughout history that when governments have such powers they tend to use them.

It was interesting that Cameron justified it in the context of...he said that if we do not do this then we will have to increase taxes.  He is basically trying to scare people by saying let us have these powers...these extraordinary, extraordinary powers and if you do not give us these powers, we will increase your taxes so it was almost an implied threat and again it is another threat to people’s deposits and savings and it shows how risky and vulnerable the banking system is .


People need to be aware of that and not have all of their savings in these banks.

Protecting Your Savings In the Coming Bail-in Era is the guide we compiled to protect people from bail-ins.

Keiser:  Right, well, of course governments have a history of political prosecution using these techniques. We have seen this in the U.S. and around the world. When the government doesn't like what people are saying, whether it is Julian Assange or others. And now they have the sanctions and blockage against Russia and Iran, they use the financial and the banking system for political ends.


Clearly, the UK now has the ability to do that. And the idea that a government can just come in and steal money and confiscate money is a recurring theme. We have seen it, as you point out, in Cyprus and elsewhere.  So your point is that laws around the world and for the G20 nations have now been changed over the last year or two so that bankrupt or kleptocrat governments can start stealing money out of people’s accounts directly.


It was seen in the USA with Jamie Dimon and JP Morgan and Jon Corzine in the MF Global case when the bankers took clients’ money. Many bankers are committing suicide because they are ashamed of their industry. So this is giving the bankers more power. Governments are still giving the bankers more power to be more psychotic in their behaviour. I would anticipate that the banker suicide rate would skyrocket so there is a silver lining to this.


Keiser: … Who actually had their deposits taken in Cyprus and what is a bail-in, Mark?

O’Byrne: Basically, in Cyprus it was people with deposits over €100,000 who were bailed in. People think, well, bail-ins only affect rich people and it was actually justified on that basis and the authorities said that this is just...initially, they said this would only hit the ‘hot’ Russian money and then there was the realisation that Russian money was only a tiny minority of the deposits that were confiscated.


People don't understand and think it was just the rich who were affected. It is not. Your average-sized, small or medium-sized enterprise business (SMEs) could easily have €100,000 to €300,000 on deposit and that is what they use to pay the salaries of their employees.

This is the key thing that people are not understanding and the ramifications of this...It is justified as almost a socialist measure whereby we are redistributing wealth from the very wealthy 1% (or the 0.1%) to the middle classes who are suffering from austerity. Nothing could be further from the truth. They are actually penalising and going after the savings of the middle classes and again protecting the interests of the 1% (or the 0.1%) and they are basically protecting the interests of large banks at the expense of small banks and smaller institutions and of the SMEs.

The other ramifications of bail-ins are that there are capital controls. So even in Cyprus today they still have not relaxed capital controls. So with bail-ins come capital controls and again it speaks to the need to have your savings outside of the banking system, to own gold and silver, physical coins and bars  and own them in the safest way possible either in your possession or in vaults, outside the banking system, in allocated gold accounts, in safer jurisdictions around the world.

Keiser: Let’s give some historical context here. The banking system collapsed because of massive fraud. Recall 2004 the U.S. Fed gave their blessing to QE and near zero percent interest rates and a way to ‘stimulate’ the economy as a way to get things going again. Six years later and we're in a huge asset bubble but the underlying economic numbers are still atrocious, but they cannot lower rates anymore, so they have two options. Option A -  negative interest rates where they store people’s money at bank or option B, they just steal it out of their accounts through the bail-in process that you are describing.


So is this a way to soften people up to the idea of accepting negative interest rates? In other words, the governments will say, “Either you let us charge you negative interest rates, that is to say, you have got to pay us to keep your money in the bank at 2 or 3% per year, or we are just going to take it outright and we have the legal basis to do that and if you do not let us do that - you are a terrorist.”

Isn’t that what they are setting everyone up for Mark?


O’Byrne: Well, it is an interesting angle. It is a way that they could justify that. In effect, we have negative real interest rates right now - when you take into account the real rate of inflation. The official measures of inflation appear very compromised to many of us who have looked at them.  

If you look at the actual deposit rate that you're getting from the bank, it is below the real rate of inflation. And then on top of it you have taxes levied on that as well.

It is just absolutely incredible and it is bizarre as they claim that they are putting these measures in place as they are trying to protect the banks and avoid what they call the “doom loop” which is a connection between the sovereign and the banks but by doing what they are doing, they are actually making the banks more vulnerable. They are more likely to cause bank runs.

It would make a cynical person wonder what is the real agenda here? Is it to strengthen the Wall Street banks instead of the small banks?

And the negative interest rate scenario is just incredible, people will soon take their money out of their deposit accounts, like the runs on banks we’ve seen in recent years.

Keiser: Mark, what we're saying is that if somebody calls their bank and says, "I need to move my money out because now you're charging me a negative interest rate", they're gonna say, "to hell with you, we're gonna penalise...you're a terrorist for supporting Bitcoin". They've already used the language to equate Bitcoin with terrorism. "So we're just gonna take money out of your account." So, first of all, any money in a bank, any of the big four banks in the UK or in the U.S. or in Europe -- only keep money in those banks that you are willing to lose. Lesson number two, if you want to maintain your wealth going forward -- by wealth I mean economic sovereignty against the pernicious plutocratic kleptocrat nightmare --- it's got to be held outside a bank, in a vault, in gold, in silver or in Bitcoin or another like-minded cryptocurrency.

Mark, we've got about a minute left. Different countries are of course approaching this bail-in scenario differently. Can you give us a little idea of which country is and how far along they are and which is the worst and which is becoming the worst. We have about a minute left. Go ahead.

O’Byrne: I wouldn't say the worst, I mean, in terms of the scenario, it is the same everywhere. In terms of being more advanced with legislation and that, the European Union seems to be more advanced. But it is in, as I said, the Bank of England and the FDIC legislation. And they are, I suppose...the driving force is, as I said, from the Bank of International Settlements. So that's coming down into the Bank of England and the ECB, and indeed the Federal Reserve. But it is very much...because it is the Bank of International Settlements, it's obviously more the western central banks. The Chinese, the Russians have been slow to, ... they are non-committal and there is no...


Keiser: Let me jump in there for a second. You just mentioned the Chinese, the Russians, the Iranians...oh, wait a minute, that's the Shanghai Cooperation Organization, oh, wait a minute, that's where the NATO, the USA, the EU are going to war with them in Ukraine! Gee, I wonder if there's any connection? That those are the only independent central banks in the world and the US is bombing them and, you know, Victoria Nuland is claiming that they're, you know, "terrorists". Gee, I wonder if there's a connection, Mark? I wonder. Anyway, that's all the time we have. Mark, thanks again for being on the Keiser Report.


The video of the interview can be watched here