Figured it Out - Bail-Ins are for Amateurs

Thu, Aug 7, 2014 - 12:29am

Fiat paper schemes always end with the currency devaluing to zero, worthless. Along the way, though, through the years, history teaches us that those in power, that is, those issuing the worthless colored paper, always resort to trickery, deceit, then war all in an effort to remain in power.

Recently, we have seen, as was done in Cyprus, and has been commented upon by many pundits, and can expect the banking institutions that are too big to fail to resort to outright theft of depositor funds to remain solvent. Remember, to a bank, a deposit is a liability, which must be repaid.

We have also seen countless schemes whereby the big institutions holding onto deposits, or investors' cash, have simply rehypothecated, or pledged the same funds time and time again as collateral for loans, which are then used to speculate in the markets or with exotic derivatives. Anyone need a refresher course need only google MF Global and Corzine for an in-depth lesson.

Of late, there has been open outcry, that it is impossible to earn large, crazy wealthy sums simply from creating a business and selling products. No, something more is required to get one's hands upon generational wealth. That "something more" requires one to embrace the paper fiat scheme, and immerse oneself.

This concept of wealth creation being possible only from immersion into the paper fiat scheme, whether through investment banking, stock trading, hedge funds, buying and selling paper assets, speculating on commodities, what not, has attracted the very best and brightest. There is no comparable upside income potential, aside from crony capitalism and generational wealth that can be earned from political favors. However, that career path and trajectory are beset by extreme odds against success.

As a result of this obvious path to extreme wealth creation, naturally, those seeking such fabulous riches are irresistibly drawn to the financial sector. In this sector, all that matters is "scoreboard." It is not how hard one tries, or that one put in a good effort, or that one acted with high moral character, or honor, or any of the imbedded, traditional values that made the USA great long ago. Instead, the extreme short term time frame, 3 months, and an objective financial bottom line are the measuring sticks of success or failure, where coming in soundly within the bell curve is tantamount to an admission of mediocrity and necessarily, failure, because there is no incentive for any market participant that rewards mediocrity. None. In the end, it is all about the bottom line.

In this paradigm, then, naturally, rewards are doled out to those that succeed, that is, who do better than their peers, some of the best and brightest that have ever lived. Who among such a rarified breed, is going to be content as a middle-of-the-packer, when to enter the industry one must abandon any pretense of morality? Easy! NO ONE!

Based on this reasoning, then, those who do not share the financial industry type value system, cannot fathom the most basic understanding of what is driving the system, nor what to look for in predicting outcomes.

Like Mr. TF, who correctly, and for years, has predicted short and long term physical metals prices, based on his understanding that the commodity spaces are manipulated, once one embraces that concept, radical as it seems, and as unbelievable as it is, then making sense on the charts is, as TF so aptly notes, not too complicated at all.

In that spirit, I offer up a thought experiment that lead me to a conclusion that I believe explains a plausible end-game, slow burn, that is not at all a collapse, but is instead an orchestrated, but not controlled, descent of fiat towards its ultimate value of zero. Of course, this entails substitute currencies, under central control, likely backed by something of value. What that is is uncertain for now, but will reveal itself as time passes.

For now, let us turn to the facts upon which I base this analysis and conclusion.

What started me down this path is the seeming impossibility that regular folks in the USA will tolerate any such bail-in nonsense. I was bolstered in this thinking the other day at a local gun show I attended. I went to get a feel for the mood, and see whether the market had corrected back to normal following the Sandy Hook story. I believe strongly that it was staged, designed to usher in massive gun control, but failed as the powers that be realized that the red states are just not going to part with their guns. The puppet masters misread their abilities, and their puppet politicians could not complete their masters' tasks. Gun control failed for now, but as normal, will creep up time after time, as marginally, regular people lose interest, and the slick politicians erode rights at the margin. As I type this, California is looking to enact laws that allow family members to rat out a loved one, and enable authorities to seize firearms. No due process, screw the Second Amendment. This marginal erosion of gun possession rights is coming to every single place, eventually. Count on it.

