Tuesday, December 27, 2011

A Run On The Global Banking System—How Close Are We?

Nine weeks after its bankruptcy, the general public still hasn’t quite realized the implications of the MF Global scandal.

Once he looks down, then he’ll begin to fall.
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.

59 comments:

  1. Prigogne's Nobel applies here — a sudden change of state after enough energy/events have occurred to create the tipping point. The flash mobs lining up at Britain's Northern Rock were a warning sign that few paid attention to. The bankruptcy of governments — implying no pay out of the account guarantees — will be the "splat" after the fall.

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  2. You and Chris Martenson are at the top of the pile. Excellent analysis, better writing.

    Thank you.

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    1. Agree with what you are saying... caveat... you are advertising for Macrotrends and SPG which are both medium-hard-sell "end of the world your fiat money looks better in my account than it does in yours". How much are you getting out of referring customers over to them Gonzalo?

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  3. Gonzalo,

    Great job! You have a knack for making things clear and understandable. This is the best piece I have seen on explaining just what is happening. Thanks
    Tom

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  4. Any thoughts on if the price smash in gold and silver that corresponded with MF global was a gift to the SIFI's so they could get their money into hard assets?

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  5. Re. Jrandom’s question: It’s not like SIFI's deliberately torpedoed MFing Global, so no. But if the thing’s BK favorably affects asset prices, why not take advantage of it?

    My guess—and it’s just a guess—is that that was the SIFI's thinking, when MFing Global tanked.

    GL

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  6. Another example (of many) of your clear and logical writing. Thank you for the continued enlightenment!

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  7. maybe this is what the myans meant all along

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  8. Why not just open a cash account to avoid the risk presented by rehypothecation, and keep assets in equities that would be sheltered from a currency devaluation?

    Is that a reasonable solution for those of us who aren't excited about the prospect of buying gold & guns?

    Thanks for the thought-provoking article.

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  9. Conscience of a ConservativeDecember 27, 2011 at 9:27 PM

    If the monies were stolen from clients, then why does the theory of fraudulent conveyance not hold

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  10. http://english.economicpolicyjournal.com/2011/12/why-was-mf-global-put-through-sipa.html

    Here's the Senate report from Ch 7, Subch IV:

    "SENATE REPORT NO. 95-989

    [Section 765] Subsection (a) of this section [enacted as section 766(h)] provides that with respect to liquidation of commodity brokers which are not clearing organizations, the trustee shall distribute [commodity] customer property to customers on the basis and to the extent of such customers' allowed net equity claims, and in priority to all other claims. This section grants customers' claims first priority in the distribution of the estate. Subsection (b) [enacted as section 766(i)] grants the same priority to member property and other customer property in the liquidation of a clearing organization. A fundamental purpose of these provisions is to ensure that the property entrusted by customers to their brokers will not be subject to the risks of the broker's business and will be available for disbursement to customers if the broker becomes bankrupt."

    Seems pretty straightforward, right?

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  11. Do you remember the vision of the stock market bull, which our Saviour gave to me about fifteen months ago? I still find this a most interesting vision.

    In that vision, I was standing outside and saw a heavy plastic covering, which was draped over a large part of the ground. I went there and lifted up the heavy, plastic covering; and when I did, I saw that this heavy plastic was covering an underground gathering and people were rallying loudly. In the vision, I saw a pole and climbed down the pole to find myself standing amidst a crowd of people. These people were looking at an arena and were all cheering about the contestant in the arena.

    There was only one contestant in the arena, and this contestant was the Wall Street Bull. I, too, stood in amazement at the height and strength of that black bull. He was very big and strong. The people were rallying around him and saying, “Who is like the Bull?” Then, they answered their own question. “There is none like the Bull!” And, this loud rallying, shouting and praising of the bull went on for a while; but suddenly, and without any expectation, whatsoever, a trap door opened alongside the interior wall of the arena, and there rushed forth a giant crocodile.

