September 10, 2008
The Hidden Bailout Of $1.4 Trillion In Fannie / Freddie Credit-Default Swaps
by Daniel Amerman
Something extraordinary happened on Monday, September the 8th, 2008. The government takeover of Fannie Mae and Freddie Mac triggered the pending settlement of $1.4 trillion in credit-default swaps. This single event could have led to a cascading series of failures that might have bankrupted Wall Street – and much of the rest of the financial world – by the end of the week. That isn’t happening, and indeed, the media is treating this as something close to a non-event. However, a very real $1.4 trillion event happened – whose resolution effectively constitutes one of the largest government bailouts in history. Nobody noticed, for even though this is occurring in “plain sight”, the simple fact is that few people outside of the financial industry understand the $600 trillion derivative securities market. In this article, written the day after the event, we will briefly explain why this hidden, massive bailout – not of Fannie and Freddie but of the financial derivatives industry – is hugely significant, with potentially profound – and arbitragable – implications for the dollar, the markets and your personal financial future.
What Did NOT Happen
(These first several paragraphs in italics do not describe what did happen, but rather what could have happened in an alternate universe in which we actually had a free market that functioned without massive government interventions.)
The financial news of the day was that Fannie Mae and Freddie Mac were both unable to make debt payments and had defaulted on $5 trillion in bonds and mortgage-backed securities. With the US real estate market having fallen $4 trillion in the previous two years (non inflation-adjusted), it should have been no surprise that these two highly leveraged companies were not able to absorb the staggering losses. As this became clear to the markets, Fannie and Freddie lost the ability to borrow – which their survival was based upon – and actual default followed soon after. This default immediately triggered settlements on $1.4 trillion in credit-default swaps (credit derivatives), which had been entered into by major financial firms who had promised – in exchange for lucrative fee income – that if Fannie Mae or Freddie Mac were to default, these guarantor firms would make good on the defaulted bonds.
As the value of Fannie Mae and Freddie Mac debt plunged to 30 cents on the dollar, this meant that there was a 70% loss on the bonds (if one could find a buyer at all). This then triggered a call for settlement on the $1.4 trillion in credit-default swaps outstanding. Because the debt of the two former titans of the financial world was trading at a 70% discount compared to par value, this meant that total credit losses were $1 trillion ($1.4 trillion X 70% = $1 trillion). This meant $1 trillion worth of payments was due from the companies that had guaranteed the value of this debt, through their entering into credit-default swaps.
Settlement was triggered, but as the credit-default swap beneficiaries soon found out, collecting their settlements was an entirely different matter. The financial institutions around the world who had guaranteed Fannie and Freddie in exchange for lucrative corporate fee income (and multi-million dollar individual bonuses) were all highly leveraged themselves (indeed, weaker than the companies they were guaranteeing), and absolutely reliant on the day to day availability of large lines of credit and general borrowing capacity. As the creditors of these financial giants realized that a trillion dollar hit was barreling straight at them, they pulled their financing. Having to repay or replace these loans, without being able to sell massive portfolios of illiquid assets in a market suddenly devoid of buyers, left nearly every major investment bank and commercial bank in the United States and Europe unable to meet their obligations – even before settlement of their trillion dollar credit-default swap losses.
The failure of the major financial firms triggered another massive round of credit-default swap events, with amounts well over $10 trillion by Thursday, and over $20 trillion by Friday. By that time, however, no one was naïve enough to expect actual payment on those swaps, as Wall Street and the rest of the world’s financial hubs had all been insolvent since Wednesday. When the markets eventually opened for business again more than two months later, the official drop in the Dow Jones Industrial Average was over 10,000 points, meaning the index was trading at a level in the 1,000 – 1,500 range.
What Did Happen
“They say there are no atheists in a foxhole. Well, there are no libertarians in a financial crisis, either.”
Jeffrey Frankel, Harvard economist
The above scenario is what might have happened if we took the naïve perspective that markets actually function on their own without government intervention, and that corporations take the consequences for their own bad decisions, in exchange for the profits that come from their good decisions. That is of course a hypothetical world that has little to do with current global financial markets.
If you want a glimpse of the real world future, and what is happening as the same flawed business model that destroyed the $1.2 trillion subprime mortgage derivative securities market now threatens the over $60 trillion credit derivatives market, then we need to look no further than what actually happened with the $1.4 trillion worth of Fannie Mae and Freddie Mac credit default swaps. The companies were taken into conservatorship on September 6th. They have effectively failed even if legally there are some different ways of phrasing it. As reported by Bloomberg on September 8th, that led to a unanimous agreement by 13 Wall Street firms on Monday, September 7, 2008, that settlement of $1.4 trillion in credit default swaps had been triggered.
If Fannie Mae and Freddie Mac had actually failed to make payments on their debt – the consequences would have quite likely destroyed Wall Street right there. As illustrated in the scenario above, there simply isn’t a big enough capital base on Wall Street to absorb a trillion dollars in losses in a week, particularly once your creditors catch on to what is happening. Much smaller losses from subprime mortgage derivatives incrementally dribbling out over the course of the year, still might have taken down Wall Street, had it not been for the ability to hide losses in Tier Three assets (with the full complicity of the government), as well as the reassurances that the Federal Reserve provided by so swiftly bailing out Bear Stearns via JP Morgan, when a creditor driven bankruptcy (as described above) threatened to take down a major player.
Of course, the hypothetical collapse did not happen. The meltdown was averted because the federal government proactively and aggressively intervened to keep a financial disaster from taking down Wall Street (just as it did with Bear Stearns, and Long Term Capital Management the decade before). When the situation started to get bad, the federal government stepped in and – even if they still are hedging a bit legally – effectively guaranteed the debt of Fannie Mae and Freddie Mac.
Which means that they also – and this is crucial – bailed out the firms who had guaranteed the $1.4 trillion in credit derivatives. There may very well be losses, perhaps significant losses, but there would be no catastrophic loss there, that would threaten the viability of the financial system. Because what has really happened is that you have replaced a credit default swap on a quasi-governmental agency, that being Fannie Mae or Freddie Mac, with a credit default swap on the full faith and credit of the United States government. If the US guarantee had not been substituted then it would be a catastrophic failure. But because the US guarantee was substituted, it’s seemingly not a big deal, though much remains to be worked out.
