BUSINESS | INVESTING | DEBT | BANKING | ENTREPRENEURSHIP
Who Owns Your Savings?
Your money is not yours if it’s in the bank.
Credits: Christian Wiediger on Unsplash and My CBS
The power given to the banks has been disastrous for the ordinary citizen, dispossessing them. Learn to design a plan that will be vital for your survival.
New definitions
A couple of years ago, the G20 passed new legislation by which the money of a bank’s depositors is no longer a debit on the latter’s balance sheet in the strict sense. Instead, it’s an unsecured debt with the former. Worse still, that money becomes the property of the bank if a crisis arises.
The IMF clearly defines what a bail-in is in a document, From Bail-out to Bail-in: Mandatory Debt Restructuring of Systemic Financial Institutions.
Previously, the bail-out referred to a financial institution’s external rescue, for example, through state aid. The new figure, the bail-in, is an “internal” rescue, made mostly with depositors’ money (savings or working capital).
Returning to the IMF definition,
One example is bail-in, which is a statutory power of a resolution authority (as opposed to contractual arrangements, such as contingent capital requirements) to restructure the liabilities of a distressed financial institution by writing down its unsecured debt [our deposits] and/or converting it to [bank’s] equity. The statutory bail-in power is intended to achieve a prompt recapitalization and restructuring of the distressed institution.[Emphasis and words inside square brackets added]
In other words:
- A bankruptcy is now a “resolution procedure.”
- The bank’s insolvency is “resolved” by legally robbing depositors by appropriating their deposits or “unsecured debts” to convert them into bank capital.
- Banks acquire carte blanche to be irresponsible with other people’s money.
- The power to commit the robbery is legal.
- Bank shareholders and owners should no longer worry about requiring directors and management to operate conservatively or maintain a healthy capital reserve for contingencies outside of what is established by law.
- A “Resolution Authority” is institutionalized: the central bank, the ministry of economy, the local superintendency of banks, etc.
- Insolvent banks should no longer close doors and sell their assets to the highest bidder to cover what they can. A respirator is now applied to the “resolved” banks to keep them with artificial life without their directors being prosecuted and condemned for their incompetent and irresponsible management.
- These zombie banks continue to operate thanks to the confiscation of people’s money entrusted to their custody.
Waiting for disaster
The turmoil in the global financial world heralds an imminent crisis. This chaos is due to the creation, participation, and exposure that world banks have in the so-called “derivatives,” whose outbreak is inevitable. The derivatives market is estimated to exceed a quadrillion US dollars, and conservative estimates place such bank exposure at more than 700 trillion.
By comparison, the world’s GDP has reached 84 trillion at the end of 2020. Thus, the gap between the real economy and the fantasy world is immense: the latter is 12 times larger than the real one. Warren Buffett called derivatives, not without reason, “financial weapons of mass destruction.”
Where are derivatives derived from?
Derivatives are financial instruments that “derive” their value from other assets, sometimes ethereal. You can get a glimpse of the absurd system used for their creation by watching the documentary The Big Short (Netflix), which I highly recommend you watch.
If a bank collected 100,000 of its riskiest mortgages taken by totally insolvent clients, as the documentary shows, and tried to get rid of them, no one would buy them.
So, what can the bank do? First, It will divide each of those mortgages into ten parts (1,000,000 pieces). The next step will be to create an instrument that contains 80% of those well-mixed pieces of junk. They’ll add to that 7% of a troubled hardware chain’s stock, 7% of Thailand weather futures, and 3% of the so-called “Bermuda Options.” The remaining 3% can be futures on political instability in the Middle East. The latter is no longer available: the suspension seemed necessary to avoid encouraging coups and other “instabilities.”
The well-packaged instrument will be offered to the market under the name PLATINUM REAL STATE FUTURES 2021 after “hiring” a credit rating agency that will certify that there is no risk in this new instrument and, therefore, will assign it a Triple-A qualification.
The PRSF2021 will enter the market as “A secure means of investment in the burgeoning real estate sector, with strong constituent elements of risk diversification. An investment instrument with a Triple-A rating.”