    This crocodile charged into the right front leg of the bull and badly mangled the bull’s front leg. However, the people continued to cheer. They continued to rally around the bull saying, “The bull is still strong. The bull still has three strong legs. The bull is still strong! Who is like the bull?”

    This rallying and praising of the bull continued on for a while; and then suddenly, and without any expectation, whatsoever, the floor fell out from beneath the back legs of the Wall Street bull. And, down went the bull. He went crashing down for many stories in that great building and he came to rest far below. When the bull came to a stop, his body was full of giant wooden stakes, which had pierced his body on the way down. The bull was bleeding profusely and he would not be coming back. But, still many shouted and proclaimed, “He is coming back. The bull is coming back.” Yet, I knew that the bull was finished.

    The Mangled Leg of the Stock Market!

    Now, my Dear Ones, this is my question. What is this right front leg, which is so badly mangled? I have not known for sure, but as of now, I am feeling more and more confident that this mangled leg might be the futures market, the so-called derivatives market, or the options market. Are they all one in the same? I am most certainly not an expert, but I believe that they are all three peas in the same pod.

    So, are we already witnessing the badly mangled leg? Has it already happened? And, is the Stock Market now in the rallying phase before its fall? It is most certainly rallying and climbing higher at this time!

    Think about this fall of the derivatives market. I have read reports that the international losses, which have occurred in the Derivatives Market could top 1.5 quadrillion. This may be the signal our Saviour warned me about, the mangled leg that would lead to the crashing of the bull. Is this the warning bell that the crash of the bull is very near? Read on.

    continued..
    http://prophecies.org/DOCS/Book%2012/Chapter85.htm

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  12. Gonzalo:

    I'd be very interested in your input on any of the ideas discussed here, if you get the chance:

    http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-edition-part-i/

    http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-edition-part-ii/

    http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-edition-part-iii/

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  13. I have to agree with this article. This MF Global situation already bothered me. I don't
    trust my bank. What to do? Okay I don't mind
    pulling out my money. I do that every month. I am also invested in miningcompanies through the
    bank. Should I liquidate everything...??? This
    is a big step for me to be honest. I expect that those gold and silvermines will be my ticket to an early retirement.

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  14. I should add that the three linked posts deal primarily with the idea of a universal debt jubilee and a change to a gold-redeemable monetary unit of account.

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  15. Agree with what you are saying... caveat... you are advertising for Macrotrends and SPG which are both medium-hard-sell "end of the world your fiat money looks better in my account than it does in yours". How much are you getting out of referring customers over to them Gonzalo?

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  16. When you say that it takes only a small part of a banks depositors to set off a panic, you are absolutely correct. It can be done electronically by the really big depositors within hours. This is how the entire system will come down I do believe. The vast majority of us working serfs will never see it coming. My guess is 2013. FWIW, here's my predictions for 2012:

    http://themeanoldinvestor.blogspot.com/2011/12/predictions-for-2012-flames-of-war.html

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  17. All this basically boils down to the obvious.

    We should be creating high powered working capital in mutual credit schemes. Interest free, of course.
    The technology is there.

    But people still don't get the message.

    We need to get away from these people and their usurious fraudulent cons.

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  18. Tks GL

    You have reaffirmed my call, in your last piece, that CB's are indeed evil empires. They are part of the so called "system" which is heavily weighted in favour of the banking fraternity. You are correct in your statement that the System is not corrupt....however imho,it is misconceived and devised to ensure that the real winners will always be the ones with the most to lose.

    For any of your readers who are interested I would suggest for them to study the creation of the Fed Reserve. Understand the real reason for its creation and who the actual "creators" were. Then and only then will all and sundry realise that it is not a question of the same acting without empathy/interests of/for the "average Joe".

    Important, I feel, to clarify that a "RUN" does not a collapse make. After all a run is the resultant of lack of confidence/ distrust of the financial system. In a market there is always two parties and buyers will step in when prices are cheap. Paper investments are just a medium of exchange for "convenience" but as long as the CB's and regulators and Banks "use" them, they will survive. I can understand the necessity for hard assets, just as I can understand the need for hard currencies. Do the two go hand in hand ?
    YES...after all, all assets need to be priced in some currency equivalent..dont they !!!!!!!!!!!!
    Paper currencies are doomed to fail, but only when there is an alternative that is mutually acceptable and beneficial to the CB's and banking fraternity. Society collapses in any other event because any failure of "paper" currency necessarily implies a lack of real value and determination or price discovery for "hard" assets.