In other words, the biggest beneficiaries of the $1.4 trillion Fannie and Freddie bailout were not Fannie or Freddie at all, but the Wall Street firms whose senior officers just happen to be major political contributors to both political parties – with some of those senior officers also running the Treasury Department on a revolving door basis.
How the ending valuation of the credit default swaps for settlement purposes will work out is a fascinating question. Arguably you could say that the value of Fannie and Freddie debt just rose, not only in comparison to prices during the recent financial turmoil, but also compared to par value. After all, we have just gone from quasi-governmental debt to something that is much closer to being explicitly a full faith and credit obligation of the United States Government, which means we should be losing part of the small spread that Fannie and Freddie traded at as quasi-governmental debt over direct governmental debt yields. From this perspective, one could say that the United States stepping in and taking over actually improves credit quality and the value of the bonds, so there is no loss at all – but a gain.
However there still remains a level of uncertainty, as the debt has not explicitly been made full faith and credit of the United States government. There’s a taint involved, and there could be liquidity issues – as investors typically are not too fond of even small uncertainties. So there’s a good chance the ending value will end up somewhere in the 90s – perhaps very close to par or perhaps a little bit further away. Wherever the ultimate settlement prices, however, it will not be a massive loss, because what has really happened is that a swap has indeed taken place, and the United States government bailed Wall Street out of self-inflicted credit swap-driven destruction, through preemptively swapping its guarantee for the guarantees by Fannie Mae and Freddie Mac.
The real implication of this then is that there is no danger from credit default swaps directly taking down Wall Street, so long as the federal government is willing to aggressively intervene every time there is a potential failure. I think we can see a clear path to the future here.
Where Did That Trillion Come From?
Before going any further, let’s stop and ask a simple question.
Where did the money for the bailout come from?
How did a strapped federal government come up with the trillions (if need be) to make good on all of Fannie Mae and Freddie Mac’s obligations?
How did a government that is already running over a $400 billion deficit so smoothly and easily come up with an extra trillion dollars or two, if needed? (With the $400 billion being based upon government accounting standards whose usage would get an individual or private firm thrown in prison. The deficit is far, far higher when unfunded retirement obligations are taken into account.)
And, for that matter, now that we’re on the subject – where did the government come up with the money for the $170 billion “tax rebate”?
How about that $59 trillion number for unfunded retirement related government obligations that keeps being bandied around? (The real number is a good bit higher as I cover in my article “The $2 Million Opportunity.”)
Where does the government come up with all that money, anyway?
The answer is simple – there is an unlimited supply of dollars. When you issue your own currency, and you are sufficiently determined, then there is an infinite supply of money available. Which could be a very good thing(?), for the Fannie Mae and Freddie Mac credit-default swaps are only one small part of a much larger market – and much larger risk. As we will discuss later in the article, however, while the supply of money is infinite, the value of that money is a different matter.
Taking Full Advantage Of Implicit Government Guarantees
Once you understand that the supplyof money is effectively infinite for a sufficiently grave emergency, then you are ready for the next step in understanding some recent events which might otherwise seem indecipherable. From some perspectives, this near catastrophe which could have so easily taken down all of Wall Street (had the federal government not intervened), was not a catastrophe at all. It was instead a highly successful experiment. For the many firms which purportedly took on the risk in creating $1.4 trillion of credit-default swaps for Fannie Mae and Freddie Mac did not do so for the fun of it or out of the goodness of their hearts. They did so because they got paid enormous sums of money for purportedly taking on all those risks. With much of that money quite directly passing through to the already wealthy individuals involved.
If Fannie and Freddie had not run into problems then the guarantor financial firms would have just pocketed all of their fees, ultimately as pure profit. Instead of that, a worst case scenario occurred that arguably should have destroyed every one of the firms involved in this business – and would have likely done so if there had genuinely been a free market involved.
What the experiment proved was that as long as the risk that you take is big enough, then the federal government and your former coworkers down at the Treasury Department can be absolutely relied upon to bail you out. Now, Wall Street felt this was likely already the case. It was kind of a shame to lose a firm like Bear Stearns, but the good part about it was it proved that a major derivatives market failure wouldn’t be allowed to occur, as was remarked upon in the article from last month quoted below:
“Government intervention has saved the $62 trillion credit derivatives market from facing the nightmare of counterparty failure during the credit crisis of the past year…
After the government backed rescue of Bear Stearns, the market views other major derivative counterparties as also “too big to fail”, and this implicit support… means the credit derivatives market will likely be spared the ultimate test.”
Reuters (Karen Brettell), August 7, 2008
With the takeover of Fannie Mae and Freddie Mac, the markets have been shown to be correct, and the reliability of the government bailout occurring has now been proven on a much larger scale. If the dollar amount is great enough, then no individual firm has to go down. Instead the United States Treasury and/or Federal Reserve will preemptively step in, and effectively make every one whole (or close thereto), perhaps without even affecting Wall Street bonuses.
The principle is very simple. Take huge risks that you know cannot possibly pay out if you lose. In fact – that’s the key to the whole transaction. The risks have to be so large that you cannot afford to lose, and the economy and markets cannot afford for you to lose. Then one of two things happens. Either the risk event does not come about and you make an extraordinary amount of money as an individual and as a firm for having taken on this huge amount of risk. Or the risk happens and you have to pay out. Except you really don’t, because you can’t afford to pay out and you have effectively blackmailed the rest of the population through being too big to fail. Then the government steps in and bails you out. Except it’s not really the government, because the government can’t truly do that, it is the rest of the population which bails you out.
Situations like this are sometimes referred to as “moral hazard” – a weak and theoretical sounding term for an insider’s game of global economic blackmail that is growing at a rate much faster than the overall global economy. The cozy relationship between Wall Street and regulators is crucial, and much of the massive, hidden derivatives bailout that just occurred can be explained by looking at just who the chief “cop” is. US Treasury Secretary Henry Paulson built his half billion dollar personal fortune as the former head of Goldman Sachs, meaning he was chief executive of one of the world’s leading derivatives players.
