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Guest Post: A Run On The Global Banking System - How Close Are We?
Guest Post via Gonzalo Lira
Nine weeks after its bankruptcy, the general public still hasn’t quite realized the implications of the MF Global scandal.
My own sense is, this is the first tremor of the earthquake that’s coming to the global financial system. And how the central banks and financial regulators treated the “Systemically Important Financial Institutions” that had exposure to MF Global—to the detriment of the ordinary, blameless customer who got royally ripped off in its bankruptcy—is both the template of how the next financial crisis will be handled, and an accelerator that will make the next crisis happen that much sooner.
So first off, what happened with MF Global?
Simple: It went bankrupt—because it made bad bets on European sovereign debt, by way of leveraging positions 100-to-1. Yeah, I know: Stupid. Anyway, they went bankrupt—which in and of itself is no big deal. It’s not as if it’s the first time in history that a brokerage firm has gone bust. But to me, the big deal in this case was the way the bankruptcy was handled.
Now there are several extremely serious aspects to the MF Global case: Specifically, how their customers were shut out of their brokerage accounts for over a week following the bankruptcy, which made it impossible for those customers to sell out of their positions, and thus caused them to lose serious money; and of course how MF Global was more adept than Mandrake the Magician at making money disappear—about $1 billion, in fact, which still hasn’t turned up. These are quite serious issues which merit prolonged discussion, investigation, prosecution, and ultimately jailtime.
But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer’s money to be stolen so as to make JPMorgan whole.
From this one issue, it seems clear to me that we can infer what will happen when the next financial crisis hits in the nearterm future.
Brokerage firms hold clients’ money in what are known as segregated accounts. This is the money that brokerage firms hold for when a customer makes a trade. If a brokerage firm goes bankrupt, these monies are never touched—because they never belonged to the firm, and thus are not part of its assets.
Think of segregated accounts as if they were the content in a safety deposit box: The bank owns the vault—but it doesn’t own the content of the safety deposit boxes inside the vault. If the bank goes broke, the customers who stored their jewelry and pornographic diaries in the safe deposit boxes don’t lose a thing. The bank is just a steward of those assets—just as a brokerage firm is the steward of those customers’ segregated accounts.
But when MF Global went bankrupt, these segregated accounts—that is, the content of those safe deposit boxes—were taken away from their rightful owners—that is, MF Global’s customers—and then used to pay off other creditors: That is, JPMorgan.
(The mechanics of how this was done are interesting, but insanely complicated, and ultimately not relevant to this discussion. To grossly simplify, MF Global pledged customer assets to JPMorgan, in a process known as rehypothecation—customer assets which MF Global did not have a right to. Needless to say, JPMorgan covered its ass legally. Ethically? Morally? Black as night.)
This was seriously wrong—and this is the source of the scandal: Rather than being treated as a bankruptcy of a commodities brokerage firm under subchapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (subchapter III) for the purposes of its bankruptcy.
Why does this difference of a single subchapter matter? Because in a brokerage firm bankruptcy, the customers get their money first—because after all, it’s theirs—while in an equities firm bankruptcy, the customers are at the end of the line.
In the case of MF Global, what should have happened was for all the customers to get their money first. Then everyone else—including JPMorgan—would have picked over the remaining scraps. And the monies MF Global had already pledged to JPMorgan? They call it clawback for a reason.
The Chicago Mercantile Exchange, which handled the bankruptcy, should have done this—but instead, the Merc was more concerned with making JPMorgan whole than with protecting the money that rightfully belonged to MF Global’s 40,000 customers.
Thus these 40,000 MF Global customers had their money stolen—there’s no polite way to characterize what happened. And this theft was not carried out by MF Global—it was carried out by the authorities who were charged with handling the firm’s bankruptcy.
These 40,000 customers were not Big Money types—they were farmers who had accounts to hedge their crops, individuals owning gold (like Gerald Celente—here’s his account of what happened to him)—
—in short, ordinary investors. Ordinary people—and they got screwed by the regulators, for the sake of protecting JPMorgan and other big fry who had exposure to MF Global.
That, in a nutshell, is what happened.
Now, what does this mean?
