Guest Post: MF Global - A Fractal In A Frying Pan

Submitted by MsCreant

MF Global: A Fractal in a Frying Pan

Gerald Celente, in an interview with Russia Today, claims he cannot access his PM trading account or get answers to his inquiries. It turns out Lind-Waldock, who he originally had the account with, was subsequently bought out by the now bankrupting MF Global. Understandably distraught, Celente asserts, “They took my money out of my account, six figures, and they have it. They closed out two of my positions, and I cannot get any answers, and I can’t get my money.”

Celente got many of us thinking—“If a guy like him can be refused access to his money, then who is safe?” Some argue he should not have been buying “paper gold.” Celente states that he was buying PM futures and taking delivery. “Max Keiser” the “Silver Bears” “Turd Fergusen” and more, have encouraged us to buy silver and “Bust the Comex.” Many of us here on Zero Hedge have fantasized in the comments section about someone wealthy enough to lay a few billion on the Comex for PMs and then stand for delivery. Celente, it is arguable, was doing this not only for himself but perhaps for Joe and Josephine Average who do not have the ammunition to fight this fight.

But as I got to thinking, I realized all of the above misses a valuable take away lesson. It is not simply the case that MF Global is a “first domino to fall” or a “canary in the coal mine” or a “harbinger of collapse.” MF Global is a fractal in a frying pan. Because of the defaults that must take place (municipal debt, sovereign debt, empty box MBS, CRE, I could go on and on), MF Global is showing us an early template, or fractal structure, for how these bankruptcies are going to manifest in our daily lives. MF Global is now falling out of the frying pan and into the fire and MANY OF US WILL FOLLOW. As the flow of bankruptcies increases, our everyday lived experience will be reshaped by the realities of the new structure as it is branded on our lives—financially and emotionally.

While Gerald Celente is crying about his lost six-figure account, Bill Fleckenstein also has personal money tied up with MF Global. He is hopeful that he will get it back but is critical of the authority figures involved. Celente does not expect to get all of his money back. Ann Barnhardt of Barnhardt Capital Management has shuttered its operations after six-years in the business. She did not feel like her clients’ funds were safe in the futures and options market any more. Lawrence Lepard, who posted on Zero Hedge, wonders if the MF Global failure was a hit job done by the Fed. My point is not about who is right or wrong (time will tell), but that we are getting an early, slow paced look at things to come—the story telling, guessing, shock, denial, hopeful strategizing, negotiations. The success, failure, triumph, rage, loss, and sorrow. As we move through time and defaults, the pace of people finding out that they “can’t get to their money” is going to pick up.

Today there is headline space to chide or support Celente and Fleckenstein. Today we have time to focus on what the one MF Global bankruptcy might mean about the state of the financial industry, the health of our economy, the impotence (or outright corruption) of our government regulatory agencies, and what it means for some of us as individuals. As more and more defaults and bankruptcies occur, more and more people will be claiming to have been robbed, crying about their lost retirement/college fund/income stream. They will not be news anymore. It will be the new normal. Before this is all over, most of us are going to claim we have had “our money taken” when, in reality, we are creditors who will be caught up in massive, multiple, overlapping, bankruptcy proceedings. We will want to focus on our individual situations—who did what with our money, why it was wrong, and who should go to jail. Many of us will also be the reason someone else has to go bankrupt. We will be their crook, their robber who did this that and the other with their money. And someone might want us to go to jail for it too. We are going to be at each other’s throats, in courtrooms and on the streets.

Gerald and Bill—you are not special. Today you can garner attention and sympathy (or contempt) for your plight. Tomorrow you will be but a grain of sand in an avalanche of financial discord, fuel long burned off in a raging firestorm that will consume everything, a fractal spark that flew out of the frying pan, giving us a glimpse of the future.

My husband read this and asked, “What do you advise?” At first blush, I find advice to be condescending. Who am I to advise? Buy precious metals? Have some cash on hand out of the banking system? Take all your cash out of the collapsing financial system? Stock up on some basics for emergencies? That might be decent advice but it is not the point. We need to be flexible. Focus on one individual’s situation, one company, or one country for that matter will soon be unsustainable. Few of us will escape the consequences of participation in the financial system. It is both broken and corrupt. Our “inability to get to our money” is going to cascade into each other’s lives, blowing up all kinds of relationships. We must keep our eyes and ears peeled for stories from multiple perspectives. This is why we read ZH.