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Good Luck Getting Your Money Out

Phoenix Capital Research's picture




 

Going forward it will be more and more difficult to get your money out of the financial system.

 

The reason for this concerns the actual structure of the financial system. As I’ve outlined previously, that structure is as follows:

 

1)   The total currency (actual cash in the form of bills and coins) in the US financial system is a little over $1.36 trillion.

 

2)   When you include digital money sitting in short-term accounts and long-term accounts then you’re talking about roughly $10 trillion in “money” in the financial system.

3)   In contrast, the money in the US stock market (equity shares in publicly traded companies) is over $20 trillion in size.

 

4)   The US bond market  (money that has been lent to corporations, municipal Governments, State Governments, and the Federal Government) is almost twice this at $38 trillion.

 

5)   Total Credit Market Instruments (mortgages, collateralized debt obligations, junk bonds, commercial paper and other digitally-based “money” that is based on debt) is even larger $58.7 trillion.

 

6)   Unregulated over the counter derivatives traded between the big banks and corporations is north of $220 trillion.

 

When looking over these data points, the first thing that jumps out at the viewer is that the vast bulk of “money” in the system is in the form of digital loans or credit (non-physical debt).

 

Put another way, actual physical money or cash (as in bills or coins you can hold in your hand) comprises less than 1% of the “money” in the financial system. Suffice to say, one of the biggest concerns for the Federal Reserve is what would happen if a significant percentage of investors decided to move into physical cash.

 

Indeed, this is precisely what happened in 2008 when depositors attempted to pull $500 billion out of money market funds.

 

A money market fund takes investors’ cash and plunks it into short-term highly liquid debt and credit securities. These funds are meant to offer investors a return on their cash, while being extremely liquid (meaning investors can pull their money at any time).

 

This works great in theory… but when $500 billion in money was being pulled (roughly 24% of the entire market) in the span of four weeks, the truth of the financial system was quickly laid bare: that digital money is not in fact safe.

 

To use a metaphor, when the money market fund and commercial paper markets collapsed, the oil that kept the financial system working dried up. Almost immediately, the gears of the system began to grind to a halt.

 

When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode.

 

As a result of this, the Fed and the regulators are looking to implement moves that would make it much harder to move money into physical cash.

 

If you find difficulty in taking my word for this, consider the recent regulations implemented by SEC to stop withdrawals from happening should another crisis occur.

 

The regulation is called Rules Provide Structural and Operational Reform to Address Run Risks in Money Market Funds. It sounds relatively innocuous until you get to the below quote:

 

Redemption Gates – Under the rules, if a money market fund’s level of weekly liquid assets falls below 30 percent, a money market fund’s board could in its discretion temporarily suspend redemptions (gate).  To impose a gate, the board of directors would find that imposing a gate is in the money market fund’s best interests.  A money market fund that imposes a gate would be required to lift that gate within 10 business days, although the board of directors could determine to lift the gate earlier.  Money market funds would not be able to impose a gate for more than 10 business days in any 90-day period…

 

Also see…

 

Government Money Market Funds – Government money market funds would not be subject to the new fees and gates provisions.  However, under the proposed rules, these funds could voluntarily opt into them, if previously disclosed to investors.

 

http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542347

 

In simple terms, if the system is ever under duress again, money market funds can lock in capital (meaning you can’t get your money out) for up to 10 days. If the financial system was healthy and stable, there is no reason the regulators would be implementing this kind of reform.

 

This is just the start of a much larger strategy by the Fed to declare War on Cash.

 

Indeed, we've uncovered a secret document outlining how the Fed plans to incinerate savings to force investors away from cash and into riskier assets.

 

We detail this paper and outline three investment strategies you can implement right now to protect your capital from the Fed's sinister plan in our Special Report Survive the Fed's War on Cash.

 

We are making 1,000 copies available for FREE the general public.