It means that nobody’s money is safe. It means that regulators care more about protecting the so-called “Systemically Important Financial Institutions” than about protecting Ordinary Joe investors. It means that, when crunchtime comes, central banks and government regulators will allow SIFI’s to get better, and let the Ordinary Joes get fucked.
So far, so evil—but here comes the really troubling part: It is an open secret that there are more paper-assets than there are actual assets. The markets are essentially playing musical chairs—and praying that the music never stops. Because if it ever does—that is, if there is ever a panic, where everyone decides that they want their actual asset instead of just a slip of paper—the system would crash.
And unlike with fiat currency, where a central bank can print all the liquidity it wants, you can’t print up gold bullion. You can’t print up a silo of grain. You can’t print up a tankerful of oil.
Now, question: When is there ever a panic? When is there ever a run on a financial system?
Answer: When enough participants no longer trust the system. It is the classic definition of a tipping point. It’s not that all of the participants lose faith in the system or institution. It’s not even when most of the participants lose faith: Rather, it’s when a mere some of the participants decide they no longer trust the system that a run is triggered.
And though this is completely subjective on my part—backed by no statistics except scattered anecdotal evidence—but it seems to me that MF Global has shoved us a lot closer to this theoretical run on the system.
As I write this, a lot of investors whom I know personally—who are sophisticated, wealthy, and not at all the paranoid type—are quietly pulling their money out of all brokerage firms, all banks, all equity firms. They are quietly trading out of their paper assets and going into the actual, physical asset.
Note that they’re not trading into the asset—they’re simply exchanging their paper-asset for the real thing.
Why? MF Global.
“The MF Global scandal has made it clear that the integrity of the system has disappeared,” said a good friend of mine, Tuur Demeester, who runs Macrotrends, a Dutch-language newsletter out of Brugge. “The banks are insolvent, the governments are insolvent, and all that’s left is for the people to realize what’s going on—and that will start a panic.”
He hit it on the head: Some of the more sophisticated people—like Tuur, like some of my acquaintances, (like myself, frankly)—have realized that the MF Global scandal means that there is no safety for any paper investment: The integrity of the systems has been completely shattered. If in the face of one medium-sized brokerage firm going under, the regulators will openly allow ordinary people to be ripped off for the sake of protecting the so-called “Systemically Important Financial Institutions”—in this case JPMorgan—what will happen if there is a system-wide run? What if two or three MF Globals happen simultaneously?
Will they protect the citizens’ money? Or will they protect the “Systemically Important Financial Institutions”?
I think we know the answer.
And I think we all know the answer to the question of whether there will be crisis flashpoint in the near-term future: After all, as Demeester pointed out, all the banks and all the governments are broke.
Thus it’s only a matter of time before they come for your money.
At SPG, we’ve been putting together Scenarios for other black swan events which are becoming increasingly likely: What to do if the eurozone breaks up, what to do if you have to leave America, what to do if there is an Israeli-Iranian war, what to do if there is forced dollar devaluation, and so on.
Now, because of this open kleptocracy and cronyism being shown by the financial authorities in the wake of the MF Global bankruptcy, we’ve been obliged to put together a new Scenario, devoted exclusively to preparing for a run on the markets: What to do in order to protect your assets from regulatory malfeasance, if there is a system-wide MF Global-type breakdown and a subsequent run on the entire financial system.
And there will be such a run on the system: It’s only a matter of time. In fact, the handling of the MF Global affair has sped up the timeframe for this run on the system, because the forward-edge players—such as Demeester, myself, and my other acquaintances who understand the implications of the bankruptcy—realize that the regulators will side with the banksters, and not the ordinary investors: So we are preparing accordingly.
Once there is a full-on panic, anyone with money in the system will lose at least a big chunk of it, in one of two ways, or a combination thereof:
• One, the firms—commodities brokerage firms, equity firms, investment banks and commercial banks—will not allow people to withdraw the totality of their money, and/or they will put a withdrawal cap of some sort, enforced by the central banks and other regulatory bodies. (Like they did in Argentina.)