Anyhow, back to the story. So, I am at the gun show, and I see table after table of guns, ammo, as far as the eye can see. Production has never abated, and people are buying hand over fist. New market suppliers are springing up in the face of increased demand. Supply and demand forces are working as should be, unlike in the physical precious metal space . . . But, I digress.

As I took this scene in, I became instantly struck by the likelihood of anyone in that building accepting some government decree taking any portion of anyone's hard-earned money, stored at a local bank. Not a chance in hell that the regular folks just meekly take losses like that. No way.

The regular folks are SEETHING. Washington politicians do not see it, nor do they want to see it. When Obummer comes to Los Angeles, traffic is snarled all day. Folks are PISSED OFF. It reminds me of the simmering racial tensions following the Rodney King video beating. It was all there, right out in the open, but most people did not want to talk about it. In mixed company, no one dared mention it. I was lucky, I had friends from all walks of life. I heard a total disconnect between my reality, and the reality of those less fortunate. We all remember the riots in Los Angeles in 1992. Koreans, armed, on rooftops, gangs of black youths rampaging, National Guard, fires, riots, lockdowns. OJ Simpson ripped open the wounds for more pain. Nothing was solved. Look what happened to OJ after a two-bit burglary in Las Vegas? Think the public is dumb, or disengaged? Not a chance. They are just uninformed, because their sources of information have been feeding them a massive daily infusion of brainwashing. Call it MOPE, or spin, or misdirection, whatever, the fact is that the truth has been withheld from the masses, deliberately.

As the truth leaks out, gradually, as it always does, people are slowly, ever so slowly, becoming aware. The gun crowd gets it, for sure, hence the effort to secure firearms and ammunition. Those red state voters understand that their colorful scraps of banker paper do not by as many rounds of ammo as they used to. The solution for them is not to complain about auditing the FED, or of returning to sound money, away from fiat. No, not at all. Heck, most of them know Fiat as a break-down prone Italian sportscar. Audit the FED? FED who? What's an audit? Like the IRS, and produce receipts? What?

Anyhow, the simple fact is that people know to spend their banker paper on durable goods. They got taken to the cleaners on the housing bust, so many people are wary, and renting. People are not foolishly taking on debt to buy the latest consumer good, either. Most people who need a flat screen TV, have one. New car? Maybe, but more likely is they are making do with less, repairing their things that break rather then replacing them with new. So, the people are aware and reacting, just not in ways politicians want them to react.

Which leads to the next huge understanding I reached. It dawned on me that there really are very few retirement options most people have. The wealthy do not worry, as they are invested in paper assets. They, by and large, see nothing, because they have reached success, and will do and say what it takes to keep the status quo operating, as they have benefited from it. They do not want change. The poor have no delusions of "retirement." Every day is a challenge. They are already getting government benefits, and they too want the system to remain intact. These are the great masses that make up the Free Shit Army. These are the voters coddled and coveted by those in elected office. These lower information voters are not at all going to do or say anything that upsets their free government transfer payments. If anything, they will complain and demand more, under various MOPE scenarios based on division and class envy.

The middle classe, though, is wholly dependent upon their pensions, whether from their 401k's, or their union pensions, or their govt pensions, what have you. The days of buying and holding, saving, and living on interest, are long gone, and are never coming back anytime soon. We all know this, as do all the overlords and secret back room meeting bosses. They know full well that the system is collapsing, in real time, and are desperately trying to keep it together.

They have seen fiat paper schemes implode, and are anxiously attempting to find a solution to the existing mess. For this, there is no doubt.

Only recently, though, did I see something that caused me to understand just HOW those banksters are going to pull of the greatest scam ever.