 

To pick up yours, swing by….

http://www.phoenixcapitalmarketing.com/cash.html

 

Best Regards

Phoenix Capital Research

 

 

 

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Sun, 05/31/2015 - 12:01 | 6149276 Sandmann
Sandmann's picture

It is essential to keep the poorly educated from raiding banks. Willie Suttons go for cash whereas Dick Fulds go for Repo 105 accounts and Nick Leeson typres prefer Error Offset Accounts

Sun, 05/31/2015 - 11:38 | 6149216 Khannea
Khannea's picture

I see an interesting way out - use "rat catcher" proxies to trade or speculate. Hire some nobody on welfare and do transactions in that persons name, for a fee. This would spread out exposure to these oddball financial regulations.

Sun, 05/31/2015 - 11:33 | 6149202 Bemused Observer
Bemused Observer's picture

I can't believe anyone keeps money they're going to need in these banks and so-called investment vehicles. But I don't think people really understand how fragile the whole edifice IS. I don't think they COULD ever really grasp it...this system is all they've KNOWN. It has always been there. (For the individual, "always" is the total of the time THEY'VE been here, which is not necessarily a very long time...)
Even if they DID, I still think most would keep their money there...the money is no more 'real' to them than the notion of systemic collapse. They've never held it in their hands. They are TOLD it's there, and get statements that say it is. So they believe it, until they stop believing.
I think there's going to be a kinda strange reaction to the loss of all that ephemeral wealth. Not like the old days, when sharp downturns wiped out people's ACTUAL wealth. These days so many numbers are artificially juiced and markets are all tech-driven and no one really knows what the value of certain assets really IS anymore.
If you aren't sure what something is worth, how can you know if you've taken a loss or made a gain?...Seriously?
And when people come to their senses and realize that for most, nothing really HAS changed, and that as long as they are holding that physical asset, be it a house, a car, gold, etc, it really doesn't matter WHAT the assigned "value" is to someone else unless you sell. If you sell your house, you just have to pay to live somewhere else, so why not just keep the depreciated house, renegotiate your expenses, and stay put?
It's those whose wealth is NOT in the form of tangible assets that are going to be hurt. That phony 'wealth' will disappear, because it was never there. Do these folks throw themselves out of windows at the loss of something they never HAD to begin with?
Or do people, after a short bitch-fest, suddenly snap out of their coma and demand an economy based on the real world?

Think about it...We are supposedly wealthier than ever in history, but is that truly the case? Have we ADDED anything real to our world? Or is the 'wealth' more a result of clever re-valuation and re-routing of EXISTING wealth? Does a house valued at 400 thousand actually change at ALL if it suddenly becomes valued at 200 thousand, or skyrockets to a million? The only thing that changes are the numbers on the paperwork.

The holders of REAL assets should be welcoming sharp price declines...cheering them on. Because they know that for them, nothing at all has changed, but all the speculators will be wiped out, bringing the economy back to Earth, and letting him discover what his asset is REALLY worth. The smart guy would ride out the market swings instead of panic-selling and giving up his REAL asset for more non-existent digital 'money'.

Sun, 05/31/2015 - 09:25 | 6148923 Kickaha
Kickaha's picture

Welcome to the Hotel California banking system.

Sat, 05/30/2015 - 22:06 | 6148122 jarana
jarana's picture

It's useless to make economic estimations in a currency like $ or € for obvious reasons.

Meanwhile this post is being read, unknown quantities of currency units are being created at 0 (recorded) costs in such currency. Need more info?

That should be enough for being substantially outside the stock and bonds market unless you're an insider or a "professional" or a politician (that is, you are in with other people's money).

This is not a case for when to get out. It's a case for when to come back into being already out.

Sun, 05/31/2015 - 11:05 | 6149126 GuusjA
GuusjA's picture

In de 'Parodie op de Waarheid' heeft de Amerikaanse minister van Buitenlandse Zaken John Kerry zijn been gebroken om Obama FtoF de laatste ontwikkelingen in de 3e SpinozaGolf te bespreken. 

 

http://www.volkskrant.nl/buitenland/kerry-breekt-been-en-zegt-afspraken-...

 

Volgens geruchten hebben de Verenigde Staten niet laconiek gereageerd op de klachten van RuitenTeam dat netwerk @MinPres de 'wiskundige definitie van de absolute waarheid' geheim heeft gehouden.

