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If Everything is Great… Why Are Sovereigns and Clearinghouses Preparing For Systemic Risk?
Everything that has happened since 2007, every Central Bank move, ever major political decision regarding the big banks, every trend, have all been focused solely on one issue.
That issue is collateral.
What is collateral?
Collateral is an underlying asset that is pledged when a party enters into a financial arrangement. It is essentially a promise that should things go awry, you have some “thing” that is of value, which the other party can get access to in order to compensate them for their losses.
You no doubt are familiar with this concept on a personal level: any time you take out a bank loan the bank wants something pledged as collateral should you fail to pay the money back. In the case of property, the property itself is usually the collateral posted on the mortgage. So if you fail to pay your mortage, the bank can seize the home and sell it to recoup the losses on the mortgage loan (at least in theory).
In this sense, collateral is a kind of “insurance” for any financial transaction; it is a way that the parties involved mitigate the risk of their deal not working out.
As many of you know, our entire global financial system is based on leverage or borrowed money. Collateral is what allows this to work. Without collateral, there is no trust between financial institutions. Without trust there is no borrowed money. And without borrowed money, money does not enter the financial system.
In this sense, collateral is the “reality” underlying the “imaginary” or “borrowed” component of leverage: the asset is real and can be used to back-stop a proposed deal/ trade that has yet to come to fruition.
For finacial firms, at the top of the corporate food chain, sovereign bonds are the senior-most form of collateral.
Modern financial theory dictates that sovereign bonds are the most “risk free” assets in the financial system (equity, municipal bond, corporate bonds, and the like are all below sovereign bonds in terms of risk profile). The reason for this is because it is far more likely for a company to go belly up than a country.
Because of this, the entire Western financial system has sovereign bonds (US Treasuries, German Bunds, Japanese sovereign bonds, etc.) as the senior most asset pledged as collateral for hundreds of trillions of Dollars worth of trades.
Indeed, the global derivatives market is roughly $700 trillion in size. That’s over TEN TIMES the world’s GDP. And sovereign bonds… including even bonds from bankrupt countries … are one of, if not the primary collateral underlying all of these trades.
Anyone with a working brain knows this is a massive systemic risk… which is Central Banks, clearinghouses and the like have begun to view Gold as a safe investment.
Consider that the large clearing houses (ICE, CEM and LCH which oversee the trading of the $700+ trillion derivatives market) ALL began accepting Gold as collateral back in 2012.
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.”
The clearinghouses aren’t the only ones. Germany’s Central Bank has begun Gold repatriation. Austria, Belgium, France, Switzerland and the Netherlands all are implementing Gold repatriation schemes. Russia and China are buying Gold bullion.
Another round of the Crisis is coming and the Powers That Be know it. This is why they’re preparing by buying up Gold bullion.
Smart individual investors are taking note and preparing as well.
If you've yet to take action to prepare for this, we offer a FREE investment report called the Financial Crisis "Round Two" Survival Guide that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.
We are making 1,000 copies available for FREE the general public.
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Phoenix Capital Research
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The "collateral" are IOU's in the form of a debt so large it can never be repaid.
What could possibly go wrong ?
Four Defense Department workers have been put in treatment following the revelation the U.S. military inadvertently shipped live anthrax samples in the last several days.
http://www.cnn.com/?hpt=sitenav
Banks are now loaning money to mining companies in exchange for gold. I'm not sure if it's a new thing, but I hadn't heard of it til recently. This is from a recent announcement by Australian gold miner Silver Lake:
"In the March quarter the Company repaid $1.7 million of its gold prepay arrangement with the Commonwealth Bank of Australia (CBA) and a balance of $8.3 million remains outstanding. The balance will be repaid through the delivery of gold (392 oz per month) to CBA between April 2015 and July 2016."
I found at least 2 other companies that have struck similar deals with CBA recently
In het script 'de Parodie op de Waarheid' speelt Blatter de 'sPion van de 1'.
http://nos.nl/artikel/2038085-koning-benadrukt-verbondenheid-nederland-e...
In de tijd dat ons Koningshuis nog de lakens uitdeelde in netwerk WitteGejT werd de 'sPion van de 1' gespeeld door de moNARch. Nu is dit de taak van iedere regeringslejder om zodoende de VN legitieme macht te geven. Maar de echte macht lag bij Blatter, want hij kreeg zelfs Rusland en Qatar op de knieën.
RuitenKoning: "Toen liet Canada zien niet te buigen voor het GEWELD=MACHT-principe en vast te houden aan de idealen (waarom werd er niet gesproken over het WAARHEID=MACHT-paradigma) waarvoor het altijd heeft gestreden."
http://www.volkskrant.nl/buitenland/vs-vragen-om-flexibiliteit-met-griek...