• Two, the central banks will “provide liquidity”—that is, print money—while simultaneously declaring a banking holiday to, quote, “calm the markets”. During that bank holiday, the currency will be devalued by double digits—which will mean that your cash holdings will essentially be taxed to save the banksters—again. (Like they did in Argentina.)
Thus apart from proving that the United States really is Argentina with nukes, the MF Global bankruptcy has proven something crucial: The central banks and government regulators have completely fallen into the trap of confusing the welfare of the “Systemically Important Financial Institutions” with the welfare of the system itself. They don’t seem to realize that the SIFI’s are actors within the system—not the system itself.
We critics of the current, corrupt state of affairs also sometimes confuse the SIFI’s with the system itself, whenever we say, “The whole system is corrupt!”
But the system is not corrupt—it’s the regulators and SIFI’s who are corrupt. If nothing else, the handling of the MF Global bankruptcy has proven that, once and for all. That’s why we’re pulling out our money now—while we still can.
Because once the general public catches on to what we already know . . . oh boy.
If you’re interested, check out the SPG preview page. The various Scenarios I discussed above (”When the Euro Breaks”, ”Exit America”, ”An Israeli-Iranian War”, etc.) are currently available. The Scenario discussing how to protect assets from a system-wide run will appear on January 20.
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"But the system is not corrupt—it’s the regulators and SIFI’s who are corrupt. "
What a silly thing to say. The regulators and the SIFIs ARE THE SYSTEM, at least the only part that matters, which means the system IS corrupt.
"But the system is not corrupt—it’s the regulators and SIFI’s who are corrupt."
If your are not bought and paid for then you are not part of the system.
Wake up !!!!
if you are not skimming you are not part of the system.
jal
I think slow motion bank runs have been happening the last two years, but steadily picking up steam. Tipping point cometh with critical mass.
Bank Runs = Bank Holidays = Chaos = Martial Law
Gerald Celene reminds us in a recent interview that motormouth Joe Biden has already said publicly in June 2009 they are/were planning a Bank Holiday. Ironically, he said this while he was in NJ campaigning for Jon Corzine's re-election. So far it has not happened, but it does mean it is very much on their minds. Maybe that's why TPTB were in such a rush to pass the NDAA, and why it passed with such broad bipartisan support. Maybe the politicos just know what is coming. They don't do crap like that unless they're told to.
A "Bank Holiday" would no doubt cause panic and chaos. But my guess is it would probably happen right after the election, especially if Obama is re-elected. FDR kept denying it until right after his inauguration in 1933. Banks can still debase currency outside the system, so be sure to panic early enough to convert it to hard assets.
Dear Readers
TIME to start a run on Bank of America, M fu__Ers , they will take our money but
not refinance , well financed citizens.
I say we welcome the New Year and take all our money from all Bank of America locations.
XOXO
RC
"...But the system is not corrupt..."
Sure Gonzalo, and the pope is the Creator's sole representative on planet earth, and Santa's reindeer shit on my roof a couple of nights ago.
Tipping point is here. Government is pushing a debt ceiling higher and higher. Government is running on fumes it cannot afford so to speak. China and Japan starting to trade w/o Dollar is a huge part of it. Russia and China already on their way. Europe won't be far behind. Even the US government will eventually stop the vicious cycle and try to save what's left of the currency.
Forget bank runs and/or bank holidays. Beware of government holidays, the day that SNAP doesn't work or banks don't accept government cheques.
There is a reason for the massive debt buildup since Obama took office. Not his personal fault. The various stimulus programs have added trillions of debt to the balance sheet and what little recovery America has enjoyed was all fueled by government spending. That is coming to an end and the Depression is not even close to having finished.
It's going to get grizzly when the "gots me no jobs" crowd that is used to having government provide all their lives awaken to empty stores, empty gas stations and empty banks.
that's going to be a dangerous crowd for sure... Need to buy more 3mil garbage bags... can't just let those bodies lay on the street...
