A Tipping Point In The Financial System

tipping pointMarch and April 2013 may go down in history as the tipping point for the western financial system.
The veil of banker honesty has been lifted. The EU/IMF/ECB will do whatever is necessary to support the banks, even if it means they will confiscate (tax, steal, bail-in) customer deposits.
Customer deposits are NOT assets held in the bank for safe-keeping, but are liabilities of the bank and are not guaranteed to be made whole.
Billions of dollars were removed prior to the Cyprus freeze, so insiders clearly knew in advance of the ordinary depositors (see below). There is no “level playing field” when billions of dollars/euros are in play.
According to Jeroen Dijsselbloem, Dutch finance minister and Euro Group President, this is “the template for any future bank bailouts.” In other words, your deposits are considerably less safe than you thought. Your bank could fail, and your deposits might be used to compensate for derivative losses or other losses that the bank incurred.

 

2013 Silver Eagles As Low As $2.59 Over Spot at SDBullion!

Submitted by Deviant Investor:

 

March and April 2013 may go down in history as the tipping point for the western financial system.

We have already seen:

  • Lehman Brothers and many other financial firms collapse.
  • $700 Billion in TARP funds arranged by banking insiders for banking insiders at the expense of US taxpayers.
  • Over $16 Trillion in bailouts, guarantees, swaps, and loans created by the Fed and given to various banks, nations, and other insiders.
  • MFGlobal took “segregated” customer funds, the exchange provided no compensation to customers, and yet no criminal indictments have been issued.
  • Global derivatives total $700 Trillion to well over $1,000 Trillion, depending on who is counting. Some are “toxic waste.”
  • Many European bailouts and “fixes.”
  • Spain, Italy, Slovenia, and perhaps France in trouble.
  • US official debt approaching $17 Trillion with unfunded liabilities many times larger.
  • The Federal Reserve creating $85 Billion per month (over $115,000,000 per hour) to support banks and the US government.

So what other disasters could occur? In a word, Cyprus!

  • Not because the EU and Cyprus took Russian money.
  • Not because several banks will close.
  • Not because some deposits will be confiscated and/or frozen.

In my opinion, the sign that a tipping point has occurred in the financial system is the real story:

  • The veil of banker honesty has been lifted. The EU/IMF/ECB will do whatever is necessary to support the banks, even if it means they will confiscate (tax, steal, bail-in) customer deposits.
  • Customer deposits are NOT assets held in the bank for safe-keeping, but are liabilities of the bank and are not guaranteed to be made whole.
  • Billions of dollars were removed prior to the Cyprus freeze, so insiders clearly knew in advance of the ordinary depositors (see below). There is no “level playing field” when billions of dollars/euros are in play.
  • According to Jeroen Dijsselbloem, Dutch finance minister and Euro Group President, this is “the template for any future bank bailouts.” In other words, your deposits are considerably less safe than you thought. Your bank could fail, and your deposits might be used to compensate for derivative losses or other losses that the bank incurred.
  • The FDIC in the US, as well as England, Canada, and New Zealand, has announced similar policies, agreements, and plans to confiscate deposits in the case of an emergency. Is this a sign that an emergency is not only possible but probable and imminent?
  • Confidence in the banking and financial system has been seriously damaged, perhaps irreversibly.

Following are a few quotes from respected commentators:

Jim Sinclair: If the fools that have attacked Cyprus persist then it is the start of an avalanche that will destroy confidence in fiat currency, the fractional reserve system and central banks. What are the central bankers terrified of? My answer is the mountain of old OTC derivative coming home to roost.” Link.

Tyler Durden: “With every passing day, it becomes clearer and clearer the Cyprus deposit confiscation “news” was the most unsurprising outcome for the nation’s financial system and was known by virtually everyone on the ground days and weeks in advance: first it was disclosed that Russians had been pulling their money, then it was suggested the president himself had made sure some €21 million of his family’s money was parked safely in London, then we showed a massive surge in Cyprus deposit outflows in February, and now the latest news is that a list of 132 companies and individuals has emerged who withdrew their €-denominated deposits in the two weeks from March 1 to March 15, among which the previously noted company Loutsios & Sons which is alleged to have ties with the current Cypriot president Anastasiadis.” Link.