 

http://www.waarheiddelen.nl/index.html

 

Goedemiddag, NRC Q-lezer. Dit zou komende week kunnen gebeuren.

 

http://www.ftm.nl/column/staat-kapitaal/#comment-1090887872

 

Minister van Sociale Zaken Lodewijk Asscher vindt 'onzorgvuldig waarheiddelen' op het werk een probleem. En dus begint morgen zijn landelijke campagne om het AANDACHT=LIEFDE-paradigma uit te rollen. Ook moet er een parlementair onderzoek komen naar de werking van het SCHULD=H00P-principe. Tenminste, dat vinden aandeelhouders van @SuperWil. Ook is het de vraag hoe Oekraïne zijn openstaande gasrekening aan Rusland gaat betalen. Een heel belangrijke factor voor de Europese Centrale Bank om samen met de Organisatie voor Economische Samenwerking en Ontwikkeling (OESO) hun voorkeur te bepalen voor de wereldwijde introductie van de 'Logica van de 1'. Premier Rutte mag de boodschapper spelen en tijdens de ontmoeting met president Hollande op het Elysée zal ...!?!??

Sat, 05/30/2015 - 22:18 | 6148178 The King
The King's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.jobs-review.com

Sun, 05/31/2015 - 09:28 | 6148925 Kickaha
Kickaha's picture

Tylers, could you possibly find a way to make these assholes pay some money up front before they can post anything.  It would be poetic justice.

Sun, 05/31/2015 - 09:52 | 6148968 jimfcarroll
jimfcarroll's picture

I wonder if he's making $7K a month posting on the comment section of various blogs. If so, he could probably get a job with the Social Security Administration.

Sat, 05/30/2015 - 20:46 | 6147923 essence
essence's picture

Phoenix Research being a ubiquitous header at the top of Zerohedge pages makes me wonder it they aren't Tylers nephew or something (something such as payola ...sorry Tylers, I call it as I see it).

Recall, a few years ago they predicted in a big way the Fed would (or wouldn't) tighten  (can't remember and it doesn't matter except that they made the wrong call) thus they went into hiding, doing pendent for awhile until memories faded and they could reemerge and post again (kinda like Eric Jansen at the horrendously formatted itulip.com website.... what ever happened to him? Hope he learned never to do your own website without training, experience & a sense of style and design. Like giving yourself a haircut and then going the the Oscars).

These days I pay little attention to Phoenix posts, but as the saying goes, even a stuck clock is right twice a day.
Except today, they actually made a relevant post.

If push comes to shove, do you really expect to expediently exit the system without extensive financial damage. Unless of course, you're an insider. Aside from that,  it seems unlikely.

 

 

 

Sat, 05/30/2015 - 20:52 | 6147972 jimfcarroll
jimfcarroll's picture

No. You're right. I don't expect to be able to get out of the stock market quick when it falls apart. But because when that happens it will be due to a liquidity crunch and the assets (stocks) will become a hot potato, not because of a lack of actual cash on hand.

I'm just wondering how useful a research group is that doesn't understand the stock market as a secondary market.

Funny you mention Eric Jansen. I used to read him. Until he was wrong a few times and after that he was just guessing. His rationalizations didn't make any sense.

Hey, I wonder if he ended up at Phoenix Research. :-)

Sun, 05/31/2015 - 22:29 | 6150724 zeroaccountability
zeroaccountability's picture

Exactamundo. Same thing happened to Turd Ferguson.

Sat, 05/30/2015 - 21:05 | 6147985 essence
essence's picture

Isn't life grand. What keeps me going is the realization of what theater it is, how temporary it is, and in a way, how wondrous & precious it is.

 

 

Sun, 05/31/2015 - 01:56 | 6148604 The Old Man
The Old Man's picture

It will all be digital. Just another derivative to worry about. Everything looks great on paper! You fools.

Sun, 05/31/2015 - 13:00 | 6149400 sleigher
sleigher's picture

One Second After 

 

William R Forstchen

 

Got it from Amazon for $7.  Worth every cent if like to read that type of stuff.

