E.U. Officially Adopts the Bank Depositors Bail-In

Almost a year ago to the day I wrote a piece called Derivatives and the Real World Implications, citing that bail-ins would be coming to the UK. This issue has been picked up by Andy Sutton @ Market Oracle.com, well here’s the proof but not all hope is lost. You can still exchange your worthless pieces of paper and digital 1’s and 0’s for gold and silver. People have foolishly put their faith in government and their ability to manage ‘money’, they have failed us but it is all by design and agenda. Fail to prepare, prepare to fail:

It has now been more than a year since that fateful weekend in the Mediterranean when everything changed. However, like most of the big changes we’ve seen lately, there is a subtlety afoot that somehow results in few noticing. This should surprise no one really. How the world can change in such dramatic ways without any type of mass awakening is a topic more for the psychologists who help pull the strings and the evil they represent than for anyone involved in the analysis of economics and events, but I say the above so that you know you’re not kidding anyone.

Even a year later, the subtlety continues and ignorance abounds. Most still don’t know the ramifications of the passage of the Dodd-Frank bill back in 2010. They take it at its word that it is a consumer protection act, but is nothing of the sort. They’ll reap what they sow. The evidence has been plentiful, the analysis outstanding. There have been countless opportunities for people to learn of the truth. Ours is not to concern ourselves with those who refuse to have their eyes opened, but for those who are seeking knowledge. After all, nobody can fault someone who doesn’t know, but wants to. There are plenty who do, especially in light of the EU’s passage of a new set of bail-in ‘rules’ this week. Much of this was already known and previously agreed to, but there are some more interesting spin-offs and it is definitely worth revisiting. The mere fact that they’re spending so much time prepping for another bank blowup essentially guarantees that one is coming at some point. These things tend to become self-fulfilling prophecies in and of themselves, and when there is so much potential looting and pillaging to be done, all the more so!

We want to state up front that this is an extensive subject and that it is impossible to provide a comprehensive look at all the facets of the emerging truth regarding the bail-in mechanism and the entire associated minutia in a single essay. Our commitment is to dedicate our remaining articles to this topic alone in the hopes of providing a singular source of information on the topic. Continue reading

Nigel Farage @ Sovereign Man…Get your money out of EU banks

I’m no fan of UKIP but I do like Mr Farage when it comes to Europe. In 2 minutes he berates the Euro, Francois Hollande and tells savers and investors alike, get your money out of the Euro zone banks before they come for your money.

He also mentions Slovenia being the next to require a bailout which I’ve been talking about with friends for the last couple of months…we’ll be hearing more on Luxembourg soon and not forgetting the bank fraud at AIB in Ireland. Video was from the Sovereign Man conference in Chile.

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Derivatives and the Real World Implications

The derivatives market is part of the financial system which operates behind the stock market and shadow banking system. It essentially leverages bets (forward, option or swaps) on the value of commodities, stocks, bonds, interest rates, currencies and anything else they can think of. The value of the market which is hard to nail down but estimates at $700 trillion-$1.4 quadrillion, considering the worlds GDP is about $65 trillion a year, its rather under reported.

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Straight from wiki:

“A derivative is a financial instrument which derives its value from the value of underlying entities such as an asset, index, or interest rate. “A derivative is a financial contract whose value is derived from the performance of underlying market factors, such as interest rates, currency exchange rates, and commodity, credit, and equity prices. Derivative transactions include an assortment of financial contracts, including structured debt obligations and deposits, swaps, futures, options, caps, floors, collars, forwards, and various combinations thereof.”

Why is this relevant? Silverdoctors broke the news below and were subsequently hacked. Here’s a slice:

In the introduction, the resolution informs readers that the FDIC and the Bank of England have been working together to formulate the new bail-in model for future bank failures:

The Federal Deposit Insurance Corporation (FDIC) and the Bank of England—together with the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, and the Financial Services Authority— have been working to develop resolution strategies for the failure of globally active, systemically important, financial institutions (SIFIs or G-SIFIs) with significant operations on both sides of the Atlantic.

The goal is to produce resolution strategies that could be implemented for the failure of one or more of the largest financial institutions with extensive activities in our respective jurisdictions. These resolution strategies should maintain systemically important operations and contain threats to financial stability. They should also assign losses to shareholders and unsecured creditors in the group, thereby avoiding the need for a bailout by taxpayers.

The joint US/UK resolution states that depositor haircuts are already legal in the UK thanks to the 2009 UK Banking Act:

In the U.K., the strategy has been developed on the basis of the powers provided by the U.K. Banking Act 2009 and in anticipation of the further powers that will be provided by the European Union Recovery and Resolution Directive and the domestic reforms that implement the recommendations of the U.K. Independent Commission on Banking. Such a strategy would involve the bail-in (write-down or conversion) of creditors at the top of the group in order to restore the whole group to solvency. And that the legal authority has already been given in the US buried in Dodd-Frank Act.

In Laymans terms, if and when a systemic crash happens, customers accounts will be raided!

But today it was revealed that Deutcshe Bank and not JP Morgan, who has the highest derivatives exposure in the world. Located on page 87 of the annual 2012 report it states that its derivatives exposure is €55,605,039,000,000.

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Convert that into USD at the current EURUSD exchange rates 29/4/13, it amounts to $72,842,601,090,000…About $2 trillion more than JPMorgan. Through the magical and mythical accounting procedure of netting, this number collapses into €776.7 billion in positive market value exposure (assets), and €756.4 billion in negative market value exposure (liabilities). Rather than magic I’d like to call it what it is, ACCOUNTING FRAUD.

What does that much exposure look like compared to the German GDP?

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It’s worrying that big banks can have so much exposure to highly leveraged instruments and when it goes South, Mr Joe Public will have to take the hit, Cyprus was just a try out and it’s coming to a bank near you!

The question is how to protect yourself? Hard assets like land, property and precious metals such as gold or silver would be a good investment and act as a hedge against a bank collapse, as well as inflation. Having a supply of fiat currency would also help protect you if the banks decided to carry out a bail-in.

Testing times are ahead of us.