Making Sense Of The Irrational
It is only when you understand the game that is being played, that the actions of Wall Street and much of the rest of the financial world after the subprime mortgage crisis becomes clear.
The subprime mortgage derivates experiment failed spectacularly. The firms that were creating these derivative securities and the rating firms who were rating them were making numerous and obvious mistakes. Yet once the fundamentally flawed business model was disproven – the world did not move away from derivative securities. Oh, they stopped creating new subprime mortgage derivatives, but when we look at the arguably much riskier credit derivatives market (this greater risk is explored in my article “Credit Derivatives Dangers In 2008 & Beyond – A Primer”), the market grew from $35 trillion in outstanding credit derivatives in July 2007 — the same time it was becoming clear that something was going very badly wrong in the subprime mortgage derivatives market — to a current level of about $62 trillion. In other words the market reacted to the real world proof that these things don’t actually work, by almost doubling the amount in existence in one year. Indeed, the amount of credit derivatives outstanding grew at an annual rate that was about twice the size of the entire United States economy.
Now if you are an academic modeling a hypothetical world of free markets and rational behavior by sophisticated investors keeping the markets safe and fairly valued for all involved, this would make no sense whatsoever. Rational investment firms ought to be fleeing markets like credit derivatives – not doubling up on an already failed experiment.
The reason? It’s the best game in town. Take a huge amount of risk, be paid exceedingly well for it and if you screw up — you have absolute proof that the government will come in and bail you out at the expense of the rest of the population (who did not share in your profits in the first place).
Investing For The Bailout, Not The Crisis
Once we recognize that what is happening here is not a massive credit default, but a monetization by the US government of those losses on a potentially multi-trillion dollar scale, then our investment strategy changes dramatically. We are no longer investing for the crisis – but for the bailout. The combination of this bailout and the Federal Reserves unprecedented actions in forcing interest rates so far below the rate of inflation creates a “target-rich environment” for the execution of arbitrage strategies by both corporate and individual investors.
The federal government is not going to let the financial system fail. It will create however much money needs to be created to bail out the institutions and attempt to bailout the economy, as it has already shown in real world test after test, from the so-called “tax rebate”, to Bear Stearns, to Fannie Mae and Freddie Mac. Which means that the government is prepared to destroy the dollar, and is not just prepared to, but is currently actively destroying the value of the dollar rather than let those firms fail. So the way you invest for the failure of an out of control derivatives market is to invest for the destruction of the dollar. Which means taking on new tools for a new time.
Four Steps To Creating Wealth From Catastrophe
The first step in creating wealth in an unfair world – is to avoid getting cheated. If you are investing money at short term rates of 1%, 2% or even 5%, while the value of your money is eroding at 9% a year, then you are being deliberately played for a sucker, and cheated out of the value of your money by the Federal Reserve.
Not that secret meetings are being held and an explicit agreement is being made to “get the little guys”. It’s just that sacrifices have to be made for the greater good to try to avert a catastrophic market meltdown, and that means that trusting individual investors get paid a negative interest rate on their money (after adjusting for inflation), while paying taxes on (economically) non-existent income for the privilege. Keep in mind as well that one of the purposes in destroying the value of your money is to keep the prices on financial assets propped above where they would otherwise be, if genuine market forces were setting short term interest rates. Which means that you are systematically overpaying for financial assets compared to actual fundamental values, and are getting played for a sucker there as well, to the extent that you are not being subsidized with below (real) market rates like the banks, investment banks and hedge funds. (See my article “Fed Manipulations Subsidize Wall Street & Cheat Investors” for more on this.)
The second step to turning financial catastrophe into personal wealth requires understanding one simple thing – which most investors do not. Inflation does not destroy real wealth, at least not directly. Inflation redistributes real wealth. Indeed, inflation can be used by individuals to quite directly take real wealth from both financial institutions and other individuals, as I illustrate in my (slightly twisted) morality tale “Inflation Pickpocket”. (To add insult to injury, those doing the pocket picking can often do so tax-free, even while their victims pay real taxes on illusory income.)
The third step is to understand that wealth redistribution on a massive scale creates personal opportunity on a massive scale. John Paulson (no relation to Treasury Secretary Henry Paulson) saw the crisis that was coming in subprime mortgages, researched and educated himself on this area (which had not been his field of expertise), and he turned the crisis into a $3-$4 billion personal payday in 2007. If you’re not a hedge fund manager like John Paulson, you may not have the tools that he used to turn a market crisis into personal billions. That’s OK, because Paulson didn’t start with the tools either. He started with educating himself and learning about a new area, until he came up with a novel way to profit from disaster. A method that wasn’t in the financial textbooks, and that he didn’t find by reading a financial columnist in the paper.
Next you need to understand that you personally may have more tools than you may think, some of which may surprise you. Tools which can give you the opportunity to turn financial disaster into personal net worth. There are ways you can use those tools to turn the destruction of the currency into perhaps the greatest real wealth-building opportunity of your life, on a long-term and tax-advantaged basis. But, if you want this to happen –you will need to start with learning. That is the irreplaceable fourth step. You are going to have to educate yourself, and work to not just understand, but to master some of the financial forces and methods in play here. You will have to learn how to turn the destruction of paper wealth into real wealth. With Turning Inflation Into Wealth being the key to this next step. My best wishes to you for turning this challenge into an extraordinary personal opportunity.
Conspiracy Facts of Laws and there hidden meaning. There is no Law in America
The Lessons of a Lifetime
SILVER WEEKLY COMMENTARY..
August 18, 2008..
By : Theodore Butler..
TED BUTLER’S ARCHIVES..
In order to understand where you may be going, it is important to understand where you have been. Nowhere is this more true than in silver. The historic price sell-off, coupled with the obvious shortages in almost all forms of retail physical silver present the lessons of a lifetime. I believe that how we learn from this lesson will determine our future financial situation, good or bad..