Dus kan de Amerikaanse minister van Financiën Jack Lew voorafgaand aan de G7-top in het Duitse Dresden vertellen dat een Grieks faillissement en het verlaten van de eurozone van Griekenland 'onberekenbare gevolgen' heeft?!?!?
http://www.zerohedge.com/news/2015-05-09/central-banking-and-greatest-co...
RuitenKoning: "Natuurlijk heeft iedere MuntUnie zijn eigen rituelen met betrekking tot het 'belasten' van het kwaad. Sterker nog; ieder land heeft zijn eigen wetten en een andere optiek van 'wat is gezond'. Jack Lew heeft van de 'sPion van de 1' gehoord dat netwerk Juncker bezig is om de 'Logica van de 1' het fundament te maken voor de 'investeringsarbitrage' die (rechts)personen de mogelijkheid geeft om staten aan te klagen, omdat zij nog steeds niet het systeem 'Leven en Laten Leven' willen promoten. De Franse minister van Financiën Michel Sapin mocht voorafgaand aan de top al spinnen 'dat de onderhandelingen tussen Griekenland en zijn geldschieters zich nog niet in een stadium bevinden dat doelstellingen op papier kunnen worden gezet'. Dat is logisch want de VN heeft zich nog steeds niet uitgesproken of het uitrollen van de 'wiskundige definitie van de absolute waarheid' voor alle mensen in de wereld al noodzakelijk is.
D'n Arend: "Ja wat Pie?! betreft ik weet het niet. Ik heb nu net voor het eerst een E-mail gekregen. ik heb vanaf het begin diverse sms n gestuurd. zelfs eentje naar Bertie. nooit geen reactie op gehad. terwijl ik bij anderen het wel kreeg. dus daar ligt het niet aan. Ik weet dat BertI eerst moet overleggen met RuitenAas voordat ze actie mag ondernemen, maar toch ...!?!??"
http://www.mintpressnews.com/dragon-araby-china-challenges-western-hegem...
De Aziatische voetbalconfederatie AFC herhaalt het besluit dat vorig jaar is genomen om Sepp Blatter te steunen. Dit in tegenstelling tot de Europese voetbalbond UEFA. Zij willen dat de voorzittersverkiezing van de FIFA komende vrijdag niet doorgaat, want behalve de zittende preses Sepp Blatter zien ze ook Ali bin Al-Hussein eigenlijk niet zitten. In de optiek van netwerk @SuperWil een mooi moment om ook 'de FIFA' te integreren met het DAB-systeem.
http://www.volkskrant.nl/buitenland/uefa-dreigt-fifa-congres-te-boycotte...
Ondertussen laat DNB-president Knot in de media weten, dat het SCHULD=H00P-principe nog steeds niet wordt ingeruild voor het GELD=ZUURSTOF-paradigma. De reden dat het IMF nog steeds beweert dat 'er geen oplossing voor Griekenland' is.
http://www.nrc.nl/nieuws/2015/05/28/dnb-president-knot-herhaalt-leengren...
Secretaris-generaal Ban Ki-moon van de VN heeft al aan afgevaardigden uit verschillende landen, waaronder Saoedi-Arabië, laten weten dat de gesprekken over de invoering van het systeem 'Leven en Laten Leven' zijn uitgesteld, totdat ...?!?!?
De reActie van de Nederlandse Vereniging van Banken is het bewijs dat banken nog steeds niet weten wat hun rol in het systeem 'Leven en Laten Leven' gaat worden.
http://nos.nl/artikel/2038111-banken-tegen-verlagen-leengrens-hypotheken...
Hoofdredacteur Sjirk Kuijper van het Nederlands Dagblad weigert advertenties van FIFA-sponsoren ...
http://www.volkskrant.nl/sport/sponsors-fifa-moeten-macht-uitoefenen~a40...
... en Google gaat een koopknop in advertenties bij zoekresultaten plaatsen.
http://www.volkskrant.nl/economie/google-koopknop-komt-naar-advertenties...
Het wordt zo steeds duidelijker dat iedereen zijn 'voorkennis van de 3e SpinozaGolf' op een andere manier zijn leven laat beïnvloeden.
Some people prepare for what they hope will take place in the future.
Smart people prepare for all contingencies, not just their preferred outcome.
You mean to tell me that confirmation bias is not the same as truth?
Here's the BEST tip ever: If Phoenix Capital is publishing shit essays like this, the stock market will go higher no matter how irrationally bubble-licious it already may be.