I would add that the countries with the largest trade deficits will be the ones imposing the most brutal measures because in the new tomorrow they will be the ones in a desparate need of capital to buy goods from abroad.The US is obviously the king of such countries , it is so dependent on imports of all possible kinds of goods that a large scale confiscation of assets will become a matter of survival for the state which will be in a desperate need of paying certain expenses.Not mentionening all those expenses for defense , the ruling cleptocracy will not give up all that power voluntarily , all that power that allows to keep whole regions of the world under control.It is great to have all that power but it also costs a lot of money and the US is not able to confiscate anything outside it's soil so obviously the US population will be the primary target
I'm soliciting input on these ideas, if anyone here is interested:
http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-ed...
http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-ed...
http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-ed...
To: https://client.schwab.com/Service/ContactUs/EmailSchwab.aspx?target=ContactUsEmail#Email
I must assume that since you have not answered my questions regarding your exposure to the conditions that lead to the MF Global bankruptcy, that my funds are similarly at risk. Therefore, I will be contacting my plan administrator to terminate my account ASAP. I refer you to the following article at Zerohedge: http://www.zerohedge.com/news/guest-post-run-global-banking-system-how-close-are-we I am among the first in line at your window.
Gonzalo with another worthless post.
Same shit that's been written ten thousand times in hundreds of other forums.
While it's all very possible that this kind of run will occur, it's more likely to happen from late 2013 on into 2014 and beyond. Still good to keep in mind and prepare for.
Or it could all happen this weekend - .gov loves to screw people on the weekend
All these fuckers are prime candidates for RICO "corrupt enterprises" prosecutions and massive civil forfeitures. What are the odds that it the US Attorney is just gathering string and waiting to pounce? Yeah, about as good as the Bills winning a Super Bowl.
There are ho's and then there are dumb ho's.
If you dont know that the pimp (JPM) gets paid first, what kind of ho does that make you?
Some ho's are in shock that the pimp dont keep his word.
Most of these ho's needed a good pimp slap and im happy they got one.
So the real question is what are these ho's going to do? Find another pimp? Or just bitch untill that get another beat down.
Welcome to the world of Mad Max. Might is right's.
No. It's exactly the system that is corrupt. It was established by the preying money leeches precisely to enable them to freewheel at the expense of the owners of the OtherPeoplesMoney.
The same system cannot but propagate the corruption of its designers to corrupt any who enter it. Attacking the corrupt individuals/designers will not change established system that corrupts all who enter, however well meaning. The system was designed to corrupt or eject all comers.
To wit...civil trials with petty penalties instead of hard prison time whenever possible, private trials/arrangements usually self-administered; special Equity Courts/Chancery Courts, instead of Common Law Courts. Oh, you didn't know?
Perhaps you are not familiar with the Equity Court system? When I discovered what it is and its nearly hidden history, the expression "fool" came to mind.
Repair/reform/adjusment is futile with the system. It must be replaced.
I agree with staying cautious and doing everything possible to protect assets, but it's important not to get caught up in "all or nothing" thinking.
Then you might go 100% physical gold, or 100% physical cash, scared that cash is going to becoming worthless, or scared that your gold will be confiscated, or scared that there is going to be a bank holiday or something. And then when you go all in one asset, it turns out that you were wrong and needed to be in others.
It's best to stay diversified so that any one loss doesn't impact you too much. And then whatever you have left, put it into something you have alot of confidence in.
So to start off you should work on security, water/food and essentials. Then some physical cash. Then some in a bank account. Then some physical metals. Then some metals accounts or certificates. Then some real estate, then some equities in a trusted brokerage account, etc.
It's highly unlikely that if you build up to this level that all of your wealth will vanish overnight. You might have to take a loss on something, but who cares? Loss is part of life. Too many people are scared of losing even a little bit. However it's definitely important to have some essentials and physical cash to hedge against a commercial bank holiday.
Wise words, dolph. I wish I could give you more that 1 +.
I bought 7 more oz of silver today. But to counter the too often repeated "you can't eat gold", you CAN eat food and water.
The System IS Corrupt. A good article until you made that statement. From another article today writter by an investment banker:
"I have lived what now, at 75, is starting to feel like a long life. If anyone asks me what has been the great American story of my lifetime, I have a ready answer. It is the corruption, money-based, that has settled like some all-enveloping excremental mist on the landscape of our hopes that has permeated every nook of any institution or being that has real influence on the way we live now. Sixty years ago, if you had asked me, on the basis of all that I had been taught, whether I thought this condition of general rot was possible in this country, I would have told you that you were nuts. And I would have been very wrong. What has happened in this country has made a lie of my boyhood."
http://www.thedailybeast.com/newsweek/2011/12/25/wall-street-has-destroy...