The drastic sell-off in silver (and gold) is further proof of an ongoing manipulation to the downside. My advice to own real silver on a fully paid for basis, has been borne out. Real pain exists among those who held silver or gold on margin. Many leveraged investors have lost their positions because they couldn’t meet margin calls. Meanwhile, no fully paid up investors sold because they had to come up with more margin money. That’s lesson number one..
The Anatomy of a Crime..
What we just witnessed in the historic sell-off in silver and gold was a crime. That’s not a crybaby complaint. There were no supply or demand developments that could account for the severity of the sell-off. The proof that this sell-off was criminal lies in public data provided in the Commitment of Traders Report (COT) and a basic understanding of how the futures market works. This has been the most extreme sell-off in the recent history of silver and gold. We are farther below the moving averages than at any point since I have been writing about silver. Price movements this severe are likely to be intentional and not accidental..
Every criminal act must have a motive and an opportunity to commit the crime. By the simple process of elimination, those responsible for this crime are the concentrated commercial shorts on the COMEX. No one else fits the profile. They had the means (through their dominant and monopolistic position), the profit motive and the skill to cause the sell-off..
I can’t identify the concentrated shorts by name, as commodity law protects their identity. But the regulators certainly know who they are and continue to choose to do nothing about them. (They also knew the identity of the SemGroup, which appears responsible for the recent run up and collapse of crude oil prices.) While I can’t identify the perpetrators by name, I can label senior management of the NYMEX/COMEX , as well as the commissioners and other high ranking employees at the CFTC as being complicit and involved in the manipulation. Incompetence can no longer be considered an explanation or excuse for them not enforcing the law. (While not the purpose of this article, I will list the e-mail addresses of the regulators at the end of this article, for those who want to make their feelings known.)..
I am not writing this article in anger. I understand how many could feel angry, particularly if leveraged silver or gold positions were liquidated as a result of this sell-off. Not only does this episode confirm that these markets have been manipulated, it also strengthens my conviction that the termination of this manipulation is a certainty. The commercials know better than anyone how the markets function mechanically. This is their full-time business. They know when the markets are least liquid and when many traders are absent. Perhaps the most illiquid times, with few traders present, are in the overnight sessions. The most illiquid time is around 8 PM EST. On Thursday evening, right at that time, the price of silver suddenly plummeted by almost $1.50. It had never before fell by that amount so quickly in any overnight session..
So, how did the concentrated shorts pull that off? They waited until the most opportune time and threw in some relatively small, but aggressively placed sell orders. These sell orders caused the price to fall, touching off further sell orders from under-margined longs, which further caused prices to fall. The analogy I like to use is that it is similar to rolling a small snowball down a hill and watching it pick up size and momentum. As the sell orders began to snowball more and more, guess who was buying after prices dropped? Correct, the concentrated shorts..
How is it possible that the commercials could buy back short positions on thousands of contracts at times of steep sell-offs, without triggering a rise in price? There is only one possible and plausible explanation – through discipline and collusion. The commercials know the price levels that tech funds and other large speculators are likely to sell at on the way down. In addition, some of those large commercials do the clearing for these speculative traders. In that position, they know the finances of the large long silver traders better than anyone. The commercials know, in advance, the sell points and vulnerability levels of the longs as well as the longs themselves. So all the commercials have to do is trigger low enough prices at illiquid times in the market to manufacture an avalanche of selling. Then they sit back with low priced buy orders and wait for the desperate sellers to come to them. Previously, I have referred to the behavior of the commercials as a wolf pack. It is shocking that the regulators can permit this..
To those who claim that these are normal market games, and the commercials are market makers, let me point out that commodity law does not allow for market making. The markets are supposed to operate as an open outcry (now electronic) auction, not as a specialist system. Even assuming that the commercials operate as self-appointed market makers, what kind of legitimate market maker only caps price rises by increasing short selling. Then they create disorderly moves to the downside. That’s why all silver price rallies are contained and orderly and why we get vicious, out of control sell-offs. The commercials make markets only for their own financial benefit. Some market makers..
I promise you that I could prove this if I were privy to the trading records rather than just the CFTC and the exchange, whose mission is to look the other way. But that is impossible, so I have to prove it with public data. While the data for this Thursday-Friday sell-off won’t be available until the next COT, the last few COTs provide ample evidence to prove what I allege..
The most recent COT, for positions held as of 8/12, confirm that the commercials have been on a buying binge for the past month. In other words, they have rigged the sell-offs in silver and gold over the past month and used those sell-offs to collusively buy as many contracts as possible. The numbers are impressive. Since the COT of 7/15, the commercials have bought back and reduced their total net silver futures short position by more than 20,000 contracts (100 million ounces) In gold the commercials have bought back, as a group, more than 90,000 futures contracts, reducing their net short position by 9 million ounces. Undoubtedly, more contracts have been bought by the commercials in the current week..
In addition to this buying on the COMEX, I believe that the naked short position in shares of the silver ETF, SLV, have been bought back, either entirely or in large part over the past month. This was the plan..
However, the percentage of net buying by the concentrated shorts in COMEX silver and gold has decidedly lagged the overall pace of commercial net buying. In silver, the big 4 concentrated shorts only bought back 10%, or 2000 of the 20,000 silver contracts bought, while the raptors (the 9+ smaller commercials) bought 12,000 and the 5 thru 8 largest traders bought a bit more than the 6000 contract balance. In gold the big 4 only bought back 22%, or 20,000 of the 90,000 net contracts bought, with the raptors buying 40,000 contracts and the 5 thru 8 largest traders buying 30,000 contracts..
What this tells us, for sure, is that the concentrated short position of the big 4 in silver and gold, while somewhat reduced in total contracts over the past month, has grown more concentrated and manipulative. The big 4 in gold and silver have grown more and more isolated from the rest of the commercials and, therefore, more desperate. This fully explains the disorderly nature of the recent sell-off and will explain any further disorderliness. The very small amount of short covering by the big 4 increases the likelihood that they may be trapped in these short positions..
Remember, concentration and manipulation go hand in hand, and the more concentrated the short position becomes in silver and gold the clearer the proof of manipulation. Only those that refuse to analyze the public data and reject the very idea that silver and gold could possibly be manipulated can conclude that we are witnessing free market behavior and not a rig job. With the growing evidence of a retail investment shortage in silver, those who deny manipulation are about to look very silly..
