Thursday, January 07, 2016

Is It Time To Panic?

There's a lot of things in the pop culture-driven society we've become accustomed to keep us distracted, but behind the scenes the big players must be fully aware of a looming economic collapse that will make the home mortgage-led bust in 2008 that brought down major banks look like a mild touch of the flu. As I write, stock trading has been halted in China for the second time this year as its stock market continues to plummet. A massive sell-off is underway on our own stock market this morning. And something called bank bail-ins are already underway in Europe. Bail-in? What's that?

Ellen Brown at the Intrepid Report talks about the bank bail-ins that have already started to happen in Europe that could well happen here. It begins with the story of an Italian pensioner who took his own life in November when he learned that his entire life savings had been wiped out when his bank failed. The blame lied with the EU's Financial Stability Board, which has imposed an "orderly transition" when banks in the EU fail by allowing the seizure of the savings of bank investors and depositors to restore solvency to an otherwise insolvent bank. As the BBC described the rescue of several regional banks in Europe at the time:
The rescue was a “bail-in”—meaning bondholders suffered losses—unlike the hugely unpopular bank bailouts during the 2008 financial crisis, which cost ordinary EU taxpayers tens of billions of euros.
Correspondents say [Italian Prime Minister] Renzi acted quickly because in January, the EU is tightening the rules on bank rescues—they will force losses on depositors holding more than €100,000, as well as bank shareholders and bondholders.
. . . [L]etting the four banks fail under those new EU rules next year would have meant “sacrificing the money of one million savers and the jobs of nearly 6,000 people.”
But that's Europe. That could never happen here in the good old USA. Think again. As Brown explains, one former hedge fund owner, Shah Gilani, wrote in an article in Money Morning that he was closing his bank accounts in the United States while he still can. It seems that that our Congress inserted into that infamous Dodd-Frank Act language requested by the bankers to "protect the American taxpayer by ending bailouts." "But it does this under Title II by imposing the losses of insolvent financial companies on their common and preferred stockholders, debtholders, and other unsecured creditors," Brown writes. "That includes depositors, the largest class of unsecured creditor of any bank."

Unfortunately, as Brown explains, Dodd-Frank didn't put needed restrictions on banks investing in risky derivatives. Shockingly, both Dodd-Frank and the U.S. bankruptcy code now provide that derivative claims have a super-priority over all claims, secured and unsecured, insured and uninsured. The largest market for derivatives is made up of banks and other "sophisticated investors" like hedge fund owners. Without trying to explain what they are in detail, they are essentially big bets placed by these big players against each other like a Las Vegas poker game. Your deposits at the bank are now considered just a loan that makes you stand in land like other creditors unlike the secured or collateralized  interest the holders of derivatives have under U.S. law. As of September 2014, U.S. derivatives had a market value of nearly $280 trillion. Is it time to panic? You bet it is.


Anonymous said...

Another truthful, informative blog post, Gary. Thank you.

Sadly, I doubt most of my college educated cohorts or their university "educated" progeny comprehend the dangers to their financial well-being forced upon them because of actions of extremist left-of-center liberal Democrats like Frank Dodd and Barney Frank.

Dodd-Frank is a disaster that completed the Socialist federalization of our money and our money supply. I warn many of my friends their 401-ks and their Roth IRAs are in the cropss hairs of our deceitful national politicians and I get blank stares. Our own Congress is working to convert our lifelong savings plans into Social Security-type "investments" because Congress bankrupted this Nation to the point it is now more and more difficult to keep the financial shell game going. I am told "that can't happen in America!!". News Flash: "America" is not the country it was at the turn of the 20th Century and "America" is not the country you think it is today. "America" is a socialist, soft Police State where they heavy hand of tyranny of a perpetual ruling class comes down on us harder every day.

America is in serious trouble and most people are so busy with bread, circuses, and smart phone games they haven't a clue what their own Congress has done to them. Worse yet, too many Americans don't want to have a clue.

Our own Congress changed "bail outs" to "bail ins"; Dodd-Frank allows the Banksters to actually just take any deposited money to pay the light bills, the salaries, and ongoing expenses should the Bank find itself in financial straits. It's true, people. Go look it up.

Anonymous said...

All bank deposits are a loan.

In a fiat money system, all money is debt. Unless someone needs your dollar to pay off a loan made to someone else, your dollar is worthless.

A bank depositor merely loans money to the bank under the promise of interest or services so that bank can re-lend that money to others.

Pete Boggs said...

FDIC: Federal Deposit Insecurity Corporation?

Anonymous said...