"The mechanics of how this was done are interesting, but insanely complicated, and ultimately not relevant to this discussion. To grossly simplify, MF Global pledged customer assets to JPMorgan, in a process known as rehypothecation—customer assets which MF Global did not have a right to. Needless to say, JPMorgan covered its ass legally..."
That is by far the most interesting topic in your Infomercial, to me.
There is too little discussion about financial custody terms on ZH and it is a critical subject. What about brokerage accounts with no margin? Is that safe from "legal" back-door looting? What about "Trust Companies"? If you read a typical trust agreement you find out all you get is an account in "street name" at State Street, with language you can drive a truck through: sub-custodians, branches of foreign banks, blah.
Those who don't want to investigate this or think about it will resort to, "gold bitchez" etc. But I think it is an interesting topic. How about direct stock ownership, with actual certificates? Where do TPTB keep their money? I am trying to get smarter on custody and would love it if ZH did as well.
Hey RB,
At last a useful question. Thank you. For myself, 3 years ago I called both brokers and paid $100 each for certs for my core mining shares. The phone reps thought I was nuts, but I'm glad I have them. DTCC is a fractional reserve racket, and "your" shares held in street name may be subject to rehypothication. I only have play money left in brokerage accts.
Good luck.
Hypothecation and rehypothecation only applies to margin unless someone would like to correct me. I have not seen that language on any regular account application that does not involve margin.
A useful idea in return. Thanks. And good luck to you.
Run BitcheZ, run!
Loose quote: "A mistake on this scale is not accidental", Ayn Rand.
Gonzalo also asserted in earlier articles here during mid 2010, RE Treasuries and inflation, that the US would be experiencing accelerating inflation from about April 2011, that would be initially welcomed as a sign of economic improvements, but it would continue to surge well past 10% per annum in following months, toward the end of 2011.
It didn't.
--
But how is a global bank run going to occur / be possible? I can't see it.
There are only so many commodities and ownership opportunities.
If you're in a global depression, you're going to bid industrial commodities to the moon, even as global demand is plunging off a cliff?
Good plan!!!!
And even if that did make sense, it just creates another unstable bubble, that you'll have to flee from again.
Where are people going to actually put the fleeing money then - real estate maybe?
So some people will 'run' on the banks and buy into PMs, but most won't, so I don't think we will see such a global bank run.
We'll just see a global banking collapse, in which Govts pledge to back all deposits, and the majority will trust that reassurance - they will presume that will suffice.
It won't.
So the banks will collapse, and Govt finances will collapse, and the currencies will collapse, and everyone will lose almost all reserves, and they'll all say;
Whocudanode?
The reality is that people generally will NOT wake up to what the MF Global collapse implies.
Right now it's hard to see a bank run in dollars out of US banks (unless the bank is 'underwater' then the run isn't) See 'Texas ratios'. Where will the funds 'run' to? What form will they take?
Runs make sense when deposits in one currency can be converted involuntarily into something else (as in the EU, where euros will wake up some fine morning as 'something else').
Runs make sense when there is no depositor insurance or no alternative assets to buy with currency. There is no shortage of assets in the US (also unlike the EU where alt assets tend to be overpriced or illiquid).
Losses in assets (as in the case of MF Global customer accounts) are no different from losses in real estate (since 2006): it is arguable that fraud in real estate transactions is more egregious than any taken place in MF Global ... and these frauds are ongoing.
Assets in the US have tended to be real estate or related (time shares, investment/rental/flip property, shares in REITS, shares/warrants in banks or loans to banks that lend to real estate developers (as bondholders). Exposure to commodities derivatives is not systemic in the US.
It's premature to assume that customers of MFG will lose their property, absolutely sure is that customers will surrender their paper 'profits'. This is not a 'bug' as customers are not entitled to them, only realized profits.