Remember, they cannot simply bail-in the Americans, because there will be massive uprisings, and there will actually be consequences. There are just too many guns, and too many pissed off, seething angry people who will, at the first chance, become active, violent, and will enact real reforms, with death and suffering as a result for many of the wealthy. For this, I have no doubt at all. There are not enough police personnel to quell the uprisings, and further, many of the local police forces will be taking care of their own families. I know this personally, on a big scale, and I also know that the powers that be know this as well. There is no delusion amongst the central planners that massive civil unrest will spell doom for those in charge.

As a result of this, and based on what transpired and is transpiring in Argentina, over the default on bonds, and the financial engineering that underlies that whole mess, I believe with 100 confidence that the end game scenario is going to play out in this fashion, as follows:

(1) Pension funds will be financially engineered such that the workers that have contributed their wages to the pension fund, will be given massive haircuts, on order of at least 50% or greater, both in the holdings of the pension fund, as well as upon payout based on the diminished holdings;

(2) The funds stolen by the pension fund managers, will be used to capitalize the TBTF institutions, keeping the system afloat;

(3) Because the pension funds will be, essentially raided, the workers will demand safeguards in the future, which the politicians will be only too happy to grant, thus requiring pensions to no longer invest in "risky" things like the stock market, or CDO's or any of the wall street financial schemes, but instead to invest in "safe" long term government bonds;

(4) After most of the pensions are looted, and the balance of funds are now invested in government bonds, there will be a currency reset, and the value of the pension funds that were converted to govt bonds will be further eroded, and of course,

(5) None of the pension funds will have invested in hard physical precious metals, which will explode in value to the upside.

(6) Anyone riding the bull this long will have amassed generational wealth, provided their family and friends still even talk to them.

If anyone doubts the premise of the very first point above, that is, that pension funds will be stolen by way of sophisticated financial engineering, then to those people, I ask them to please read this excellent piece over at nakedcapitalism:

The bottom line from the nakedcapitalism piece is that the workers, who contributed to their pension fund, had their funds stolen from them through outright theft by a corrupt fund manager, who also invested the funds in a high yield scheme whereby the pension fund was left holding the bag on worthless CDO's.

See, the crooks at the top are not going to just plainly "take" the money. No. They will use arcane concepts, driven by classic human emotion, like fear and greed (hat tip, Argentus for his great post on this recently), and will engineer turnover of the fund investments such that the poor, dumb workers end up taking the losses. The gains of course, all went to the corrupt, TBTF banks, which silently "hypothecated" the funds in the normal course of business and "thems is the breaks!"

This scenario will take place over years, not days or months. The system will hold together until it doesn't. But so long as it does, it will be a slow, gradual descent, marked by the occasional failed bank, headline, and then back to bread and circuses.

Remember the Greek bailouts? What happened to that? See what I mean?

Please, whatever you choose, prepare accordingly.

About the Author


Spartacus Rex
Aug 9, 2014 - 1:52am

[GATA] Dennis Gartman: Gold vs. The Force

Dennis Gartman: Gold vs. The Force

Submitted by cpowell on 07:41AM ET Friday, August 8, 2014. Section: Daily Dispatches

11a ET Friday, August 8, 2014

Dear Friend of GATA and Gold:

Doug Casey of Casey Research refuses to see gold market manipulation because it contradicts his ideology that markets are always bigger than governments. (If only they were, since then no government on the planet would remain in its current configuration and totalitarianism would be impossible.)

The job of CPM Group's Jeff "Pay No Attention to That Man Behind the Curtain" Christian depends on his denying gold market manipulation, since the market manipulators are his own clients, central banks.

But with his commentary today recognizing gold market manipulation and naming it "The Force," financial letter writer Dennis Gartman may signify that the End Times are approaching, wherein the obvious can be simultaneously acknowledged and dismissed as what everybody supposedly knew all along, though the record will show only denial and ridicule of assertions of what is now acknowledged as obvious.