    In summary, running to hard assets may seem astute because of the implied "touchy...feely" qualities...ie the physicality of an asset. Your quoted example is testament as to how paper can vanish into thin air.When/if there is a so-called run on the financial system, it would imply currencies are of no use either, as they are the linchpin to the system. The logical suggestion then is howis / what is an asset priced in. Holding physical does to some degree preserve wealth in the form of tangible assets. But the physical needs to be productive or capable of being converted to something that is productive.

    Is there enough physical or better still are there enough people with enough common sense to realise the importance/purpose of having physical assets and in doing so in a timely fashion. In all reality... I dont believe so. Those that do act ...I would suggest that they have an expectation for a LT hold. A ST or MT trade will be near on impossible unless they trade for similar "physical" assets.

    The more the financial system gets analysed the deeper one needs to go to find the ultimate resolution/answer.

    Liquid Motion

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    Replies
    1. Finally someone has done the right thing...an Article about the FED.....burn after reading...

      http://theeconomiccollapseblog.com/archives/10-things-that-every-american-should-know-about-the-federal-reserve

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  19. Anonymous (prophetic dream of Wall St.), you are right on. Its here, it's now. Its over.

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  20. You forgot about the silver hiest they pulled off too with other peoples metal investments. So they woundnt have to deliever from the comex. Your article was only half there telling the truth i think.

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  21. Actually, it was intentional. The 1.2 bln that disappeared had been in physical gold, and that is what they were after. The purpose was to sell the gold after the night fix, to push the price down. Everything else was a distortion and misdirection. 20 tons of gold was the target. This is why corzine has an official indulgency from the hbighest courts and he can curiously pretend to be insulting tptb by saying he has no idea where he had lost mere 1.2 bln. You try to pull that same trick, Gonzalo, and watch how quickly they will throw a book at you.

    I liked your analysis, but basically, what I see is that everyone in the west is just a sitting duck. You still believe that MFG bk had happened unintentionally. Which means you have absolutely no realization of what is going on.Meaning, in turn, that your strategies on how to deal with crisis are not valuable, because you do not call the situation correctly.

    I see this everywhere in the west, you have been lied to for so long, you actually believe that "shit" just happened. No, it was planned that way. In other words, westerners although skilled shooters are currently walking into a trap believing that this is just an incidental tripwire across their way. Again, this cannot be called being prepared, as this view prevents any anticipation.

    What to do? LOL

    Read a question a few comments above. There are people who are not comfortable getting rid of fake money. This shows that people are childish, no one takes anything seriously. Imagine a jew who had been told that he needs to get out of Germany, and upon weighting the prospects of a gas stove vs. being alive, he says "I am just not comfortable about crossing the border of Switzerland".

    LOL no?

    The solution is simple, - conversion (NOW) of what will be forgiven into what will count. You have prepare to ride this wave on the same side of the wave tptb are going to ride.

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  22. Well if this doesn't bring the end of the world, just wait 'til December when it's predicted again.
    See you in 2013.....when Obama will be serving his second term....wanna bet?

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  23. Hello,

    America seems to be having a serious problem with something called the rule of law.

    Corzine is/was one of Obama's chief money raisers on Wall Street. It will be a great measure of the status of the rule of law in America whether Corzine is prosecuted and sent to prison for a very long time.

    The apparant corruption of the exchange and Morgan bank were well presented by GL and need no comment from me except to ask: how much are you surprised by any of this? And if you're not seriously shocked (which I assume you're not), then what does that tell you about America these days generally?

    Meanwhile hundreds of thousands of mortgage related felonies are committed in such plain sight that any first year law student could recognize them, and Obama maintains with a straight face that no laws were broken. Yet close to half the country still supports him.

