In Half 1 ( https://www.paulcraigroberts.org/2024/04/11/the-great-dispossession/ ), I reported that we already don’t personal something. The speedy response from readers is: what can we do to keep away from dispossession? Offhand, the reply may look like debt-free property and gold and silver in private possession. Nevertheless, if the purpose is that we personal nothing and are managed underneath a digital forex regime, these property will likely be taken as properly.
Webb says if the billionaires and enormous monetary establishments may be made conscious of the scenario, they might make Congress conscious of the regulatory modifications and power Congress to make use of its law-making energy to undo the regulatory modifications. In any case, if there isn’t a non-public monetary property, there isn’t a one to contribute to Congressional elections. Billionaires’ marketing campaign donations elect the politicians, and what the regulatory modifications do to billionaires is to scale back them to the identical poverty as a homeless individual. What the modifications imply for giant monetary establishments resembling Merrill Lynch, Schwab, and so on., is their existence ceases. Webb’s hope is the mixed affect can undo the regulatory modifications. The query is whether or not consciousness may be generated. The destiny of Congress can be at stake. Within the Nice Reset there isn’t a enter from the individuals and no perform for Congress.
As in all of my writings, I’m attempting to convey consciousness. Little doubt the messenger will likely be shot.
The aim of Half 2 is to stipulate the regulatory modifications which have been made which have turned our property in monetary property into the property of “secured collectors.” Webb phrases them authorized modifications, which they’re, however as I learn it from regulatory, not legislative, motion. Webb says the modifications are world, however he solely describes how the US and EU effected the modifications for themselves. I’m unable to think about that Russia, China, Iran and any elements of the world not captured within the Western monetary system are events to the dispossession, particularly underneath the regime of sanctions. As I learn it, the dispossession that awaits is proscribed to the Western world and its captive nations. By world, maybe Webb means the worldwide operations of Western world monetary organizations.
First some definitions: an “account holder” is you, your IRA, your pension plan, your inventory and bond investments held at an “account supplier” or “middleman” or “depository establishment” resembling Merrill Lynch, Schwab, Wells Fargo. An “entitlement holder” is the definition of you whose possession declare to your monetary property has been subordinated to the claims of “secured collectors” of the establishment the place you may have your accounts. Please do perceive that the dispossession of which I write is your dispossession.
As reported in Half 1, a rustic’s securities are pooled in a Central Safety Depository (CSD). Every nationwide CSD is linked to the Worldwide Safety Depository (ICSD), which within the phrases of a 2013 report by the Financial institution for Worldwide Settlements Committee on the World Monetary System, makes accessible to “secured collectors” all accessible collateral (all of our shares and bonds) and offers cross-border mobility of collateral from the “collateral giver” to the “collateral taker.” Sure, these phrases are explicitly used, indicating recognition that theft is happening.
Webb writes that these preparations have been “designed and intentionally executed to maneuver management of collateral to the most important secured collectors behind the derivatives complicated. That is the subterfuge, the endgame of all of it.”
To attain these preparations took a few years and plenty of regulatory modifications that didn’t contain monetary market members (you) within the selections. The variations between monetary property rights within the US and in some European nations have been a particular impediment which required “harmonization” of Europe with the US. The primary effort was signed solely by the US, Switzerland, and Mauritius. The EU didn’t signal, as a result of in some EU member nations (Sweden, Finland, for instance) the purchasers of securities had inviolable property rights primarily based on the traditional authorized precept of lex rei sitae.
Webb describes, citing the paperwork, the 10-year work-around of this blockage.
The creation of cross-border collateral mobility started with the Depository Belief Company shifting from bodily inventory certificates held within the house owners title to book-entries. A “paperwork disaster” was claimed from having to course of transactions of individually owned shares of securities.
Then the US Uniform Industrial Code was quietly amended over a few years with out requiring an act of Congress. Listed here are the modifications:
Possession of securities as property has been changed with a brand new authorized idea of a “safety entitlement”, which is a contractual declare assuring a really weak place if the account supplier turns into bancrupt.
All securities are held in un-segregated pooled kind. Securities used as collateral, and people restricted from such use, are held in the identical pool.
All account holders, together with those that have prohibited use of their securities as collateral, should, by legislation, obtain solely a pro-rata share of residual property.
