Remember back in 2008 when......
Posted: Sun Jul 26, 2015 2:29 pmYou may or may not remember this back in 2008….This was a rare moment of truth was divulged by a member of Congress in an interview on C-Span.
If you look at the video i.e. 2 minutes, 20 seconds into this C-Span video clip, Rep. Paul Kanjorski of Pennsylvania explains how the Federal Reserve told Congress members about a "tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars." According to Kanjorski, this electronic transfer occurred over the period of an hour or two. https://www.youtube.com/watch?v=Vh0vQAdZhuc
Here is a transcript of what Kanjorski says in the video:
"On Thursday Sept 15, 2008 at roughly 11 AM The Federal Reserve noticed a tremendous draw down of money market accounts in the USA to the tune of $550 Billion dollars in a matter of an hour or two.
Money was being removed electronically.
The treasury tried to help with $150 Billion.
But could not stem the tide.
It was an electronic run on the banks
The treasury intervened but had they not closed down the accounts they estimated that by 2 PM that afternoon. Within 3 hours. $5.5 Trillion would have been withdrawn and collapsed and within 24 hours the world economy."
Ok, with that in mind fast forward to today and as you read this article from Zero Hedge...More and more institutions are trying to make it harder for you to move your money into cash.
Globally, over $5 trillion in debt currently have negative yields in nominal terms, meaning the bond literally has a negative yield when it trades. In the simplest of terms this means that investors are PAYING to own these bonds.
Bonds are not unique in this regard. Switzerland, Denmark and other countries are now charging deposits at their banks. In France and Italy, you are not allowed to make cash transactions above €1,000.
This sounds laughable to most people, but it is a reality in Europe… and in the US, in some regions. Louisiana has made it illegal to purchase second hand goods using cash.
This is just the beginning. The War on Cash will be spreading in the coming weeks.
The reasoning is simple. Most large financial entities are insolvent. As a result, if a significant amount of digital money is converted into actual physical cash, the firm would very quickly implode.
This is precisely what happened in 2008…
When the 2008 Crisis hit, one of the biggest problems for the Central Banks was to stop investors from fleeing digital wealth for the comfort of physical cash. Indeed, the actual “thing” that almost caused the financial system to collapse was when depositors attempted to pull $500 billion out of money market funds.
A money market fund takes investors’ cash and plunks it into short-term highly liquid debt and credit securities. These funds are meant to offer investors a return on their cash, while being extremely liquid (meaning investors can pull their money at any time).
This works great in theory… but when $500 billion in money was being pulled (roughly 24% of the entire market) in the span of four weeks, the truth of the financial system was quickly laid bare: that digital money is not in fact safe.
To use a metaphor, when the money market fund and commercial paper markets collapsed, the oil that kept the financial system working dried up. Almost immediately, the gears of the system began to grind to a halt.
When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode.
None of these issues have been resolved. The big banks remain as leveraged as ever and at risk of implosion should a significant percentage of capital get pulled into physical cash.
European banks as a whole are leveraged at 26 to 1. In simple terms, this means they have just €1 in capital for every €26 in assets (bought via borrowed money).
This is why whenever things get messy in Europe, the ECB and EU begin implementing capital controls.
Consider what recently happened in Greece. Depositors began to flee the banks in droves, so they declared a bank holiday. This holiday included safe deposit boxes… so all the bullion or physical cash Greeks had stashed there remained locked up… just like the “digital” money in their savings accounts.
Again, it was impossible to get cash out of the banks… even cash that technically wasn’t “in the system” anymore but sitting in safe deposit banks.
The US financial system isn’t any better. Indeed, the vast majority of it is in digital money. Actual currency is just a little over $1.36 trillion. Bank accounts are $10 trillion. Stocks are $20 trillion and Bonds are $38 trillion. And at the top of the heap are the derivatives markets, which are over $220 TRILLION.
If you think the banks aren’t terrified of what this market could do to them, consider that JP Morgan managed to get Congress to put the US taxpayer on the hook for it derivatives trades.
Mind you, this is the same bank that is now refusing to let clients store cash in safe deposit boxes.
This is just the tip of the iceberg. As anyone can tell you, it’s all but impossible to move large amounts of money into cash in the US. Even the large banks will routinely ask you for 24 hours notice if you need $10,000 or more in cash. These are banks will TRLLLIONS of dollars worth of assets on their books.
Source: http://www.zerohedge.com/news/2015-07-2 ... n-war-cash
Now, my question to everyone is this:
If the total global credit system collapses overnight or during the day, then sooner rather than later all credit ceases to exist and you will no longer have access to the money in your bank account. Even if you did you are considered an unsecured creditor and the cash is not yours it is the banks. So whatever cash you have on hand will be it. Period, end of story.
Now consider this: Nearly eight in 10 Americans carry less than $50 cash and two out of five carry less than $20 cash on a daily basis, according to a new report by Bankrate.com. Additionally, about 9% of consumers surveyed say they don’t carry cash at all. http://consumerist.com/2014/05/12/study ... n-50-cash/
It is going to get ugly rather fast don't you think? How fast will things unravel; 24 hours or 48 hours, maybe in a week? What are you going to do when your neighbors comes knocking at your door looking for help?