Sat, 05/30/2015 - 18:15 | 6147658 two hoots
two hoots's picture

If you use a major fund as your broker your money must move throught the Money Market Fund after selling stock before you have access.  It is a trap.

Sat, 05/30/2015 - 19:09 | 6147760 One World Mafia
One World Mafia's picture

Tell them to sweep it into cash.  You may be able to do this yourself depending on your broker.

Sat, 05/30/2015 - 16:08 | 6147378 jimfcarroll
jimfcarroll's picture

"3) In contrast, the money in the US stock market (equity shares in publicly traded companies) is over $20 trillion in size."

This is simply stupid. The stock market is a secondary market. There isn't money IN it.

When you buy a stock, the money goes to whoever is holding it, not into some *vault* called "the stock market." That money is already PART of #2 and after you sell the stock (or buy it) that's where it STILL is. Some of it's just shifted hands.

Ultimately MUCH of it (money from #2) may shift hands. But that's besides the point of this article.

The reason you wont be able to get out will have nothing to do with the point of this article and everything to do with the illiquidity created by a lack of buyers.

Sat, 05/30/2015 - 21:47 | 6148085 tarabel
tarabel's picture

 

 

I recognize the point you are making but I'm not sure I agree with the conclusion.

Say there is 20 T in the market and 10T in cash total.

Selling half the stock in the market and demanding cash would require every last nickel in circulation yet still leave an additional 10 T yet to be redeemed. Unless the people who just sold out were willing to buy back in, the transaction would have to remain trapped in digital wonderland.

Which is pretty much the point that Phoenix was making-- that redemptions for cash would have to be restricted due to the lack of cash available to wind out the transaction.

It is a typically unsettling problem that we face. In some ways, it is perfectly understandable why they wouild need this standby. Yet, on the other hand, the large number of restrictive standbys that pile one upon the other start to look like a definite scheme rather than individual pieces of precaution in a world that is half analog and half digital.

George Washington referred to this sort of thing as a long train of abuses that seem to have the same eventually nefarious objective in mind.

Sat, 05/30/2015 - 22:17 | 6148177 jimfcarroll
jimfcarroll's picture

Selling 1/2 the stock market means that currency stored in accounts changes owners and the stock changes owners in the other direction. Nothing lost, nothing gained. Same number of stock shares, same number of dollars, different owners.

The lack of cash could be a problem on the credit/debt side including all of the leverage built up in the stock market since that has a multiplying effect on currency.

For example, the FED creates $100 in their magical computers and gives it to me. I put it in the bank. The bank loans $90 to you.

Now you have $90 and I have $100 (in my nice safe bank account). Magically, $190 now exists where there was just $100.

Now, you buy advice from Phoenix Research with the $90 and they put it in the same bank. The bank then loans $81 out to ZH and now there's $271 in circulation ....

Anyway, this can end badly, obviously, which may be the main point of the article, I don't know.

But that doesn't change the fact that the stock market doesn't behave that way. Leverage (which is really just credit) does, but not for the typical retail investor.

Sun, 05/31/2015 - 09:40 | 6148949 Bagbalm
Bagbalm's picture

No. If they bought for $400 and the next owner buys for $50 it is not the same in and out. If you wait ten days to cash out in a crashing market there may be plenty of cash to pay you. Especially if you will take coin...

Sun, 05/31/2015 - 09:48 | 6148960 jimfcarroll
jimfcarroll's picture

I didn't mean the amounts would be the same and that there would be no losers.

For the first buy, $400 had the owner's name changed on it. For the second buy $50 had the owner's name changed on it. All of the money is still part of #2 but the person who took part in both transactions is now poorer. Yet, there's still the same amount of money in #2.

Sun, 05/31/2015 - 00:12 | 6148480 tarabel
tarabel's picture

 

 

I've understood the ramifications of fractional reserve banking since at least 1982 so there is no need to belabor the obvious.

But the point is that neither the buyer or the seller typically make the exchange as a cash transaction. A sudden rise in the number of people who insist on such terms would leave the market struggling to rustle up enough of the actual green stuff in order to keep liquidity flowing.