Peter Cooper: “Depositors in the beleaguered Bank of Cyprus are now facing losses of 60 per cent on deposits over 100,000 euros as the Cyprus Government seems to have woken up to the fact that this is its last chance to steal money off these mainly foreign depositors. It’s an absolute travesty and a red letter day for European Union banks…

“Money in EU bank accounts is clearly now up for grabs by any government that recapitalizes its banking sector. Moreover, the Cyprus precedent is going to cause a run on the weaker banks that will make this sort of recapitalization inevitable. Standby for a systemic banking crisis in the EU…

“What the EU has done in Cyprus is the modern equivalent of the failure of the Credit Anstaldt in 1931 that brought on the Great Depression with thousands of banking failures around the world.” Link.

Jim Sinclair: “I believe Cyprus is the defining moment whereby the physical market for gold overtakes the paper market for gold as the arbiter of price. When that occurred in 1979 the price of gold began its move to seek its maximum valuation.” Link.

Julian DW Phillips: “When it was announced [in Cyprus] that both large and small depositors were to have a percentage of their deposits seized, it was not the amount that horrified the world but the discovery that you do not own your own bank deposits… Most investors worldwide are of the belief that when you deposit your money in a bank, it simply has safe-keeping of that money. The realization that you have lent the bank your money and are an “Unsecured Creditor” of the bank is an unpleasant revelation.” Link.

Michael Snyder: “What you are about to see absolutely amazed me when I first saw it. The Canadian government is actually proposing that what just happened in Cyprus should be used as a blueprint for future bank failures up in Canada.

The following comes from pages 144 and 145 of “Economic Action Plan 2013″ which you can find right here. Apparently the goal is to find a way to rescue “systemically important banks” without the use of taxpayer funds…”

“In addition, branches of the two largest banks in Cyprus were kept open in Moscow and London even after all of the banks in Cyprus itself were shut down. So wealthy Russians and wealthy Brits have been able to take all of their money out of those banks while the people of Cyprus have been unable to…”

“The global elite are fundamentally changing the game. From now on, no bank account on earth will ever be able to be considered “100% safe” again. This is going to create an atmosphere of fear and panic, and no financial system can operate normally when you destroy the confidence that people have in it.

Confidence is a funny thing – it can take decades to build, but it can be destroyed in a single moment.” Link.

Ellen Brown: “Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.” Link.

Richard Russell: “I’ve been asked to name one future situation of which I’m most certain. My answer is this – I believe the surest situation (change) in America’s future is a decline, even a drastic decline, in our standard of living. We’ve spent it; we’ve spent what we didn’t have. And somewhere ahead, probably much sooner than we think, will come payback time. And it won’t be pretty.” Link.

Summary

  • Bank deposits are neither safe nor sacred. What you think is true might be false and costly.
  • More financial disasters are inevitable and imminent. Your standard of living is likely to decline.
  • Insiders – the political and financial elite – will benefit at the expense of the other 99%. (Nothing new here.)
  • Governments, agencies, and bankers are preparing for more confiscations. Plan on it! It’s going to end badly!
  • Buy gold and silver and remove it from the banking system. Silver and gold purchases
  • The next few years will be very problematic for citizens of Europe and the United States. Preparation is essential.

 

Comments

  1. Leaving aside the fact that the CEO of Italy’s largest bank said bail-ins are a good idea and a template for the future, the othe shoe just dropped.  Spain has not expropriated 97% of al Spainish pension into their CCC- bonds.  
    If bail-ins are the new  salvation template to save banks, the theft of pensions is the new template for saving government bond markets.  The dots are pretty clear to me

    • Dammit, AG, I just hate it when you are right about this kind of thing!  :-(
       
      Time to make another timely withdrawal of IRA fiat and a conversion to REAL money.

    • At this point in our existence the “if you don’t hold it you don’t own it” really hits home. Even if what you hold is fiat at least it isn’t in digital form where the greedy bankers can get their hands on it.

  2. The price action has been mostly disheartening for silver for a long time now, similar to post crash 3 1/2 year consolidation of the $10-20 range.   We are already 2 years into this one.   I will not be unhappy with silver at $50 in 1 1/2 more years if the consolidation period repeats itself.    I am not sure it will take 3/1/2 years to breakout, this PM bull market is more advanced now, and the greatest price advances occur in the latter stages.   I am quite certain neither the Dow nor bonds will advance 100% from these levels however.   On the flip side, I could see the Dow plunging 50% or more in a panic, but I think silver dropping to $14 or below is ludicrous.   Probably more then half of primary silver mines would shutter, and what would base metal prices be if silver tanked?   In the basement, thus, many silver byproduct mines (primary base metal deposits) would ALSO SHUTTER.   Don’t like the uncertainty?   Well, consider now that BANK DEPOSITS don’t belong to you, nor do your IRA and 401k!!   So do you like REAL money in your hand yet?   I don’t regret all the silver I bought at $15-20 when it went to $10-12 multiple times after that, and I suspect people who bought silver at higher prices than the current COMEX/LBMA “price” will be exonerated with the passage of time and future events.