The Retail Silver Investment Shortage..
The growing and persistent retail silver investment shortage is becoming increasingly obvious. This segment makes up a small part of the total silver market on a daily basis. However, due to the large number of participants, on both the buy and sell side, the demographics elevate this segment to a more reliable barometer than daily volumes might suggest. With some 5,000 US retail dealers and perhaps 100,000 customers, there is much to learn from in this retail market..
What is happening is nothing short of astounding. For the first time in our lifetime, there is not enough silver to go around. Just about everywhere you look, dealers are sold out or low on inventories, throughout the entire supply chain. Delays in deliveries, the clearest definition of a commodity shortage, are commonplace. This is unprecedented. That this is occurring precisely at the same time of a sharp sell-off in the price of silver, should make your head spin..
I would suggest, if you have college-age children or that you borrow any basic economics textbooks they have. What you will read, is what you already know. The most basic law of supply and demand dictates that low and falling prices must be an indication of growing supplies or falling demand. You will find no suggestion that the price of anything could fall sharply with record demand, especially with the unavailability of supply. At least, not in any free market system..
Then I would suggest that you consider the only plausible explanation to silver investment shortages amid plummeting prices. That explanation is that there must be something wrong with the price of silver, not with supply or demand. After all, the actual supply or demand can’t possibly be “wrong.” They are what they are. Only the price could possibly be wrong. To be exact, the price of silver is manipulated, something that I have maintained for more than two decades. The growing retail silver shortage confirms this manipulation..
I recognize that even if the true Prophet of any or all religions descended from the Heavens and certified that the price of silver (and gold) was manipulated, there would still be many who doubted it. That’s because one of the most powerful forces on the face of the earth, is the inability to admit that they may have been wrong. If that error is about something as basic as a market being free or manipulated, then the denial is likely to be more obstinate. In fact, as the evidence becomes more apparent, it’s actually quite humorous to read and listen to why the shortage doesn’t matter..
As regular readers know, the inevitability of a silver shortage (as a direct result of the long-tern manipulation) has been at the center of my message. If there is one thing upon which I have agreed with my good friend and mentor, Izzy, it is the coming shortage of silver. This has been an issue on which we have agreed for more than 20 years. But it is only recently that I have come to appreciate his true take on what shortage will mean to the price of silver. He has a perspective that few of us have, including me..
By way of review, the silver retail investment shortage emerged some six months ago, shortly after Izzy’s article extolling the advantage of buying US Silver Eagles..
There is not the slightest doubt in my mind that his article jump started the huge demand for Silver Eagles and as a result the US Mint could not keep up with demand. They still can’t. Already, the Mint has sold more Silver Eagles in the first seven and a half months of this year than it sold in any full year in the 22 year history of the Eagle program. And we still have four and a half months. Clearly, Silver Eagle sales would have been higher were the Mint able to keep up with demand. I believe the demand for Silver Eagles subsequently generated sales for all retail silver investment products. Those not able to buy Eagles bought other forms that were available, until demand exceeded supply for other silver products..
Now many may doubt that a retired grandfather could write a single article that could launch a shortage of retail silver for the very first time in history, but I know better. I know that is exactly what happened. And the reason I know it is because I knew that was Izzy’s intent beforehand. Everything he wrote about the benefits of owning silver was the gospel truth. But, he also intended and set out to highlight just how tight silver supply had become by forcing the Mint into a position where they could not meet demand. He knew that the Mint couldn’t hide a shortage of Silver Eagles. There’s no way that someone sets out to accomplish such a specific objective and then achieves it by accident..
The reason I am recounting Izzy’s remarkable accomplishment is to give you a sense of the true meaning of his thoughts on the coming silver shortage. Even I raise my eyes when he offers his seemingly outrageous price projections, although I know better to dismiss anything he says. But there is something unique in his experience and background that gives him a perspective unlike most. In fact, it is a perspective one can achieve only through first hand experience..
Izzy has experienced the kind of shortages of basic goods only witnessed during war. He was present during communist take over in his native Romania. He has related to me how people would pay any price for a loaf of bread, a chicken, even a tool. You and I can’t conceive of such shortages because we have never experienced them first hand..
Perhaps you can mentally transport yourself to imagine such shortages, where price becomes secondary to availability,. If so, you may get a brief glimpse of Izzy’s vision and “crazy” price targets for silver in a time of true shortage. I can only do it for the shortest of times, before my imagination shuts down. If this persistent and growing retail shortage of silver develops into a true full-blown wholesale and industrial shortage (as I believe we may already be in), we will not be able to judge what price is truly crazy. Those most likely to gauge price correctly in a shortage may only be those who have been there and done that..
Lessons For Everyone..
I realize I am running long here, but I ask your indulgence. This article is about the important lessons before us. Let me summarize the lessons to different segments of the silver market..
For investors, don’t let this opportunity slip by. I realize you are seeing something with your own eyes that you have never seen before, namely, shortages and low and sharply declining prices. This is contrary to everything you have learned and experienced. It is nothing short of extraordinary. You must rely on your common sense. Something has to give, either prices or supply. This can’t last for long. Continued low prices won’t increase supply. The only solution for shortage is higher prices. In the case of silver, sharply higher prices. Don’t hesitate in buying silver now..
Recently, I wrote that I thought silver was exceptionally low-risk, since it had fallen sharply. The price then went lower than I thought it would or could. But my basic premise is still intact, namely that the lower the price goes, the lower the remaining risk..
For those investors capable of switching gold owned into silver, this is a particularly opportune time to switch, as silver prices have been manipulated much lower than gold prices. Silver is cheaper, compared to gold, than it has been in a long time. That can’t last. Yes, gold looks cheap here and appears to be also tight on a retail supply basis, but the big difference is this; due to silver’s industrial consumption nature and deeply depleted world inventories, higher prices for silver will not cure a shortage for a long time..
