Wednesday, November 15, 2017

A Major Central Bank Just Announced That Your Money Is Not Safe In a Bank

Something extraordinary happened yesterday.
And no one is talking about it.
The ECB proposed removing “deposit insurance” for bank deposits. Put another way, the ECB wants to make it so that if an EU bank fails, the individuals who keep their savings in the bank lose everything.
In a paper published on the European Central Bank’s Banking Supervision website, the ECB proposed the following:
‘covered deposits and claims under investor compensation schemes should be replaced by limited discretionary exemptions to be granted by the competent authority in order to retain a degree of flexibility.’
In legal terms, this means that the ECB wants to do away with deposit insurance entirely, Instead, the ECB proposes that should an EU bank fail, the amount of capital you can access would be both “limited” and at the sole discretion of an authority.
Let’s say you have €10,000 in a bank account at a bank that fails. According to the ECB’s proposal, if the monetary authority decides you should only get €1 back… that’s all you’re getting.
[This involves]...“bail-ins” and other wealth confiscation schemes...and judging by this recent development, we’re much further along in the financial collapse than most realize.
Where are things going ultimately? The bottom chart [may tell] us.

The time to prepare your portfolio for this is NOW...!"

[Would you rather be early or late?]

Graham Summers
Chief Market Strategist
Phoenix Capital Research

Monday, January 30, 2017

Gary Shilling Blog: US vs China in a trade war - who will win ?

Gary Shilling Blog: US vs China in a trade war - who will win ?: One clear takeaway from Chinese President Xi Jinping’s Jan. 17 speech at the World Economic Forum in Davos was that U.S. President Donald Tr...

Thursday, December 22, 2016

Ready for FDIC Bail-In's? Ready to lose 1/2(?) your capital? There is no other way without printing money. Food for thought...

December 22, 2016

"'Bail-Ins' Are Now Spreading Throughout the Banking System

Italy has now joined the “bail-in” crowd.

Monte dei Paschi di Siena is to be rescued by the Italian state using a new €20bn bailout package, as a last-gasp private sector rescue plan for the world’s oldest bank looked set to fail, forcing losses on bondholders.

The government rescue, which had long been resisted in Rome, is designed to draw a line under the slow-burn crisis in Italian banking that has alarmed investors and become the main source of concern for European financial regulators.
         Source: Financial Times

In this particular case, the bail-in will use bondholders’ money. But depositors will be on the hook in future cases in Europe.

Those who are shocked by this development are not paying attention. The template for this manner of dealing with financial issues was first laid out in Cyprus in 2012-2013.

Anyone who wants to understand how the next global banking crisis will unfold should take heed.

The quick timeline for what happened in Cyprus is as follows:

June 25, 2012: Cyprus formally requests a bailout from the EU.
November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is €17.5 billion).
February 25, 2013: Democratic Rally candidate Nicos Anastasiades wins Cypriot election defeating his opponent, an anti-austerity Communist.
March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under €100,000 and 9.9% for accounts larger than €100,000… a bank holiday is announced.
March 17 2013: emergency session of Parliament to vote on bailout/bail-in is postponed.
March 18 2013: Bank holiday extended until March 21 2013.
March 19 2013: Cyprus parliament rejects bail-in bill.
March 20 2013: Bank holiday extended until March 26 2013.
March 24 2013: Cash limits of €100 in withdrawals begin for largest banks in Cyprus.
March 25 2013: Bail-in deal agreed upon. Those depositors with over €100,000 either lose 40% of their money (Bank of Cyprus) or lose 60% (Laiki).

The most important thing I want you to focus on is the speed of these events.
Cypriot banks formally requested a bailout back in June 2012. The bailout talks took months to perform. And then the entire system came unhinged in one weekend.

One weekend. The process was not gradual. It was sudden and it was total: once it began in earnest, the banks were closed and you couldn’t get your money out (more on this in a moment).