Whenever you see a Phoenix Capital article, buy stocks with both fists.
Go short like crazy when Phoenix Capital articles/essays/puff pieces are no longer published on ZH.
The trick is, if they are no longer published, when can you tell that happened?
If you bet that Old Faithful will continue to spew hot water at regular, predictable intervals, when can you tell that it stopped doing that? Do you wait 15 minutes? 30?
When the goldbugs stop getting published, how long will you wait?
The prudent method is 30 minutes before SHTF.
All good hedgies are precogs for some magical reason.
Clarke's Three Laws are three "laws" of prediction formulated by the British science fiction writer Arthur C. Clarke. They are:
Although the majority of us are pretty good postcogs, no magic involved.
ahhhh ...so when do you know you are in the impossible?
Magic = "Magic or sorcery is the use of rituals, symbols, actions, gestures and language that are believed to exploit supernatural forces.[1][2][3][4] Modern Western magicians generally state magic's primary purpose to be personal spiritual growth." -wikipedia
...what was Clarke's definition of magic?
"When he states that something is impossible, he is very probably wrong."
...we see a lot of this on ZH
Clarke should have stayed with SF and not padeophilia.
"Child right activists in Sri Lanka have expressed shock over science fiction writer Arthur C Clarke's confession in a newspaper interview of a life of paedophilia and called for his deportation just around the time Prince Charles was to knight him.
Clarke, 80, widely regarded as a visionary and author of the celebrated 2001: A Space Odyssey and some 80 other books, was quoted as saying in the interview published in London's Sunday Mirror that having sex with children was all right."
http://www.rediff.com/news/1998/feb/02clarke.htm
Well, that just ruined my day.
The only thing that affords protection from a systemic collapse is liquidity.
If that fails then you have gold and/or silver.
I simply cannot see a liquidity issue arising in the US anytime soon.
Oil, natural gas, F-150's, Chevy Volts...we're swimming in liquidity right now.
State and local Governments still look in dire need of a capital raising...but that is not the fault of Wall Street or "capitalism.". Talk about cheap capital. 600 billion for defense and we're still going into a recession?
Bwhahahahahaha
Sounds like a problem with various " oversight mechanisms" and I ain't talking FIFA.
"Pension Deficit Disorder" seems to be the order of the day.
If oil hits 20 bucks a barrel I imagine you'll get your shake out then.
Bitcoin is debt free collateral, just like gold, you either have or don't have bitcoin, you can control it and do proof of reserves. You can build your own bank or ATM without asking permision to anyone and many do. You can store it on your phone and cannot be seized. You can trade it on OTCQX or Nordic Nasdaq and anyone can create a stock backed fund with bitcoin in any country.
You can program it to do a transfer in the future if 2 of 3 parties approve it. There are hedge services to keep you $ value stable in bitcoin... It will revolutionize international commerce!
Check out the latest news of Visa founder Dee Hock, John Reed and Lawrence H. Summers , joining Xapo insured bitcoin wallet advisory board!
https://www.reddit.com/r/Bitcoin/comments/37bo4h/visa_founder_former_cit...
Troll. Larry Summers should be in jail. Now fuck off.
Wow. Bitcoin sounds amazing. Maybe you can help that fund manager who has over $100m of Bitcoin but can't access it because he forgot the password. Now with my gold if I lose the safe combo I just bust it open. Bitcoin wouldn't be so stupid as to lose people's assets like that would they?
I forgot where I buried part of my stash once. Bummer, dude.
Think like a big boy and go get a metal detector and find your lost stash. Otherwise, I'll be happy to help for 50%.
bitcoin Private Keys should have multiple encrypted backups stored in multiple geographical locations. With sensible precautions no bitcoin private keys should ever be lost or stolen , it's still early days for bitcoin , the security kinks are still being worked out of the system , those that understand this system the earliest are the ones who will profit from it the most once the protocol is fully deployed.
Hey my electr.............
No it didn't , and if the power company does cut you off for non payment you can always charge your phone from a 10 dollar solar panel.
An EMP or solar flare and your power will go out for a long time and you will not be able to do anything even if you can somehow charge your phone battery. There is no such threat to metal besides melting and if it gets that hot it just won't matter anyway.
Bitcoin wouldn't be stupid to lose something as it is just a protocol. A person however might be stupid and forget a password. Just like a person might forget a safe combo but the safe will never forget.
Old story from 2012 rehashed. Move along.
So honest accounants say this "shit" is great collateral! Triple A rated, don't worry! Sound familiar? Only on Wall Street.