    Meanwhile, the Senate passed the military funding bill that included serious curtailments of the right to habeas corpus and due process for American citizens. They passed it 93 - 7. Question: How many of these guys will be defeated this year because of this vote?

    Meanwhile Newt runs for president calling for arresting judges he doesn't agree with, and so on. Is there some law that would let him do that? If there isn't, then why don't republican primary voters just laugh this guy off the stage? But they don't.

    The MFG affair is just one more thing indicating that a once great country has jumped the tracks in so many ways. Any citizen in America who votes for any of these people, frankly, is part of the problem and is contributing to the continuation of the lawlessness in that country.

    One last suggestion. Take a close look at the names of the seven senators who voted in favour of maintaining the, now all but defunct, American constitution. There are some on the "right" and some on the "left", but they all deserve your deep respect, whatever your politics.

    Regards,

    Unna

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  24. It wasn't that many years ago, theft was against the law..

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  25. AM I the only one sick and tired of hearing of the forthcoming collapse.
    Nothing seems to bring the trough scoffers down.
    Nothing!
    They thieve, lie, cheat, openly rob like Sherriff of Nottinghams on crack.
    Nothing! not a thing happens.
    No one does a thing!.
    Why aren't the people of America marching on the Capital?
    Why aren't we in Britain marching on Westminster.
    We know there is barely an honest politician.
    We know who pays them.
    Even in Russia some old commies, neo cons and liberals are on the streets admittedly paid for by George Soros and the American and British taxpayers - but they are out.
    Egyptians are dying, Yemeni and Bahreinis dying.
    We in Britain and America are being absolutely BSed, yet we do nothing except post comments like this letting off hot air and waiting for the come uppance, the promised!! comeuppance of the 1% that is stubbornly refusing to come up.
    I want to see it happen this side of 2020 and I suppose we have yet another 8 years of 'the collapse' is coming.
    When?, please put me out my misery.?

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  26. As I read about this lack of protection of segregated funds in brokerage accounts, my mind turns to similarly segregated accounts related to insurance companies. A different situation in that assets are segregated and ring fenced to insure the money is there for meeting death benefits and the like. I've a friend of mine that swears that the safest place to be is to have some cash value built up in a life insurance policy in light of state regulations that require that these assets be ring fenced, but in a collapse, whatever those proceeds are invested in are at risk and for all we know may have been effectively "rehypothecated" in some way. It just seems to me that the criminals are scouring the financial landscape to get their hands on any money that exists anywhere and no place is safe. I think the best physical asset one can have is land and the means to make it productive.

    Also, it's quite telling that we've not heard from any other MF Global customers other than Celente. Whereas most folks here are familiar with him, his audience is limited to financial types and the broader public doesn't know his story. If farmers and others were on TV or even at the congressional hearings, then the broader public might have an understanding of what went down. This is being deliberately squelched through a conspiracy of the government and the media.

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  27. The invasion of property rights is a slippery slope; today not only customer’s money, but their futures contracts are being ‘commingled’ with the capital of the depositories. The ‘furniture’ held in the MF Global ‘warehouse’ was used by the criminals in charge to try and save their own bacon. This theft shows what road we are on; the odor of burning sulfur grows stronger every day! If we do not establish an unadulterated, stable Gold standard under the world economy, our civilization is doomed.

    Rudy J. Fritsch

    Editor in Chief

    The Gold Standard Institute

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  28. Coming soon to a city near you. . . United States Spring. It's time for change

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  29. Was the correct process followed when GM went under?
    Who was first in line for the remaining resources?
    The investors or UAW?

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  30. It would be foolish of me to comment on the validity of the claims made for or against MF Global without access to the contract between the brokers and MF Global.
    I think it is also foolish for anyone to make any assumptions without the facts before them.

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  31. 30 yrs of mostly successful trading with Lind-Waldock, later MFG.

    I was temporarily flat and zeroed out of my acct when the BK announced. So, had another good year, just taking time out but subliminally worried about WTfuck is happening to the USA.