Hypothecation risk is overstated, probably b/c it is ia big word like 'rumplestiltskin risk'. The assumption there is x-times leverage in all markets all the time when finding creditworthy borrowers has been difficult since the crisis began four years ago. There is little in the way of a bubble to 'feed' by way of hypothecation.
... unless someone is proposing a 'gold bubble' :P
Probably not bank runs as most people think of a run on the bank. The average person will leave his money in the bank to the bitter end. Why run on the bank anyway? In the 30's bank runs were to exchange paper money for gold and silver, which is one reason FDR changed the rules. Now you would run to your bank to get pieces of paper that .Gov can make worthless on a whim. Whats the use.
BUT - what MF Global did was make sure people knew that - 'property rights' - which is the basis for a free society, was at risk with the crooks running this government. NO ONE in their right mind would put money at risk in this system knowing that it could be taken from you by the people running this show, who are SUPPOSE to enforce the laws that assure you have the right to your property. THIS WAS A WAKE UP CALL..... I have removed all money from the casino markets, keep only what is needed in the bank, and I refuse to 'invest' in any money making venture as long as the crooks are in charge.
As long as this kind of MFGlobal shit continues - - I quit, I have taken my toys and gone home. AND I AM NOT ALONE !! <-----Is this the new 'bank run'
BTW - it doesnt matter what signed legalease paperwork was used to do this. In the good times - no one took the time to read the fine print, times were good and it didnt matter. BUT IT WILL ONLY HAPPEN ONCE TO ANYONE WITH A BRAIN ! ! Everyone knows the game now and will be getting out and not getting back in !!
—in short, ordinary investors. Ordinary people—and they got screwed by the regulators, for the sake of protecting JPMorgan and other big fry who had exposure to MF Global.
Fuck the average joe and feed the tribe.
From what I read, the CME is losing customers (those that have any money left) and there is NO CONFIDENCE in the markets, the regulators and the brokers.
Until they arrest Gensler and anyone from MFG, it's just a farce.
Think MF Global was bad? You ain't seen nothin yet.
"Let them eat cake."
http://www.youtube.com/watch?v=G2EARJGkdTM
A Wall St. douchebag peers through his telescope at a mob scene on the street 50 floors beneath his penthouse office:
"Johnson, what on Earth are those filthy peasants shoveling into their gaping, toothless maws?"
"Cake, sir."
"Cake? Well, we can't have that, now. That cake is slated for rehypothecation. Send security down immediately and instruct them to sieze of every last chocolatey crumb. By tomorrow, that cake will be the brownies, muffins and cookies that pay my well-earned bonus. Quickly, Johnson, before that ragged horde devours it all."
"Yes, sir. Oh, and you have a visitor."
"Who is it?"
"Satan."
"Uncle Lu is here? Excellent! Send him in!"
It would be interesting if individuals started removing margin from brokerage accounts en masse. It would help starve the beast. And margin is stupid anyway. And most people would be better off not trading naked options as well...theta is a bitch.
It is not clear to us that the rehypothecation clause only applies to margin, if that's what you're thinking. On our account agreement, it appears in the 'trading on margin' section. While we don't trade on margin, our account is margin-enabled, as many are. There is nothing in the wording that specifies rehypo is limited to just securities purchased on margin, but perhaps there is a securities law restricting it that I don't know.
If the MFers only disappeared assets that were purchased using margin, I would be very interested to know that. I have been reading carefully and have not yet seen it reported that way.
Right. I don't have even the right to use margin on my brokerage accounts. I can't short, can't trade options and obviously can't use leverage. I think that means "they" should not touch my securities. I still worry when the SHTF the "they" might take them anyway under the, "how are you going to enforce your rights in a world gone FUBAR" theory. Physical certificates and hard assets seem to be the safest route.
I look at a bank run a little differently than others.
Place your physical dollar between 2 mirrors, the dollar representing your physical asset and the mirrors representing the financial system.
How many images of your dollar do you see? Tens or maybe hundreds?
The physical dollar belongs to whom again? You? Not really. At MF we found out that the financial system stole the dollar that was represented by the financial systems mirror images.