If you look at the video i.e. 2 minutes, 20 seconds into this C-Span video clip, Rep. Paul Kanjorski of Pennsylvania explains how the Federal Reserve told Congress members about a "tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars." According to Kanjorski, this electronic transfer occurred over the period of an hour or two. https://www.youtube.com/watch?v=Vh0vQAdZhuc
Here is a transcript of what Kanjorski says in the video:
"On Thursday Sept 15, 2008 at roughly 11 AM The Federal Reserve noticed a tremendous draw down of money market accounts in the USA to the tune of $550 Billion dollars in a matter of an hour or two.
Money was being removed electronically.
The treasury tried to help with $150 Billion.
But could not stem the tide.
It was an electronic run on the banks
The treasury intervened but had they not closed down the accounts they estimated that by 2 PM that afternoon. Within 3 hours. $5.5 Trillion would have been withdrawn and collapsed and within 24 hours the world economy."
Ok, with that in mind fast forward to today and as you read this article from Zero Hedge...More and more institutions are trying to make it harder for you to move your money into cash.
Globally, over $5 trillion in debt currently have negative yields in nominal terms, meaning the bond literally has a negative yield when it trades. In the simplest of terms this means that investors are PAYING to own these bonds.
Bonds are not unique in this regard. Switzerland, Denmark and other countries are now charging deposits at their banks. In France and Italy, you are not allowed to make cash transactions above €1,000.
This sounds laughable to most people, but it is a reality in Europe… and in the US, in some regions. Louisiana has made it illegal to purchase second hand goods using cash.
This is just the beginning. The War on Cash will be spreading in the coming weeks.
The reasoning is simple. Most large financial entities are insolvent. As a result, if a significant amount of digital money is converted into actual physical cash, the firm would very quickly implode.
This is precisely what happened in 2008…
When the 2008 Crisis hit, one of the biggest problems for the Central Banks was to stop investors from fleeing digital wealth for the comfort of physical cash. Indeed, the actual “thing” that almost caused the financial system to collapse was when depositors attempted to pull $500 billion out of money market funds.
A money market fund takes investors’ cash and plunks it into short-term highly liquid debt and credit securities. These funds are meant to offer investors a return on their cash, while being extremely liquid (meaning investors can pull their money at any time).
This works great in theory… but when $500 billion in money was being pulled (roughly 24% of the entire market) in the span of four weeks, the truth of the financial system was quickly laid bare: that digital money is not in fact safe.
To use a metaphor, when the money market fund and commercial paper markets collapsed, the oil that kept the financial system working dried up. Almost immediately, the gears of the system began to grind to a halt.
When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode.
None of these issues have been resolved. The big banks remain as leveraged as ever and at risk of implosion should a significant percentage of capital get pulled into physical cash.
European banks as a whole are leveraged at 26 to 1. In simple terms, this means they have just €1 in capital for every €26 in assets (bought via borrowed money).
This is why whenever things get messy in Europe, the ECB and EU begin implementing capital controls.
Consider what recently happened in Greece. Depositors began to flee the banks in droves, so they declared a bank holiday. This holiday included safe deposit boxes… so all the bullion or physical cash Greeks had stashed there remained locked up… just like the “digital” money in their savings accounts.
Again, it was impossible to get cash out of the banks… even cash that technically wasn’t “in the system” anymore but sitting in safe deposit banks.
The US financial system isn’t any better. Indeed, the vast majority of it is in digital money. Actual currency is just a little over $1.36 trillion. Bank accounts are $10 trillion. Stocks are $20 trillion and Bonds are $38 trillion. And at the top of the heap are the derivatives markets, which are over $220 TRILLION.
If you think the banks aren’t terrified of what this market could do to them, consider that JP Morgan managed to get Congress to put the US taxpayer on the hook for it derivatives trades.
Mind you, this is the same bank that is now refusing to let clients store cash in safe deposit boxes.
This is just the tip of the iceberg. As anyone can tell you, it’s all but impossible to move large amounts of money into cash in the US. Even the large banks will routinely ask you for 24 hours notice if you need $10,000 or more in cash. These are banks will TRLLLIONS of dollars worth of assets on their books.
Source: http://www.zerohedge.com/news/2015-07-2 ... n-war-cash
Now, my question to everyone is this:
If the total global credit system collapses overnight or during the day, then sooner rather than later all credit ceases to exist and you will no longer have access to the money in your bank account. Even if you did you are considered an unsecured creditor and the cash is not yours it is the banks. So whatever cash you have on hand will be it. Period, end of story.
Now consider this: Nearly eight in 10 Americans carry less than $50 cash and two out of five carry less than $20 cash on a daily basis, according to a new report by Bankrate.com. Additionally, about 9% of consumers surveyed say they don’t carry cash at all. http://consumerist.com/2014/05/12/study ... n-50-cash/
It is going to get ugly rather fast don't you think? How fast will things unravel; 24 hours or 48 hours, maybe in a week? What are you going to do when your neighbors comes knocking at your door looking for help?
