A Tipping Point In The Financial System
Posted by Deviant Investor on April 4th, 2013
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In my opinion, the sign that a tipping point has occurred in the financial system is the real story:
* The veil of banker honesty has been lifted. The EU/IMF/ECB will do whatever is necessary to support the banks, even if it means they will confiscate (tax, steal, bail-in) customer deposits.
* Customer deposits are NOT assets held in the bank for safe-keeping, but are liabilities of the bank and are not guaranteed to be made whole.
* Billions of dollars were removed prior to the Cyprus freeze, so insiders clearly knew in advance of the ordinary depositors (see below). There is no “level playing field” when billions of dollars/euros are in play.
* According to Jeroen Dijsselbloem, Dutch finance minister and Euro Group President, this is “the template for any future bank bailouts.” In other words, your deposits are considerably less safe than you thought. Your bank could fail, and your deposits might be used to compensate for derivative losses or other losses that the bank incurred.
* The FDIC in the US, as well as England, Canada, and New Zealand, has announced similar policies, agreements, and plans to confiscate deposits in the case of an emergency. Is this a sign that an emergency is not only possible but probable and imminent?
* Confidence in the banking and financial system has been seriously damaged, perhaps irreversibly.
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So a new definition of “counterparty risk” has appeared.
There is no safe store of wealth.
(There really never was, but there was an illusion.)
One has to think very carefully about keeping balances in banks.
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