What people are coming to grips with now is whether or not they should pull their dollar out of the loop before it gets stolen by one of those hundreds of mirror images that keep the financial system afloat.
With leverage so out of control a withdrawal, by depositors, of only a very small portion of their funds leaves the finacial system in chaos. Thus we see EU soverigns conjuring up fial to lend to banks to replace those few hyperlevered physical euros belonging to average joe, just to kick the can a little further down the road.
Banks have NO real assets, just mirror images of someone elses asset.
Take your hard earned dollars or euros out of your accounts and the mirror has no images to lever.
Without YOUR assets TBTF will fail.
Why did Kyle Bass prompt the Trustees of the University of Texas to take delivery of $1,000,000,000 worth of gold bullion in May 2011? Reread the article - more paper than real assets. The middle tier of investors and traders are cashing out. This is not the first I have heard of this. Buying farms, moving out of their posh city quarters.
The party will start to thin out and at a certain point the remaining people will try to figure out where the others went, then they will get a sick feeling in the pits of their stomachs, then you will find the dead bodies piled high at the exits blocking any and all remaining people from leaving the burning theater.
Let me say that I believe the remaining sign will be when the talking heads on TV can no longer stop from having facial ticks and other tells when talking about "the markets" as if there are any left.
When the talking head sound like this, and people still keep watching, get the fuck out of Dodge:
http://www.youtube.com/watch?v=YxupxBKatX0
How was that any different than all the corporate media parrots bleating about "Ron Paul is a racist", "Ron Paul will never win", blah blah blah? At least this woman was not lying through her teeth while on air!
I doubt the University of Texas is as "hedged" for the future as they think.
Their gold is being stored for them in the Comex vaults in New York, owned by HSBC....(sigh)
But...but....we took delivery.
Yeah?....lots of customers over the years have "taken delivery"....and were charged storage fees on their metal.....just ask Scotia Moccata and Morgan Stanley.
Not saying it will happen to them (U of T)....but after the MF Global incident....why trust anyone at this point? I would venture to guess that the gold and silver below the Trade Center Demo Days Festivus from 9-11 was not recovered in it's entirety either....much like Gaddafi's gold will get "Re-Hypothecated"....and forgotten about in the near future. Do you think JPM bought up the Henry Bath warehouses last year for a specific reason? Try reading the SLV prospectus....and ask yourself....if you can see a future where the Trustee decides to pull the plug....and the "Custodian" has a Jon Corzine moment....and can't explain how it all came up missing....
I can tell you that if 'da boyz in Chicago/NYC fuck over UT, they will find out who will get fucked. I am sure there are a few nuclear options that are in place in order to disincentivize any such attempts at theivery.
I know it sounds harsh....and a bit extreme....but I think it would be an extremely good thing for such a happening to occur.
I would've thought more of Americana to become outraged over the MF Global situation....it really speaks to the "Pharma-Comas" that our citizenry is enveloped in presently.
I'd like to see the UT get defrauded....and the criminals get away with stealing from them....perhaps it could be a more effective alarm clock than the ones currently getting triggered.
Turn this mutha up a notch....maybe a new demigraphic could become engaged instead of asleep
It about time for the European banking downgrades and it's going to take a giant diaherra crap on the EU banking system.
Here's a thought... when the pump gas prices hit $5-$6 a gallon the joe earning min. wage (on 40 hours a week at $7 an hour = $280 a week, then minus take out (leaving them about $210)) can no longer afford to fill up their weekly fill-up to get themselves to work/ do general travel (because it will then cost them $114 to fill their tank), eat, or pay rent. When I checked last week pump prices where I live were $3.09.
TPTB have long stopped caring about Joe Lemming.
Just pay him off with food stamps and section 8! Then he's happy with Cheez Doodles and Call of Duty, or Dancing with the Stars for the missus.
Problem solved. He just needs to get to the Wally Mart and back.