Investors should recognize that the manipulative sell-off may have created the very springboard that will cause the price of silver to soar. This is not about some academic discussion on whether silver is manipulated or not. This is about identifying and taking advantage of a potential price explosion. It has been my long-held premise that before we took off to the upside, we were likely to get a super smash to the downside. I think this was the super smash..
For industrial consumers of silver, the lessons are even more compelling than for investors. That‘s because, investors don’t have to buy silver. They have the choice to buy or not buy. Users don’t have that choice, they must buy. Their only choice is when, how much, and at what price to buy silver. A few weeks ago, users were paying more than $19 an oz for silver. Since then, the price dropped more than $6. Users will not consume less silver just because the price declined..
If you know you must consume an item, price declines are the time to stock up. This is not complicated. If you consume a favorite type of coffee, when it goes on sale for 30% off, the reaction is to take advantage and buy more than you normally would. Likewise, some industrial consumers of silver will do the same. It’s called legitimate hedging, which is the economic justification of the futures markets..
A special note to users. For the past ten years or so, hedging has been a disaster for the producers who sold future production at too low of a price. But if there was one shining example of a good hedge, it was on the buy side by a user. I am speaking of Southwest Airlines, and their magnificent buy hedge of fuel. As a result of locking in low prices, those responsible for the fuel hedge are placed upon a pedestal at the company, and rightly so. Someday soon, there will be some great success stories about those users who locked in silver at current prices..
For mine producers of silver, the current sell-off presents unique risks and opportunities. Obviously, the low price presents danger to your shareholders. I don’t know of a primary miner that can operate at a profit at current silver prices. Producers can and should do something about it. At a minimum, producers should speak up about the sell-off and question its cause. They might threaten to withhold production. Such actions would meet with strong approval from shareholders. It would be a public relations bonanza. Shareholders don’t want to hear producers say everything is fine in the silver market, because they know otherwise..
A few years ago, a silver mining company, Silver Standard, appeared to take my public advice to buy some silver. The results were spectacular. Not only did the company and its CEO, Robert Quartermain, reap shareholder goodwill, it achieved a profit of roughly $25 million, when it sold the silver earlier this year above $20. I would suggest that this company (and others) take advantage of the sell-off and do it again. If they do, I think the results, both from a public relations and profit standpoint, will be even better..
Finally, the lessons to the regulators from this sell-off may be the most important of all. This year we have witnessed disorderly pricing in many markets. In oil and cotton, the disorderly markets were caused by speculator shorts, masquerading as commercials, who ran into trouble and had to buy back their short positions. While the concentrated shorts in silver and gold have not yet lost control, given the growing physical shortage in silver, it would appear to be only a matter of time..
In the meantime, the regulators are permitting a crime to remain in progress. This is shameful. Worse, I believe that their denial of the existence of a silver manipulation has, effectively, given a green light to the concentrated shorts to continue the manipulation. In other words, the CFTC is directly responsible for the recent silver and gold sell-off. That’s beyond shameful..
Any pretense that the concentrated short position in silver was somehow a legitimate hedge went out the window the minute that the price cracked below the cost of production and shortages started to develop. After all, who legitimately hedges to lock in a loss or hedges against nonexistent inventory?..
Here are the e-mail addresses for the regulators. If you want to give someone a piece of your mind about the manipulation, this is a good place to start. While it may or may not do any good, it is the right thing to do, especially if you are disturbed by this manipulation, as you should be..
If you own stocks you need to read this
The Unknown $19 Trillion Depository Trust Company
Rumor Mill News ..
Part I of II-
This exclusive report is a compilation of interviews and background research from October 1995 through April 1999. The Depository Trust Company (DTC) is the best kept secret in America. Headquartered at 55 Water Street in New York City, the average American has no clue that this financial institution is the most powerful banking corporation in the world.
The general public has no knowledge of what the DTC is or what they do. How can a private banking trust company hold assets of over $19 trillion and be unknown? In a recent press release dated April 19, 1999, the Depository Trust Company stated: The Depository Trust Company (DTC) is the world’s largest securities depository, holding nearly $19 trillion in assets for its Participants and their customers…. Last year, DTC processed over 164 million book-entry deliveries valued at more than $77 trillion.
In dealing with the trust department of Midlantic Bank, N.A. in New Jersey [now PNC Bank, N.A.], this writer was authorized, as trustee and power of attorney, to transfer original trust assets comprising of common stocks and bonds to a new trust set up in another jurisdiction. An Assistant Vice President from the Trust & Financial Management Office of Midlantic Bank said to me “it will take at least 6 weeks to do this as the majority of the stocks and bonds are not held in the name of the trust”. This same Midlantic Bank Assistant V.P. also stated in a letter dated November 17, 1995, “Of the 11 municipal bonds, 8 are held in book entry only.
This means they cannot be physically re-registered with a certificate sent to the new trustees.” (* these are not the actual figures quoted in the letter in order to protect the privacy of the account holder, at their request. Also, we were asked not to name the Midlantic Assistant V.P. in order to protect her privacy Rights. We respect these requests with full moral compliance). In disbelief, I brought this matter to the attention of our research assistants at the Christian Common Law Institute [formerly the North Bridge News] and we began our lengthy investigation into the matter. After 3 years, the can of worms we’ve opened up should frighten every American. With the advent of reported Y2K computer glitches and the possible collapse of our ‘paper asset’ economy, every person who has a stock or bond in their portfolio had better read this report and act on the information we are disclosing here. In November 1995, after encountering numerous “no comments” and a myriad of “that’s not my department” excuses via telephone, I eventually spoke with Mr. Jim McNeff who told me his position was Director of Training for the DTC.
He said he’d been employed there for 19 years and was “very proud” of his employer. During my initial telephone interview, either Jim’s employer or some other unknown person or persons were illegally listening or taping our telephone conversation according to the electronic eavesdropping equipment we have installed on our end. Why did anyone feel it was necessary to illegally record our conversation without advising us?