    • “I am quite certain neither the Dow nor bonds will advance 100% from these levels however.”
       
      In order to know that, we will need to know how much more money the Fed is going to print.  If they double the supply of currency, as Japan is now doing, stock prices could easily double to match.  Other than this, I agree that it is unlikely that the  Dow 30 will advance to such levels anytime soon.
       
      Bonds are much trickier, though.  The Fed has pretty much taken over the UST bond market, so there is no way to know what will happen there.  My guess is that the Fed will not be able to hold rates this low forever and that at some point rates will begin to rise.  When that happens, bonds will take a beating in price.  This will cause people to panic and rush to the exits.  The first ones out will save most of their money but a lot of them will not get out in time.  If the rush is severe, it could collapse the bond market faster than the Fed can inflate it.  This will be an awful financial mess, if it occurs, and we will all suffer from the consequences, whether we own bonds or not.
       
      “On the flip side, I could see the Dow plunging 50% or more in a panic…”
       
      Agreed.  In fact, we saw exactly this in Oct 2008 – Mar 2009, so anything that has happened before can certainly happen again.  The current stock market is being levitated by the Fed.  The current US economy in no way justifies all time high stock prices.  Only rapid economic expansion could do that and we are far from that by any business metric with which I am familiar.  
       
      I like stocks, investing in them, and making money from them.  The current stock market has my teeth on edge, however, because asset prices are not being determined by company fundamentals.  Instead, they are being determined by Fed and Gov policies.  Successful economic decisions derive from very careful analysis of companies, sectors, and the national and world economies. But the decisions made these days are based more in politics than they are in economics.  It is a rare event when good politics and good economics converge.  This is most certainly not something that occurs on a sufficiently routine basis that we can continually make good decisions based upon it.  Yet, our politicians continue to try.  They will fail and they will fail miserably.  We need only look to the example of the USSR in the early 1990s to understand our economic fate, if we persist in using government policy as a mechanism for economic control.

  3.  
    One must wonder if all these globalist bankers today with their bought off politicians, judges and the like are not the direct descendants of the Money Changers that Christ threw out of the Second Temple some two thousand years ago!  History never tells a false tale; as sad as it may be eventually someone is going to get really pissed off and these crooks are going to start disappearing.  This is not justifiable either but until we get some honest, moral prosecutors and judges this will be the default.
     
    Eventually, “let them eat cake” just won’t cut it anymore and as history repeats itself the hangman’s noose, guillotine are firing squad will re-establish itself as public recourse to such blatant crimes.
     
    Let us hope that sanity prevails and societies invoke legal measures to reduce the probability of all out revolution.  None of us will benefit from that course of action.  The truth be known, in The States that is the main reason for politicians wanting stronger gun control measures, no right to bear arms, no right to anything other than slavery!
     

    • “History never tells a false tale…”
       
      History is ALWAYS written by the winners, so false tales abound, IMHO.
       
      I have a different analogy.  Any social system is somewhat like a pressure cooker.  During its normal operation is does a great and needed job.  But it also has to “blow off a little steam” from time to time to maintain safety.  The leaders can either allow this and channel it in a harmless direction OR they can clamp down on the lid and not allow any steam to escape.  The former approach is messy, inconvenient, and difficult to control but the latter can lead to complete disaster.  Eventually, the pressure will become so great that the cooker explodes and does terrific damage. 
       
      I wonder if those in power today even know what a pressure cooker is, let alone how it works?

  4. “Customer deposits are NOT assets held in the bank for safe-keeping, but are liabilities of the bank and are not guaranteed to be made whole.”
     
    Considering the threat to personal wealth that this creates, why should anyone put their money into a bank?  They are currently paying little to no interest on that money, so there is no financial reward for savers to allow banks to hold their money.  Yes, it will be relatively safe from common thieves but it is not common thieves who seem to pose the biggest threat to our money these days; it is the sticky-fingered bankers and their lackey politicians themselves!

Speak Your Mind