Finally, the bank will sell its wonder to the Gullible Retirees Mutual Fund in a Latin American country, the Municipality of Wonder City, or the Community Bank of Potunaville, all of them expecting to receive a fair return when the product matures in ten years.
The strategy against the coming crash, although it can be called a “retrograde” one, is well documented in books like those of the German economist Paul C. Martin and consists of keeping cash with you.
Understanding these products can prove to be challenging. Their “cooking” is too complicated, and most of the products from which they derive are ethereal. To add up, their creators use esoteric mathematics to calculate them and their promoters an ambiguous terminology.
In his article The Derivatives Disaster, Ronald Ray states: “Since not even the creators fully understand them, it is a given that investors also cannot, adding a sinister aspect of deliberately unethical investment sales.”
It doesn’t matter where you live
If you think that this nightmare will not disturb your night rest because you do not live in the US or Europe, I am sorry to tell you that you are wrong. In this globalized world, all the world’s economies are dependent on each other, and a consequence of it is that your savings are at risk.
Most likely, the US dollar dominates the international trade of your country of residence. Therefore, banks in your country need to keep a large part of their funds (that is, that of their clients) in “the big” (and bankrupt) global banking institutions, the same ones I have been talking about.
Governments themselves hold their international foreign exchange reserves in the US central bank (the FED) or “reputable” commercial banks or have such funds in US Treasury Bonds.
Given that the US debt has become unpayable and already exceeds 27.8 trillion, the USD’s decline may not be tomorrow, but it is still imminent. When it occurs, it will affect you adversely if you have not bothered to prepare yourself.
The chances are that your local Savings Bank, the Retirement and Pension Fund to which you pay monthly contributions, and the municipality of your county or city have a large part of their assets represented by foreign derivatives, mainly American or European.
How safe do you feel?
What can you do?
The strategy against the coming crash, although it can be called a “retrograde” one, is well documented in books like those of the German economist Paul C. Martin and consists of keeping cash with you.
The growth of your businesses may not be so fast. Still, you will ensure your survival by creating a cash cushion. You must dedicate part of your income to such an unproductive end (from a performance point of view), but so necessary at the same time. This cash should be at your fingertips, not in a bank.
Use part of that cash to purchase physical gold and bitcoins. One ratio that you might consider using in your cash-against-crack strategy is 50% in cash, 35% in physical gold, and 15% in bitcoin.
I said, “physical gold,” not gold-denominated papers, and you should also have that on hand. You can buy jewelry in the absence of a better option, but ideally, you should buy coins or bars from recognized mints (Canadian Gold Maple Leaf coins, for example).
Don’t assume or believe that you are “investing” in gold. Its function consists of something other than investing: that of preserving the value of your money.
Concerning cryptocurrencies, only buy bitcoin and, like gold, do not consider your purchase as an investment. It would be best to store it in a paper wallet or a “cold” wallet like Trezor, never in an exchange.
But a good part of a healthy survival strategy for you and your loved ones is to go international. I’ll cover more about that in upcoming articles.
Here’s to your future!
— Víctor Tapia —
Thank you for reading this article. If you have any questions or concerns, leave a comment below, I promise to respond.
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COMPLETENESS is the publication that studies the factors that restrict your freedom and prevent you from reaching your financial, health, and wellness goals. It analyzes the alternatives at hand and formulates and discusses actionable strategies.
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Víctor Tapia is a writer who specializes in bitcoin, internationalization, and wellness issues. For his website’s web presence, he writes and edits both English and Spanish articles, guides, and courses. Similarly, he focuses on producing material for other parties and produces Medium stories on various themes related to his field.
Víctor worked for many years in the field of food and beverages, both for the hospitality and food industries. Before founding My CBS in 2002, he was the General Manager at Parmalat S.p.A., the multinational food corporation, at its subsidiary in Curaçao. One of his activities is service coaching in any area of commerce and industry, including food and beverages.
You can get in touch with him on LinkedIn, Twitter, Facebook or Instagram, follow his posts on Medium, Mixturas (Spanish) and Completeness (English), or by visiting his website, My CBS.