“Re-vindication,” which is the taking again of 1’s personal securities within the occasion of insolvency, is totally prohibited.
Account suppliers could legally borrow pooled securities to collateralize proprietary buying and selling and financing.
“Secure Harbor” assures secured collectors precedence declare to pooled securities forward of account holders.
Webb reviews that “absolutely the precedence declare of secured collectors to pooled shopper securities has been upheld by the courts.”
Webb reproduces the New York Federal Reserve Financial institution’s reply to questions from the European Neighborhood’s Authorized Certainty Group in regards to the new system Washington was growing. The Fed was requested if buyers have rights attaching to explicit securities in pooled securities. The NY Fed responded “No.”
The Fed was requested if buyers are protected towards the insolvency of an middleman or depository or account supplier. The NY Fed answered “collectors have precedence over the claims of entitlement holders.”
The Fed was requested if collectors nonetheless had precedence if failure concerned fault, negligence or comparable breach of responsibility of the middleman. The NY Fed answered: “When it comes to the curiosity that the entitlement holder has within the monetary property credited to his securities account: no matter fault, fraud, or negligence of the securities middleman, underneath Article 8, the entitlement holder has solely a professional rata share within the securities middleman’s curiosity within the monetary asset in query.”
In brief, omnibus accounts pool property in order that particular person securities can’t be recognized with particular buyers. When chapter happens inflicting default of the account supplier, purchasers are left with a mere contractual declare and should line up with all different unsecured collectors.
The target of utilizing all securities as collateral has been obtained. “Complete ‘collateral administration’ methods have been applied which guarantee the transport of all securities cross-border by way of the mandated linkage of CSDs to ICSDs to the CCPs (the place the chance of the derivatives complicated is concentrated), and on to the anointed secured collectors which is able to take the collateral when the CCPs fail, having assured for themselves that their taking of property can’t be legally challenged.”
Nonetheless, two issues stay. What occurs if the swimming pools of collateral are inadequate to cowl the claims of secured collectors and what’s the danger {that a} CCP (Central Clearing Social gathering) might fail?
The 2013 Financial institution for Worldwide Settlements World Monetary Committee report says that if there may be inadequate pooled collateral (our shares and bonds) to forestall the collapse of the monetary system (by which is supposed apparently the mega-banks), then non-collateral must be remodeled into collateral. What non-collateral is and the way it’s remodeled just isn’t clear. The BIS World Capital Committee’s report says: “some market members could have to alternate accessible, however ineligible [as collateral], securities for different securities that meet eligibility standards [as collateral] with a purpose to fulfill their collateral obligations. Enterprise transactions to attain this consequence has been outlined as ‘collateral transformation.’”
Webb writes: “Collateral transformation is solely the encumbrance of any and all forms of shopper property underneath swap contracts, which find yourself within the derivatives complicated. That is completed with out the information of the purchasers, who have been led to imagine that they safely owned these securities, and serves no helpful goal in any respect for these purchasers.”
As Assistant Secretary of the Treasury, my bailiwick was the administration of the home financial system, and my activity was to exchange the Keynesian demand-management coverage that had resulted in “stagflation” with a supply-side coverage. Furthermore it was 40 years in the past previous to the period of derivatives that exceed many occasions the scale of world GDP and, as I perceive, the mixed worth of all shares and bonds within the Western world. Subsequently, I can’t present the reply. Webb doesn’t clarify, nor does the BIS committee, how extra collateral is created when the pooled accumulations of all shares and bonds are inadequate to fulfill secured collectors’ claims. However it isn’t from cash creation by the central financial institution.
Beneath the brand new Dispossession, a Central Clearing Social gathering (CCP) has the counterparty danger between events in a transaction and offers clearing and settlement. The CCP has “the obligations of the failed clearing participant.” So what occurs if a CCP itself fails? The reply appears to be monetary Armageddon. “If a big CCP is in bother due to its members’ default, then we will likely be having a banking disaster” says Benoît Gourisse, Senior Director, European Public Coverage at ISDA.
The Depository Belief & Clearing Company states that it has no answer to the undercapitalization of CCPs.
Webb concludes that the CCPs are intentionally under-capitalized and designed to fail.
In Half 3 we are going to take into account the probably results of the pending monetary disaster.