Was some federal alphabet agency monitoring DTC calls to safeguard National Security? That in itself is suspicious enough to warrant a big red warning flag. Jim informed me back then (1995) that “the DTC is the largest limited trust company in the world with assets of $ 9.1 trillion”. In July 1998, I spoke with Ms. Rose Barnabic of the DTC Finance Department who said that “DTC assets are currently estimated at around $11 trillion”. As of April 19, 1999, the DTC itself has stated that their assets total “nearly $19 trillion” (see above). Mr. McNeff had also stated “the DTC is a brokerage clearing firm and transfer center.
We’re a private bank for securities. We handle the book entry transactions for all banks and brokers. Every bank and brokerage firm must secure their membership with us in case they become insolvent, so your assets are secure with DTC”. Yes, you read that correctly. The DTC is a private bank that processes every stock and bond (paper securities) for all U.S. banks and brokerage houses. The big question is this; Just who gave this private bank and trust company such a broad range of financial power and clout?
The reason the public doesn’t know about DTC is that they’re a privately owned depository bank for institutional and brokerage firms only. They process all of their book entry settlement transactions. Jim McNeff said “There’s no need for the public to know about us… it’s required by the Federal Reserve that DTC handle all transactions”.
The Federal Reserve Corporation, a/k/a The Federal Reserve System, is also a private company and is not an agency or department of our federal government, according to the 1998 Federal Registry. The Federal Reserve Board of Governors is listed, but they are not the owners. The Federal Reserve Board, headed by Mr. Alan Greenspan, is nothing more than a liaison advisory panel between the owners and the Federal Government. The FED, as they are more commonly called, mandates that the DTC process every securities transaction in the US. It’s no wonder that the DTC (including the Participants Trust Company, now the Mortgage-Backed Securities Division of the DTC) is owned by the same stockholders as the Federal Reserve System. In other words, the Depository Trust Company is really just a ‘front’ or a division of the Federal Reserve System.
“DTC is 35.1% owned by the New York Stock Exchange on behalf of the Exchange’s members. It is operated by a separate management and has an independent board of directors. It is a limited purpose trust company and is a unit of the Federal Reserve.” -New York Stock Exchange, Inc. Now, let’s see how this effects the average working American family. If you’re not aware how the system works, you should visit or call a stock broker or bank and instruct them you want to purchase some shares of common stock or a small municipal bond, for example.
They will set up a brokerage account for you and act as your agent with full durable power of attorney (which you must legally sign over to them) to conduct business on your behalf, upon your buy or sell instructions. The broker will place your stock or bond purchase into their safekeeping under a “street name”. According to Mr. McNeff of the DTC, no bank or broker can place any stock or bond into their firm’s own name due to Federal Trade Commission (FTC) and Security and Exchange Commission (SEC) regulations. The broker or bank must then send the transaction to the DTC for ledger posting or book entry settlement under mandate by the Federal Reserve System. Remember, since your bank or broker can’t use their name on the certificate, they use a fictitious street name. “Since the DTC is a banking trust company, we can’t hold the certificates in our name, so the DTC transfers the certificates to our own private holding company or nominee name.” states Mr. McNeff. The DTC’s private holding company or street name, as shown on certificates we have personally examined from numerous certificate holders, is shown as either “CEDE and Company”, “Cede Company” or “Cede & Co”. We have searched every source known to learn who CEDE really is, but have been unable to get any background information on them. Is Cede Company fictitious or is their identity perhaps a larger secret than DTC?
We must presume that the information Mr. McNeff gave us was correct when he confirmed that Cede Company was a controlled private holding company of the DTC. We have now found the following proof that CEDE is real from the Bear Stearns internet site: NEW YORK, New York – March 16, 1999 – Bear Stearns Finance LLC today announced that it will redeem all of the 6,000,000 outstanding 8.00% Exchangeable Preferred Income Cumulative Shares, Series A (“EPICS”) of Bear Stearns Finance LLC, liquidation preference of $25.00 per Series A Share, CUSIP number G09198105. All of the Series A Shares are held by Cede & Co., as nominee of The Depository Trust Company, and the payment of the redemption price will be made to Cede & Co. by ChaseMellon Shareholder Services, LLC, as paying agent, whose address is: 85 Challenger Road, Ridgefield Park, New Jersey 07660. The banks and brokers are merely custodians for their clients. By federal law (SEC), they cannot hold any assets in the customer’s name.
The assets must be held in the name of DTC’s holding company, CEDE & Co. That’s how DTC has more than $19 trillion dollars of assets in trust… or is it really in “trust” if the private Federal Reserve System is technically holding it in their “unknown” entity’s name? Obviously, if stock and bond certificates you’ve purchased aren’t in your name, then the “holder” (the Federal Reserve System) could theoretically refuse to surrender them back to you under a “national emergency” according to the Trading with the Enemy Act (as amended). Is this the collateral being held by the private Federal Reserve System to pay off the national debt owed to them by our federal government, first initiated by Lincoln’s debt bonds of 1864? According to Mr. McNeff, the DTC was a former member of the New York Stock Exchange (NYSE), and “Our sister company is the National Securities Clearing Corporation… the NSCC” (they have since merged). He was correct since we now know that the NYSE holds 35.1% of the “ownership” of the DTC on behalf of their NYSE members.
Simply put, the Depository Trust Company absolutely controls every paper asset transaction in the United States as well as the majority of overseas transactions, and they now physically hold (as of April 1999) 99% of all stock and bond book-entrys in their street name, not the actual owner’s names. If you have stock or bond certificates in your name buried in your back yard or under your mattress, we suggest you keep them there. If not, it might be very wise to cancel your brokerage account and power of attorney status, re-register the stocks and bonds in your name (if you still can), and keep them hidden where only you know their location. Otherwise, you have absolutely no control over them (see Part II of our exclusive research report on the DTC for more information on beneficial ownership status).