In this regard, a sudden preference for analog liquidity could totally melt the assumed digital liquidity that allows the markets to function on what is essentially a trust basis. Namely, I swear that this digital entry is actually a stock certificate and you swear that the the digital entry I receive in return is money.

The only way this demand could be satisfied would by by the market itself promptly reselling the stock and also demanding cash or its equivalent rather than what is, in effect, a promissory note issued by the money market fund-- thus doubling the original problem. 

Sun, 05/31/2015 - 09:42 | 6148950 jimfcarroll
jimfcarroll's picture

Pardon my ignorance; I meant no disrespect.

Well, we'll just have to wait and see. I'm sure when it comes down to it neither will care who's right about this particular point. So I'll bet you a beer. :-)

I'll put the beer aside now, since once it all goes down it might be hard to come up with one. :-)

Sun, 05/31/2015 - 02:03 | 6148618 The Old Man
The Old Man's picture

But the balance sheet will show numbers in an account, somewhere. Digital paper wealth. What, however, will back it up?

Sun, 05/31/2015 - 08:10 | 6148846 Sashko89
Sashko89's picture

You don't own your stocks, dtcc owns your stocks. Unless you have the actual stock certificate with your name on it... So I don't think anyone will be getting anything for their stocks when shtf...

Sun, 05/31/2015 - 10:04 | 6148987 _SILENCER
_SILENCER's picture

I heard a detailed explanation of this in an interview on the John B. Wells show. it was very eye-opening.

Sun, 05/31/2015 - 12:41 | 6149370 sleigher
sleigher's picture

Cede and Co.  (another name for DTCC)  

cede s?d/ verb      
  1. give up (power or territory). "they have had to cede control of the schools to the government"
  2. to yield or formally surrender to another:
Sat, 05/30/2015 - 15:55 | 6147340 bitterwolf
bitterwolf's picture

...And when CASH is eliminated....good luck getting your value back from your PM's......world history and the destiny of global capitalism is not on your side...

Sat, 05/30/2015 - 21:53 | 6148108 jarana
jarana's picture

Oh bitterwolf,

has "world history" told you that -this time is different-???

How you managed to be the first one to scape this 6000 year bubble?

You are really ahead of time...

Sat, 05/30/2015 - 20:11 | 6147891 Dakota Kid
Dakota Kid's picture

bitterwolf, I suggest you read some history. 

I personally know two Vietnamese men that were lucky to have left Vietnam alive on boats near the end of the war.  The ONLY thing the people that got them out would accept as payment was GOLD. Cash, even US dollars, was worthless.  Tell them about  not "getting your value back from your PM's".

Sun, 05/31/2015 - 06:11 | 6147726 Kokulakai
Kokulakai's picture

When Cash is eliminated only bugs will hold cash.

For the rest it will be credit, along with it's inherent fees, and risk.

Sun, 05/31/2015 - 10:27 | 6149037 KnuckleDragger-X
KnuckleDragger-X's picture

I keep telling people to keep some cash stuffed into the mattress national bank because while that grungy dollar bill ain't worth much, if the banking system seizes up, that piece of plastic in your pocket will be worth even less....

Sat, 05/30/2015 - 16:31 | 6147428 Dead Canary
Dead Canary's picture

Yea, it's too bad I can't exchange my PM's to other people for goods and/or services. Curses, foiled again!

Sun, 05/31/2015 - 10:29 | 6149043 KnuckleDragger-X
KnuckleDragger-X's picture

You can exchange them, but not easily. Most people have never even seen REAL metal currency. If they don't know what it is, they won't trade....

Sun, 05/31/2015 - 12:14 | 6149309 Dead Canary
Dead Canary's picture

Everyone will suddenly become educated in real money.

Sat, 05/30/2015 - 21:48 | 6148099 tarabel
tarabel's picture

 

 

You could probably work out some sort of deal with the guy who needs to dive to the bottom of the lake for you.

Sun, 05/31/2015 - 09:41 | 6148953 Dead Canary
Dead Canary's picture

Yea, just hand me the silver, and I'll pull you into the boat. I promise!

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