The relevant excerpt from Gartman's commentary today is appended.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

By Dennis Gartman
The Gartman Letter
Friday, August 8, 2014

Regarding gold, of course it is strong: War is in the air and when war is in the air gold goes bid. What else can gold do? Capital is fleeing to the safe corners of the world, and when that happens it flees to gold. So we begin our discussion this morning noting this simple fact.

We note secondly that this shall be an important day for gold and for gold's future, for whoever or whatever has been the seller of gold on Fridays in recent days, weeks, and months cannot allow gold to trade upward through $1,325 and certainly it cannot allow gold to trade upward through $1,350 for that would send an inflationary fright through all other markets in all other places.

Hence -- and let's call this group The Force -- The Force will have to work very hard today to defend its authority. The question shall be: Will it?

The Force has already lost one very important battle: it has lost the battle at E975/oz., with gold trading now at or near E982 and with the truly psychologically and technically important E1,000/oz. level only just a bit ahead.

Once E1,000 is taken out -- and we think that it shall be, if not today, then next week if the geopolitical events unwind as badly as we fear they might -- then there is nothing that stems the advance until E1,100, noting that the peak for gold in euro terms was E1,350 back in late 2012.

Aug 8, 2014 - 9:09pm


Hell Bro I would love to meet you in DC but shit they won't allow me to pack my Piece. Sorry.

Hi everyone,

I have 6 coins I am looking to unload, a total of around 6.6 ounces.

3 Mexican gold pesos around 1.2057 ounces each
2 Chinese gold pandas
1 South African krugerrand

I would preferably like to sell to one buyer if possible.
I have dealt with Urban Roman in the past where I traded
around 100+ buffalo silver coins for some gold, the process went
very smoothly. If you are in the DC Metro area all the better,
we won't have to deal with shipping.

For price I thought we meet somewhere in between spot and what
you as an individual could buy from a shop so it would be an ideal
situation for both.

Going by today's prices:

Best price for a chinese panda right now is 1360
I will do 1340.00. So 2680 for both.

Krugerrand is going for 1342, I will do 1330.

Mexican Gold peso is going for around 1588 lowest,
I will do 1578 right at spot price.

So that is 2680+1330+4734(3x1578)= 8744 would be the total

For someone buying all 6 I could go under spot for the
pesos a bit. If you are in the DC metro area we could meet up.
Looking forward to serious inquiries.

Aug 8, 2014 - 1:57pm

Govy wants "Cap-&-trade" so big govy and banks can . . .

stay in control.

That's why Thorium batteries/reactors are kept a big secret:

"So with all these benefits, why are we still using dangeous uranium that makes every nuclear reactor a ticking time bomb? In simple terms – the military industrial complex, big oil, and all the politicians whose campaigns were funded and supported by both.

In 2004, Thorium plasma batteries made their debut as compact portable devices that could provide reliable power for 3-7 years, non-stop, without a recharge. Three inventors came up with 3 different but similar designs and all three worked flawlessly – providing a green alternate energy source with no adverse safety or environmental concerns."

Human Mushroom
Aug 8, 2014 - 1:48pm

KNOX brand unflavored gelatin

Just happen to have this in the cupboard. Can't believe I've been trying to figure this out and making it way too difficult. @rxman I'll check this out also. Yes, my use case is to apply it topically. One important use is for one of my clients that has had a super-pubic catheter for 4 years. I apply a dab of silver gel at the entrance point and never had any hints of infection, or even irritation. Silver is amazing stuff. Thanks everyone for the feedback. Sorry CL, didn't mean to steal your thread.

Aug 8, 2014 - 1:44pm

Thorium batteries inventors all murdered or missing . . .

Except one.

