The Long, Long Depression

The markets were on a roll. New companies were being listed every few days. Germany had a new currency, and its mighty exporters were doing business around the world. Greece had merged its currency with that of France and Italy in a bold experiment in monetary union. A massive new continental economy was flooding the world with cheap goods, disrupting old industries. And new technologies were creating global markets, where money and information zipped from bourse to bank virtually instantaneously. Until the crash came, it seemed as if everyone would keep on getting richer and richer forever.

You could be forgiven for thinking that was a description of New York in 2008. Or London in 2000. Or Shanghai right now. But actually it is Vienna in 1873.

All freepers need to keep an eye on their banking accounts. Numerous banks are quietly moving their derivative assets into the side backed by FDIC. FDIC opposes the move but the US Treasury thru the Fed Reserve have over ruled the opposition. We do not know what contractual obligations banks have with their derivative creditors. If US bank implodes and insolvent, the creditors may have legal standing to access all the assets in the bank first and freeze all customer accounts in the dispute like MF Global creditors did with the customer accounts in the firm. JPM was able to get MF Global to pay what they owe with customer money. Now JPM denies that because they are suppose to return the money that was illegally given to them. JPM lawyers simply say prove it in court!!!! The gov regulators were suppose to force JPM to return the funds and unfreeze the assets so the customers can access their money. They have not and allowed the bankruptcy trustees take their time. In the meantime, customers lives and business are disrupted as their accounts are taken and frozen. Worst people who had taken title and delivery of gold from MF Global contracts actually had their gold seized by the trustees while it was in third party storage. This was unheard of 20 years ago, but unfortunately the deregulation enthusiast of the GOP and both parties in Congress brought by bank lobbyists undid these protections in the name of modernizing our competitive edge in international banking and finance.

Because many of the derivatives were made under international financial contractual obligations which do not recognize FDIC. The creditors will take it first and ask questions later. MF Global customers were under CMFTC regs and the creditors operated under international regs. Problem is after your account is frozen you have to wait for some bankruptcy judge sort it all out. In the old days a bank that went bankrupt, it was close down by the FDIC, but days before the auditors froze all the accounts before they closed the banks. Today a bank can unilaterally declare bankruptcy and in the instant of a computer keyboard accounts empties to pay off creditors per international obligations, and customers must use US regulations to sue and get their money back. That is the main story about the MF Global Customer Account robbery that the MSM missed. These accounts were protected by US regs but MF Global used international obligations to dip into them, then declare bankruptcy before Fed Reg can move in, and the international bankers got the money and refuse to give it back unless someone goes to court and contests their actions. Isn’t globalism and international banking wonderful?

The problem is not FDIC, the problem is all customer accounts can be frozen as creditors argue why you cannot have first divs at it until they are paid off first. MFG explicitly has two types of accounts, firm accounts and customer accounts. Customer accounts can never be used to pay off firm debts and losses when the firm goes bankrupt. Revco was the last major commodity firm that went bankrupt and customers never had their accounts taken and be part of a credit fight. Today federal regulators refuse to enforce existing rules and let the trustees and large banks get paid off on debt owe from customer accounts. Since the gov refuses to follow the rules what will prevent them from following the rules on the FDIC if the imploding bank owes money to one of the big 5 US banks or an international bank who will claim they will fall and bring down the world banking system if customer money is not made immediately available to cover the losses???
There is reg against putting derivatives into the asset portion of banks covered by FDIC. That is why the FDIC opposed what Bank of America is quietly doing. Federal Reserve simply chose to ignore the FDIC because free market politicians deregulated banking and eliminated their power to stop the Federal Reserve from doing reckless things. Now everyone’s savings accounts are vulnerable to an MF Global account seizure if the bank declares bankruptcy and the creditors immediately moves in and take what is owed, before the regulators have a chance to freeze all transactions.
MFG and desperate means to payoff large creditors indicate that the system is out of money. Desperate banks and gov will break every promise just to survive and avoid a financial meltdown. Those who trust banks with their savings will be run over. Those who are smart will put their money into hard assets and physically have possession of them outside of the banking system may be able to preserve their wealth from the crisis.

Oil up over 3.00 now, getting close to 103. Commodities leading the false government protection rally. (They have to)

They’re tossing out the balloon of more “easing” today.

The plan: Continue to steal others fixed savings by the ease, and jack up their own salaries/pensions above the easing effects. Quite sinister.

The only choice will be continued consumer “shut down” for rising price protection, resulting in unemployment pressure.

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GGG managers are SunkenCiv, StayAt HomeMother & Ernest_at_the_Beach	join list or digest view topics view or post blog bookmark post a topic subscribe

Thanks dynachrome. Vienna in 1873. Just adding to the catalog, not sending a general distribution. To all -- please ping me to other topics which are appropriate for the GGG list.