There were no warnings that this was coming because everyone at the top of the financial food chain are highly incentivized to keep quiet about this. Central Banks, Bank CEOs, politicians… all of these people are focused primarily on maintaining CONFIDENCE in the system, NOT on fixing the system’s problems.

Indeed, they cannot even openly discuss the system’s problems because it would quickly reveal that they are a primary cause of them.

If you believe that this kind of issue cannot hit the US, you are mistaken. The FDIC has already proposed legislation that would permit authorities to freeze accounts and use them to "bail-in" banks when the next Crisis hits.

If you are not already preparing your wealth for these sorts of potential risks, you need to start thinking about it now...."

Graham Summers
Chief Market Strategist
Phoenix Capital Research

Thursday, October 6, 2016

DEBT: Why is it that the ABLE seem to DISABLE?

DEBT: the able, disable... "Anemic global growth is “sets stage...lower growth hampers deleveraging...debt overhang exacerbates slowdown,”


Gary Shilling Blog: It's not going to be pretty

Gary Shilling Blog: It's not going to be pretty: We have a situation where most people in Europe and North America have seen declines in their purchasing power for over a decade. When we ...

Wednesday, July 13, 2016

"Yes, The Economy Is Actually That Bad"

"...debt is a two-edged sword and that if additional indebtedness doesn’t work to create income to pay down interest and principle, it is a no-win deal."

"Debt. It’s good, it’s bad, there’s too much of it, the government keeps piling on more of it. What’s the deal?
You may have none, you may have too much, but one thing is certain, debt is a major driving force behind the world economy. Both in our personal lives and in the lives of immense corporations struggling to hold on in an ever-changing economy. Make no mistake, debt patterns will continue to shape all of our financial landscapes.
Given this unavoidable fact of life, when we had the chance to sit down with Dr. Lacy Hunt of Hoisington Investment Management to discuss his upcoming appearance at our Irrational Economic Summit in October, debt is where we began.
U.S. consumers have racked up almost $1 trillion in credit card debt, despite some saying this is a great sign, that this means consumers are optimistic and will buoy the economy, Dr. Hunt does not agree.
He immediately points out that debt is a two-edged sword and that if additional indebtedness doesn’t work to create income to pay down interest and principle, it is a no-win deal.
See, when you agree to spend borrowed money today, you’re leveraging that against your future income. That means that the dollars you’ll earn tomorrow are already spent and will not be there to use in the future for anything else. Seems obvious, right?
Of course, this is not a problem if you expect your income to increase as time marches along and your payments become due. But how many people in America are facing an increase in personal income when the standard of living hasn’t changed one iota in 20 years? Not many.
Unfortunately, this is not on the forefront of most people’s thoughts when they go to buy something like a new car. Dr. Hunt points out that new car sales are buoying portions of the economy, but that credit-lending standards have slipped, much like they did for mortgages prior to the housing crisis in 2008 (Harry has been talking about the auto sector soon getting turned on its head for months!).


To illustrate this, Dr. Hunt points out that the average automobile loan has gone from six years to eight in order to allow less qualified buyers to purchase more expensive cars than they might otherwise have been able to afford.
This allows buyers to make smaller payments over a longer term, but also exposes them to the risk of missing any one of those 96 monthly payments.
But what about student debt? That has always been one way to invest in ourselves, and our children, and foster new revenue streams to pay down interest and principal. Dr. Hunt has bad news on that front, as well.
From Dr. Hunt’s interview with Rodney Johnson:
Unfortunately, the economy is performing so poorly that a lot of our college graduates are coming out and they’re having to settle for jobs that are not much better than what they would’ve received if they had gone directly into the labor force from high school.
Even classically “good debt” like a college education has become a non-performing investment. That’s scary because Dr. Hunt also points out that this deluge of debt, and our eagerness both as a country and as consumers to incur the “wrong type of debt” is killing growth.
This debt is slowing GDP growth and the growth of our personal incomes and investments. “That’s why”, Dr. Hunt points out, “the standard of living is unchanged from where it was 20 years ago....”
Robert Johnson
Editorial Director, Dent Research

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