Britain’s Debt Mountain is not Repayable

Commentators have claimed that the Chancellor has a £2B hole in his finances following the NI debacle.

In case they hadn’t noticed, the elephant in the room is the debt mountain of £1.6T which is ultimately not repayable due to its size.


Squeezing the “Rich”

In 1974, Chancellor Healey famously said that he would squeeze the rich until the pips squeaked.

In the modern version by Chancellor Hammond, he will squeeze everyone until the pips squeak…….

If You Can’t Touch It, You Don’t Own It

The pending Brexit has, not surprisingly, caused a shakeup in the investment world, particularly in the UK. Of particular note is that, r ecently, asset management firms in Britain began refusing their clients the right to cash out of their mutual funds. Of the £ 35B invested in such funds, just under £20B has been affected.

For those readers who live in the UK, or are invested in UK mutual funds, this is cause for conern.

The trouble is that quite a few of them made the request at about the same time. Of course the management firms don’t keep enough money on hand to pay them all off, so, rather than spend all their money paying off as many clients as possible, then going out of business due to a lack of liquidity, they simply announce a freeze on redemptions.

Those who are outraged may read the fine print of their contracts and find that the fund managers have every right to halt redemptions, should “extraordinary circumstances” occur. Who defines “extraordinary circumstances?” – The fund managers.

Take account of all your deposits and investments and determine what percentage of them you do truly own. If you decide that that percentage is too low for you to accept, you may wish to implement some changes… before others do it for you.

Sprott Money

Deutsche Bank: “QE Has Run Its Course, It’s Time to Tax Wealth”

In the upside down world of Quantitative Easing, Deutsche Bank has suggested as policy that the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – banks might also pay borrowers to buy houses via negative mortgage rates. As they say: Its a mad world.

The Catastrophic Threat of Bail-Ins

It has now been more than 2½ years since the Cyprus Steal, the first “bail-in” perpetrated in the Western world, occurred.

The term “bail-in” describes a scenario in which a bank confiscates private property to indemnify itself for losses it has suffered. A bail-in is a lawless theft of assets, as there is no principle of law (of any kind) that could authorize such a seizure of private property. And in fact, there are many principles of law that demonstrate the lawlessness at work here. As with much of the financial crime jargon, “bail-in” is simply another euphemism like “quantitative easing” or “derivatives.”

As custodians of the financial assets of their clients, banks represent a form of trustee . The purpose of any trust relationship is to provide absolute security to the beneficiary of the trust (i.e. the legal owner of the property). Thus, one of the most fundamental principles of our legal system is non-encroachment regarding the property held in the custody of a trustee .

From a legal standpoint, it is like there is an invisible and impenetrable wall that surrounds the trust property. The only exceptions to this wall (ever) occur when the trust beneficiary makes a legal request for some disbursement or related transaction, when the trust itself directs some form of action (in the interests of the trust beneficiary), or when the trust allows the trustee to manage the trust assets on behalf of the beneficiary.

The idea of trustees using assets for their own benefit or (worse) claiming ownership of any trust assets represents one of the most serious forms of financial crime in Western civilization. Given this context, how did the government of Cyprus respond when its own Big Banks whined and claimed that they “needed” to confiscate deposits in order to pay off their own gambling debts? It meekly rubber-stamped the lawless theft .

How did other Western governments react to the violation of one of the most sacred legal principles in our entire financial system? They simply nodded their heads in unison, and, as a single chorus, called the Cyprus Steal “a precedent” – a template for future systemic financial crime in their own regimes.

For the longer term financial Armageddon that is now inevitable. How do people protect themselves from the massive bail-ins that are imminent? : Further info here

Source: Sprott Money

When in a Hole, Stop Digging. But When in a Bubble, Keep Blowing

Are the markets a bubble or Ponzi? 

The weakness of all bubbles, Ponzi or otherwise, is that all it takes is a rumour that it might be time to get out or that someone ‘in the know’ wants out, and a Ponzi scheme will pop like a soap bubble.

With low interest rates for too many years, markets have been distorted by companies borrowing cheap money and using the proceeds to buy-back shares. A recent example is Caterpillar who have had 28 months of consecutive falling sales but the share price is at near record highs. Last year they launched a $2B debt bond, some over 50 years, to buy-back shares to not only support the share price but the share price linked remuneration packages of the Executives as well.

Increasingly share valuations are not based on fundamentals and companies are not reinvesting in capital expenditure which will have serious future consequences.

So….what happens when the endless supply of credit, back stopped by QE and low interest rates, stops?

Greeks Take to The Mattresses as Graccident Looms

Last week, the Greek banking sector lost some €400M in deposits in a single day as Greek citizens debated a future which could include the suspension of salaries, pension fund plundering, and capital controls. As it turns out, Athens found enough money to make the payments thus avoiding a weekend “Gracciddent.”

What portion of deposit outflows went under the mattress?

€4B of deposits left the Greek banking system in December,

€12B in January and likely

€6B in February. That is; between December and February €22B of deposits left the Greek banking system and of this €10B or 45% went under the mattress with the balance into offshore accounts. 

What is clear is that the Greek banking system cannot withstand another big wave of deposit outflows.


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“The System Is Dangerously Unanchored; It Is Every Man for Himself”

Published on 22/12/2014

According to former BIS Chief Economist, William R. White, the international (non) monetary system is now in dangerous and uncharted territory.

With negative interest rates now being introduced in Germany and the US and with widespread printing of uncontrolled money supply in many countries, we will find that things do not operate as they used to and there will be unplanned and indeterminate consequences.

Almost every country in the world is in easing mode, following the Fed, and we have absolutely no idea how it will end up.

What are the risks of this non-system?

There is now no automatic adjustment of current account deficits and surpluses; so they can now get totally out of hand. The system is dangerously unanchored. It is every man for himself and we do not know what the long-term consequences of this will be. And if countries get into serious trouble, eg the Russians, there is nobody at the centre of the system who has the responsibility of providing liquidity to people who desperately need it. If we have a number of small countries or one big country which runs into trouble, the resources of the International Monetary Fund to deal with this are very limited. The idea that all countries act in their own individual interest, that you just let the exchange rate float and the whole system will be fine: This all is a dangerous illusion.

German Bank Hits Savers with Negative Interest Rates

Published on 04/11/2014

Deutsche Skatbank will charge customers with more than €½M on deposit anegative interest rate of 0.25% or punishment interest [as the Germans call it] for keeping cash in the bank, from the 1st November.

In the upside down world we live in, this is wealth confiscation by another name and has turned “cash in the bank” from an asset to a liability.

Alternatively, clients can spend the money [which keeps debt ridden economies going for another round before facing the music].

So the punishment interest door has now been cracked wide open.

It starts with large deposits and small rates. Then step by step, deposit amounts get smaller and punishment interest rates get larger until everyone gets hit with it, and no money is saved.

Protect Your Wealth Now.