Relax people. What a bunch of nervous nellies. You know when we faced a hard time? World War II. Militarily. Financially. We pulled together and got through it. This is nothing. These are good times. You pups don't know hard times. Food was rationed. Gas was rationed. The men all went off to war and so many didn't come back. The government begged people to buy war bonds to keep the government and the war going. You were lucky if one person in your family had a car, and people lived in tiny houses and apartments. This country has gotten fat. And people aren't nearly as educated as they used to be. We are still an economic miracle, the world's financial powerhouse. You worry about the wrong things, ladies. Toughen up. Your savings are safe. The sad reality is that half of all households can't put their hands on $2,000. They're not underprivileged. They're lazy and stupid and they don't have any savings to lose. We have issues in the U.S. but it isn't the banking system, although those Steagall banking prohibitions ought to be put back on the books. In my day there was no entitlement to cell phones and cable tv and fast food and fancy clothes and cars. My grandfather raised all his own food, caught his fish and trapped and shot half his meat; he lived without refrigeration, indoor plumbing washing machines and access to medical care. Owned his own farm and lived to 93. His locally owned Indiana bank never went under, and neither will Indiana banks in the future.

Flogger said...

The problems with the American economy goes back decades to even before when Bill Clinton and his allies in the Republican and Democrat Parties enacted NAFTA, and then Permanent Normal Trade Relations with China. Our manufacturing base was dismantled and sent off shore and with it the jobs. I recently bought some lens cleaners for my glasses - Made In China. My new Computer - Made in China. My new Cell Phone - Made in China. The tooth picks I bought - Made in China. Profits can be hidden away in some post office box or a closet Corporate Office - off shore.

When was last time Nike made a shoe in the USA?? Bill Clinton again with the collaboration of Republicans and Democrats trashed Glass-Steagall and allowed through the Telecommunications Act the coagulation into the McMega-Media. The McMega-Media decides the narrative and content of what you read, watch or hear.

Insider trading to fraud, money laundering, misleading markets, breach of duties and lying to the authorities, the mortgage manipulation and housing bubble and the LIBOR Scandal has essentially went unpunished here in the USA. Incredibly, a fine might be levied but there would no admission of wrongdoing. This is the infamous Too Big to Fail, To Big to Jail.

leon dixon said...

So, why not take your money out of the bank.? It isn't like you are getting any interest to speak of? Buy gold coins and stick them in your safety deposit box along with a bag or two of silver coins. Your savings would be a LOT safer.

Anonymous said...

not sure where to start here: part of what I do is bankruptcies for people; you simply would not believe who is not only broke, but in the hole so far they have no real possibility of ever getting to zero. seriously. also, do you really think that gold eagle is safe in your bank's safe deposit box? pity, seriously. people with money that have common sense (and it would appear to me there are only about 20 of you, someday I hope to be counted among you) know what's going on; I know people will be calling me chicken little but the smart money is in precious metals in a safe place (i.e. not a 'bank') and lead. carry on.

Anonymous said...

I don't know why people thing gold is safe. Think about these nuggets: 1. In Greece the banks raided all the safe deposit boxes when money got tight. 2. When you sell gold, they take your fingerprints and all identification and the gov can make them turn that over if it wants. 3. There have been times in history when governments simply taxed gold coins and bullion so extremely high that it no longer had much value to an individual, and hoarding it without paying tax could get you sent to jail. So good luck with those gold coins being the end all you're counting on.

Gary R. Welsh said...

I know a guy who is worth more than $600 million who had a very large underground vault built at one of his homes in a rural area to store large quantities of gold.

Sir Hailstone said...

Didn't the great socialist President Franklin Delano Roosevelt make it illegal to possess large quantities of gold in 1933??

LamLawIndy said...

Actually, alcohol is a pretty good prepper investment. When the SHTF, you'd be able to trade a bottle of rum for quite a bundle.

Anonymous said...

I'm pretty sure the capital gains rate on gold sales is already 25%. When governments want gold, or want the population to divest of gold, they have every weapon in their arsenal to do that. Its a fiction that gold coins will save you in perilous times. You can't spend it at the gas station or grocery store. And if the bad guys find out you have a ton of gold in your house, you're a dead man.

Anonymous said...

The Banking Crisis Explained.

Paddy decides to buy his daughter a horse from a local farmer for £100 and the farmer agrees to deliver him as soon as he can.

The next day he drove up and said, 'Sorry Paddy, but I have some very bad news, your horse died in the night'.

Paddy replied, 'No worries, just give me my money back.'

The farmer, wringing his hands, said, 'Sorry Paddy, I can't do that, I've already spent it.'

Paddy said, 'OK, then, I'll just have to raffle him off'.

The farmer said, 'You can't raffle a dead horse!' Paddy said, 'Sure I can, watch me, I just won't tell anybody he's dead.'

A month later the farmer met up with Paddy and asked, 'What happened about the raffle?'

Paddy said, 'It worked perfectly just as I said it would'.

'I sold 500 tickets at two pounds apiece and made a profit of £898.00'

The farmer said, 'Didn't anyone complain?'

Paddy said, 'Only the guy who won, so I gave him his two pounds back.'

Paddy is a director of the Federal Reserve Bank

Pete Boggs said...

Establishment mythology, laughably asserts that "special" DNA will somehow protect them; from the very policies of destruction they promote & exploit.