    Just luck?...lol

    The MFG in-your-face theft is shocking.

    Totally agree with everything in the GL article. I'm getting totally out of paper.

    Farmland & phyz only.

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  32. Its must be a coincedence how 614,000 onces of silver dissappeared out of MF Global accounts and then magically reappeared in J.P. Morgans accounts a week later. Welcome to the Banana Republic of the USSA.

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  33. Anonymous @ Dec 29, 2011 8:01 AM,

    Yep, was it not amazing? Of course, that and the fact that Corzine has some sort of high-powered immunity is just coincidental, and not pointing to any sort of intentional action at all!

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  34. when JPMorgan accepted the security, was it not their duty to do proper due diligence to be sure they have "legal" security?
    is JPMorgan not guilty as an accessory to this crime?
    if i am right then the fraud is even greater by regulators rewarding fraudulent behavior!
    what is the use of having regulators?
    this is already a wild west situation where the regulators are the soldiers of the robbers.
    j.b.

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  35. "Why aren't we marching on the Capital?" We tried that -- camped out for weeks, "occupied", and what happened? They sent their paramilitarized police after us with dogs, chemical sprays and stun grenades. They bulldozed the place, threw 5,000 donated books in a dumpster and told everybody to go home.

    I guess you missed that part.

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  36. Wow! What a show!

    Anyone care for popcorn?

    K Smith

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  37. Your money is safe if you follow the central banker-backed Communitarian UN Sustainable Development Agenda 21 plan, which is public and documented in detail. Then you can tell what the overall political plan is, and plan for the future accordingly.

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  38. The only solution is to pay off all of your debts piece by piece and quit participating and abetting theft by propping up banks and politicians.Buy land and livestock and become an amswer to the problem

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  39. I learned a very long time ago that most of the wall street brokers are crooks.
    I have since been investing in real estate only. I might ad I have done VERY well despite the "crash". In fact I am making more money now than I have in the past five years.

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  40. See this interview with Ann Barnhardt on the implications of the MF Global collapse, and what it means for the US futures markets.

    Very profound comments.

    http://www.financialsense.com/financial-sense-newshour/guest-expert/2011/12/30/ann-barnhardt/the-futures-options-market-destroyed-by-the-mf-global-collapse?q=contributors/2011/12/02/ann-barnhardt/interview-transcript

    ReplyDelete
  41. I read the alarming interview with Ann Barnhardt at Financial Sense (posted by anon at 2:48 on 12/30/11). She urges people to liquidate their 401ks, take the 10% penalty, and get into physical assets. She states that the MF Global swindle proves that the rule of law is gone and that everything that can be stolen will be in the future and that we're headed for civil war in this country.

    So this poses some questions:

    For over a year now various websites and bloggers have been predicting complete financial collapse, yet it still hasn't come. Are people just crying wolf?

    If the evil, corrupt thieves who stole customers' money from MF Global plan to steal 401ks and other accounts, how can they possibly think they can get away with THAT? America is not Argentina. There are a lot of angry people here and a lot of gun owners. Confiscating a few hundred accounts at MF Global is one thing (and horrible indeed) but then confiscating thousands of ordinary folks' savings via their pension and brokerage accounts would set off America's Second Civil War against the political and/or financial class. Millions of people with pitchforks and guns would descend upon Washington D.C. and Wall Street. Would the corrupt elite seriously risk THAT?

    -A reader from California

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  42. RE: California Reader who posts; 'Millions of people with pitchforks and guns would descend upon Washington D.C. and Wall Street. Would the corrupt elite seriously risk THAT?' The short answer? Yes. The crackdown on Occupy Wall Street in virtually every US city was simply a micro version of what you will see if folks FINALLY take to the streets. By the time the masses figure all this out, it is already too late. Plus, most people, even here on this blog, probably were the ones cheering when the riot police pepper sprayed, physically beat and then arrested peaceful OWS demonstrators. If they will do this to peaceful and unarmed civilians, just think what they have planned for the folks carrying guns and pitchforks.