"Since 2006, five different inventors have designed, three have created, and two have demonstrated self-contained safe and green nuclear "plasma" batteries that can put out reliable and stable power for 5-10 years - without a single recharge. These inventors include Americans Aries M. DeGeus, MIT Professor Eugene Mallove, a former U.S. Air Force Reservist we only know as "Danny", and a Russian name Dimitri Petronov. The fifth inventor still works for Uncle Sam and is not allowed to give us his name or details, but he vows to write a tell-all book when he retires and expatriates himself in 2 years. He too is very angry. Now if you Google the above names, along with the key words of "Inventor, plasma battery, energy, technology" you will find that two of these inventors have been murdered and the other two have simply vanished over a year ago. Why? "

Aug 8, 2014 - 1:42pm

More treefrog!

Tell me more! I love jello (and kinda like silver too).

Aug 8, 2014 - 1:27pm

jelling silver

go to the grocery. buy a pack of JELLO brand gelatin dessert (any flavor you like, or you can use KNOX brand unflavored gelatin). prepare according to package directions, using silver/water in place of plain water. use pyrex cookware to avoid other metals being added. if you want a paste, stir the resulting jello and smear it on where desired. for pre-separated doses, make the jello in an ice tray.

occam's razor: when there are several solutions, the simplest is probably right.

rxmanHuman Mushroom
Aug 8, 2014 - 1:27pm

@ Human Mushroom

If you are looking to make a preparation to apply topically (externally) check out a product named Aquaphor. Amazing product that you can incorporate much water into. It starts out like a stiff vaseline and as you mix in the water it loosens up to your desired consistenceny. Use a stiff cake frosting spatula as a tool or........


Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

Aug 8, 2014 - 1:16pm

Reads like a "whodunnit?" unreliable PM data . . .

"When downloading the numbers from 2013 and all the years before something quite remarkable appeared to me. According to Eurostat the UK imported 614 tonnes of gold in August 2008 and 1,352 tonnes in September 2008, just from one country; Germany. It was hard to comprehend these numbers, how could Germany export nearly 2,000 tonnes of gold in two months? This had to be a mistake, I thought. Eventually I wrote a post about it leaving it to the reader to decide whether to believe these numbers.

What made these numbers so intriguing was the timing, Lehman Brothers collapsed on September 15, 2008. To find elevated physical gold trade right after the fiat house of cards was on the brink of collapse that month wouldn't have surprised me at all, but, as Eurostat claimed, the gold started moving in August. Did the authorities knew what was about to happen and was gold sent to London in advance?"

El Gordo
Aug 8, 2014 - 12:54pm

Good news, bad news

Great article CL. I have exactly the same thoughts as you, but I do not possess the wordsmithing skills to present the coherent arguments as you do so well. Good news, we know that holding hard assets rather than paper assets will eventually prove to be a sound philosophy. Even better news, as currently priced, PM's are virtually a steal, or at least silver is while gold may still be a little high; but the point is that now is not too late to get into the game. The bad news: None of us may live long enough to see the end game finally play out. Government has proven time and time again that it has the resources and skills to defer, delay, obfuscate, scheme, scam, misinform, ad infinitum to postpone the day of reckoning. I remember the S&L and banking crisis of the 1980's and early 1990's as I was actively engaged in the regulatory processes - government probably spent 10X or more resolving the problems (to the extent they actually did) by deferring an aggressive solution, taking their losses, and moving on by playing it out over several years, maybe perhaps averting a financial crisis, but at a huge cost (I used to say to the taxpayers, but taxpayers now fund such a small portion of our total expenditures that it hardly matters any more). I suspect they will be able to do the same with current schemes by gradually grabbing control of those vast sums of pension funds out there and spending them too, averting some additional printing and borrowing for a brief while, but not for long. I don't even know what the sum total of privately held pension funds out there total, but my guess is that it couldn't be much more than 1 year's interest expense on the national debt at the most. Anyway, we can analyze conditions, see what is going on, make prudent decisions based on the facts, handle our affairs in a proper manner, but we cannot anticipate all the moves that government has at its disposal, and therein lies the rub.

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