For the rest of us, well, it's going to be one long bicycle ride that's for sure. Hopefully our employers understand if we come in 2 hours late, drenched.
no worries! the fed will backstop the entire western world....at your expense. the bank run is really not the danger. the danger is the preemptive attack by the banks upon you. ndaa sets the table. i actually believe they will let paul win the nomination because obama is needed as continuity of control and they think paul is the weakest candidate so an obama victory(landslide) will tighten their grip. a false flag will be employed in the spring to catapult(remember that) the propaganda that will cover the final looting of the western world in a cyclone of inflation "caused" by war. it is then the reset will occur with a new currency under a single global banking cartel. that is what they will want. it is not what they will get. they will get the end of the 400 year western reign over the world.
No way will Obama win by a landslide. At this point in time it's looking like he will win a return ticket, Ron Paul is too much for Republicans to swallow and Independents don't like his foreign policy. They'll prefer someone more controllable who knows how the street works. Hence, it will be Mittens, that gets the Republican nomination. BOA wipe out would be bad for main street. I do think a currency reset is on the cards as that will allow the "final looting" as you say to occur. Fat Sheeple may be soft, but don't be under any illusion that if you pull the rug out from under them that they will give up without a fight.
It's WTF Global...
Haven't heard Bernank or Geethner in the news lately. Something must be going on.
An ounce of Silver in the hand is worth two in MF Global's vault.
An ounce of silver in the hand is worth any two Bushes.
An ounce of silver in the hand is worth more than any politicians.
The banking system is a global closed loop.
A bank run in a closed loop system?
Round and round the digits would have to flow, with each transaction creating a fee, until the depositors reached exhaustion or penury.
What about anyone with a mortgage? If assets can be rehypothecated at will, what is to stop bankers from releveraging your property? The first you'd know about it is when you get a team of bailiffs on your doorstep, informing you that your property is to be repossessed - because it has been used as rehypothecated collateral...
After all, if it could happen to MF Global's clients, it could happen to you.
—in short, ordinary investors. Ordinary people—and they got screwed by the regulators, for the sake of protecting JPMorgan and other big fry who had exposure to MF Global.
That, in a nutshell, is what happened.
No, that's not what happened. Regulators had nothing to do with it.
What MFG did was completely legal. Re-hypothecating customer assets (pledging customer assets as collateral for gambling done by the brokerage firm) is completely legal under current law, and JPM grabbing those assets ahead of the bankruptcy court is also completely legal under current law.
Regulators aren't the problem here. Current law is the problem here, which means congress is the problem here.
Now, what does this mean?
It means that nobody’s money is safe. It means that regulators care more about protecting the so-called “Systemically Important Financial Institutions” than about protecting Ordinary Joe investors. It means that, when crunchtime comes, central banks and government regulators will allow SIFI’s to get better, and let the Ordinary Joes get fucked.
Yep, that's what I've been saying since MFG collapse. Nobody with any common sense would leave unencumbered funds / assets in a brokerage account anymore
... and leaving encumbered funds / assets in a brokerage acoout is equally risky, as Gerald Celente discovered. He had encumbered funds in his account because he was standing for delivery on his gold futures. Didn't matter.
As I write this, a lot of investors whom I know personally—who are sophisticated, wealthy, and not at all the paranoid type—are quietly pulling their money out of all brokerage firms, all banks, all equity firms. They are quietly trading out of their paper assets and going into the actual, physical asset.
Again, exactly what I've been saying ...except the author includes banks now.
I haven't been saying pull funds out of banks, but maybe those "sophisticated wealthy" investors know something we don't.
MFG wasn't a "run on the bank" by depositors.
It was a "run on the bank" by counterparites ...perfectly legal under current law.
As long as the law remains as it is, then no, nobody's funds / assets in a brokerage account (and bank account now apparently) are safe.
I do belive that your right on all points.
1+
As it is with the US justice system (rich & famous very rarely go to lock-up), so it is with the US financial system (rich & famous very rarely lose money).
Principal + Interest = Debt (P+I=D)
It's not "an economy." It's a malignant, inherently destructive terminal process, intended from its very inception to dispossess us unjustifiably, or the justification would mark every Central "Bank" like the Lincoln Memorial.
Interest has a critical fault. So long as it exists, there's no neutralizing or stabilizing of its consequences; its inherent processes are perpetual, and irreversible.
As Mr. Kondratiev observed, "interest" inherently meets its end.