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  43. Anonymous @ December 30, 2011 12:58 PM,

    How horribly wrong you are...
    It's OK, we've all gone through this stages, but actually try not to do anything you're advising.

    Hint: do exactly what the govt does. Why? Because they are planning the show, and if you want the good seat without knowing where it would be, your bets bet is to follow those who ordered themselves a good seat!

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  44. A reader from California,

    So, you've been warned that the law is gone, and instead of heeding that, you wonder how is it she's going to be right?

    Do you even have the pitchfork? And what good is it going to do against modern arsenal in hands of police and military (btw, the military was just authorized to kill you, the citizen, right here at home), can you match the drones, where you the one getting recent experience in murdering people in Iraq and Afghanistan?

    Please! Marching on Washington and missing out on American Idol and Fear Factor?

    The most that will happen is just another blog post.

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  45. The message should be crystal clear.
    Let me spell it out ...

    Protect yourself.
    Don't expect that the Government, the law, or the normal rules of finance to work in your favor from now on. They will not.

    The big banks are fighting for survival, and the right to be the ultimate winners in a global slugfest. They only thing they are concerned about is acquiring assets tied to collateral that has real and tangible value. Look at what happened to MF Global. The real assets were raided and taken over by the big banks. The paper assets were abandoned. The small-time investors were screwed.

    The system does not care if you lose your 401k, your lifesavings, or your home. You do not matter to them.

    Take care of yourself - and do it now.

    ReplyDelete
  46. THE BIG QUESTIONIS WHERE DID THE BILLION DOLLARS GO? BLIND FREEDY KNOWS THE SYSTEM IS A TRAIN WRECK,I THINK LIKE MAX KEISER. ANYWAY GREAT ARTICLE RIGHT ON THE MONEY. GREAT SITE. CHECK OUT MY FAUVORITE VIDEO!! http://www.youtube.com/watch?v=JYPqN7bbxaA&feature=player_embedded

    ReplyDelete
  47. Good article and good comments. Only thing left out is the betrayal by the CME. That is like the SEC saying that your broke stock broker can run off with your equities account. Also, when I look at contracts with commodities brokers, I see that one paragraph says that accounts are strictly segregated. The next para says that if the broker goes bankrupt, the customer may not get all their money back. So what kind of a segregated account is that??!! You have to agree to this BS to do business with them. Were they planning in advance to have you agree to let them steal from you?

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  48. SIFI = Systemically Important Financial Institutions

    Is SIFI the new short version buzz word for "too big to fail."

    Nice write GL.
    Kansas

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  49. To Unna

    Newt did not say he would arrest judges he did not agree with. He said that
    if a judge, summoned to testify before congress, refused to appear at hearings then he would send the police to bring them. The same thing that would probably happen to you if you didn't show up.

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  50. Well, now we know what the 'MF' really stands for.

    As Gerald Celente said, "This is the Mother of all Fuck-ups." And it PROVES beyond all doubt and to all points of certainty that the regulators are owned by the banksters.

    I think the details are right on target. I'm just waiting for some shoes to drop.

    I'll probably be waiting a LONG time for that to happen, though.

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  51. That kind of business is immoral, so none can be very surprised if he loses. Dr. Leos.

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  52. I have study reviews the fact that global losses, which have occurred in your Derivatives market place could best 1.5 quadrillion.

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  53. "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."

    The American people should have gotten bailed out first back in 2008 so smaller, more local banks and lending institutions, could pick over the scraps of bigger dinosaur banks.

    ReplyDelete
  54. all the common people around the world are getting the same shi... and they absolutely do not care about us. And this is just a beginning ...

    check this out .. http://www.youtube.com/watch?v=IYyNXmAOmX8&feature=related

    ReplyDelete
  55. Why not just open a cash account to avoid the risk presented by rehypothecation, and keep assets in equities that would be sheltered from a currency devaluation?

    Is that a reasonable solution for those of us who aren't excited about the prospect of buying gold & guns?

    Thanks for the thought-provoking article.

    ReplyDelete

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