This is truly sinister, and straight from the mouth of the Vice Chairsatan of the Fed, Stanley Fischer, and a speech given on August 11th at “The Great Recession–Moving Ahead,” a Conference Sponsored by the Swedish Ministry of Finance, in Stockholm, Sweden, as posted on the Federal Reserve Bank’s official website.
Additional steps have been taken in some countries. For example, in the United States, capital ratios and liquidity buffers at the largest banks are up considerably, and their reliance on short-term wholesale funding has declined considerably. Work on the use of the resolution mechanisms set out in the Dodd-Frank Act, based on the principle of a single point of entry–though less advanced than the work on capital and liquidity ratios–holds the promise of making it possible to resolve banks in difficulty at no direct cost to the taxpayer.As part of this approach, the United States is preparing a proposal to require systemically important banks to issue bail-inable long-term debt that will enable insolvent banks to recapitalize themselves in resolution without calling on government funding–this cushion is known as a “gone concern” buffer.
“Bailing-in” is what happened in Cyprus last year. Remember that? Probably not, because it was more than 36 hours ago. Customers’ bank deposits were swept in order to “recapitalize” the Cypriot banks, hence the phrase above “recapitalize themselves”. Customers were issued, in exchange for their cash which had been stone-cold stolen from them, long-term debt in the banks, bonds which were worth less than the e-paper they were written on. That is what the “long-term debt” referenced above is.
Isn’t it interesting how these people think that stealing OTHER PEOPLE’S MONEY held in SACROSANCT CUSTODIAL ACCOUNTS constitutes banks “recapitalizing THEMSELVES”? I know it is still hard for some people to comprehend how totally the Rule of Law has been reduced to a veneer mere atoms in thickness in western civilization, but when you deposit money in a bank, these people view that money as THEIR property, because stupid peasants like you exist simply to subsidize them.
But hey, at least they won’t have to call on “government assistance” after seizing all of their customer seg funds (exactly like MFGlobal) and mollifying you, the great unwashed, with their junk bonds.
The term “gone concern” is defined as “a defunct firm or one in the process of being wound up. Debts of such firms become due immediately in full, their market value is determined on the basis of auction or liquidation value of their tangible assets, and their goodwill counts for nothing.”
So yes, the Vice Chairsatan of the Fed is talking about “systemically important”, read BIG, banks as “gone concerns”, because that is exactly what they are, and further calling on these banks to establish a plan RIGHT NOW for seizing their customer deposits to “recapitalize”, or “bail themselves in” while cravenly maintaining the political line of “not taking government money”.
Of course, the question is "Where should I put my cash?" Perhaps corporate and treasury bonds and other interest bearing securities. Then, too, there's gold, silver, and commodities.
If Barnhardt is correct, moving cash out of banks and into just about anything else --except the stock market--would be wise.
Let the discussion begin...