However, getting a stock or bond certificate these days is not so easy if possible at all: “For the most part, issuers know little about the role of the Depository Trust Company (DTC). The DTC was created in 1973 as a user-owned cooperative for post-trade settlement. Our members are banks and broker/dealers, whom we refer to as participants. We handle listed and unlisted equities, including 51,000 equity issues and 170,000 corporate debt issues, equating to more than 78% of shares outstanding on the New York Stock Exchange (NYSE). We also have more than 95% of all municipals on deposit. In the 1980s, the “Group of 30″ [business leaders] recommended that stock certificates be eliminated, because physical certificates create risk. The Securities Exchange Commission (SEC) issued a concept release in 1994 to gradually decrease certificates, providing optional direct registration on the books of the issuer instead of a certificate…. this enhances the portability of shares between transfer agents and brokerage accounts. With the direct registration system, brokers transmit instructions to purchase through DTC, which the issuer or transfer agent then registers, so shares can be delivered electronically.” -John D. Faith, Manager, Corporate Trust Services,
The Depository Trust Company (1996) Now we’re about to reveal to you the most shocking discovery we came across during our research into this matter. Most of us remember a few years back the purported computerized selling of stocks that resulted in Wall Street’s “Black Monday”: Dow Dives 508.32 Points in Panic on Wall Street “The largest stock-market drop in Wall Street history occurred on “Black Monday” — October 19, 1987 — when the Dow Jones Industrial Average plunged 508.32 points, losing 22.6% of its total value. That fall far surpassed the one-day loss of 12.9% that began the great stock market crash of 1929 and foreshadowed the Great Depression. The Dow’s 1987 fall also triggered panic selling and similar drops in stock markets worldwide” -Source: Facts on File World News CD ROM The stock exchanges had dramatic record losses, and a record volume of shares were traded on that infamous Monday in October 1987. We all asked ourselves how computers could have done this by themselves without someone knowing about it. After all, someone has to program a computer to tell it what to do, what not to do, or even when to do or not do it.
During my telephone conversation, Mr. McNeff was trying to assure me that they [the DTC] have “never lost a certificate or made a mistake in a book ledger transaction”. In attempting to give me an example of how trustworthy the DTC is when I asked him how he could back up such a statement, he replied “DTC’s first controlled test was 4 or 5 years ago. Do you remember Black Monday? There were 535 million transactions on Monday, and 400 million transactions on Tuesday”. He was very proud to inform me that “DTC cleared every transaction without a single glitch!”. Read these quotes again: He stated that Black Monday was a controlled test. Black Monday was a deliberately manipulated disaster for many Americans at the whim of a controlled test by the DTC. What was the purpose of this test?
Common sense tells you that you test something before you intend to use it. It’s quite obvious that the stock markets are going to ‘crash and burn’ at some future date and for some ‘unknown’ reason since the controlled test was so successful. Was this just one of the planned tests for a Y2K internationally planned worldwide economic meltdown?
The Great Depression is about to be repeated, and it will be as deliberate and manipulated as the first one that began with the stock market crash of 1929. We are, without a doubt, on the brink of the Mother of all economic Depressions. As of May 3, 1999, the Dow Jones Industrial Average (DJIA) went above a record 11,000 points. Just prior to the 1929 stock market crash, Wall Street was posting record prices, record earnings, and record profits…. just like the scenario we are experiencing today. Will Y2K be a manipulated and deliberate a financial meltdown?
Too many facts already support this probability. On June 7, 1995, the federal government issued a new regulation requiring stock and bond certificate transfers to be cleared in three days instead of the previous five day time period. It coincided with the infamous Regulation CC that purportedly gave us faster three day availability of funds from deposited checks. This means that brokers and banks must get your stock or bond transaction into the street name (Cede & Co.) of the DTC within 3 working days.
That’s hard to do considering banks claim it takes 3 or more days to clear a check that you’ve submitted to pay for a stock purchase. But, there’s a reason for this new regulation and it coincides with the introduction of the new FRS “dollars”. On February 22, 1996, “the DTC will flip the switch” according to Mr. McNeff. “What switch?”, I asked. “This is the day that clearing house funds will no longer be accepted for stock or bond transactions” was my reply from Jim. “Instead, only Fed Funds will be accepted”. Fed Funds, or a Fedwire, are electronic computer ledger debit transfers between Federal Reserve System member banks. No checks or drafts have been allowed from that day, just as Mr. McNeff accurately stated.
This is more commonly called a ‘cashless transaction’. I call it the reality of the mark of the beast. This is the manifestation of the new international god, the New World Order [I prefer the term ‘New World DISorder’ as a more accurate description]. [RMNews: In case you are new to all of this and you don’t understand that the Federal Reserve Banking System is a privately owned bank, there is an article on the http://www.rumormillnews.com page that will help you begin to understand.
It is found by clicking the Gunther Russbacher button and then clicking on the headline that reads: An Expose of the Federal Reserve. This article was written in late 1991 or early 1992. At the time is was published in many diferent newspapers and newsletters. It was the first introduction the American people had to the “new money” that is referenced in this article.
Consider this my fellow Christian Americans: All pension funds and other institutional ‘managed funds’ are comprised of paper asset investments such as stocks, bonds, and mutual funds. These certificates are technically in the name of DTC’s private holding company, CEDE and Company. The DTC is owned by the private Federal Reserve System owners (Click for a complete list of names). Congress has attempted, on no less than two occasions since 1995, to pass legislation allowing pension funds to be used by the government as purported ‘loans’. All the Federal Reserve System has to do is hand it over. But, what happens to the people counting on those pension fund investments in order to feed themselves in their retirement? Too bad for them…. they’re out of luck because for the ‘good of the nation’, they may be forced to share or relinquish their lifetime of hard-earned wealth.
This can be done without the consent of Congress under an Executive Order based on the War and Emergency Powers Act and a state of National Emergency, just like we are already under (See further Executive Orders). Since the Federal Reserve System already holds our stocks and bonds in their fictitious DTC “street name”, CEDE, then perhaps they’ll cash them in for the federal government’s failure to repay the loans that have become way overdue. Heck, some of Lincoln’s gold backed bonds from 1864 have not been repaid yet…. and for a reason. On March 6, 1933, all bullion gold and gold coins were forcibly taken from the hands of private citizens (see New York Times). Under the War Powers Act, President Roosevelt declared a national emergency touted as a “Banking Holiday”.
It was declared due to the deliberately calculated stock market crash that preceded the Great Depression. Where did this gold end up? Into the hands of the Federal Reserve System owners. The majority is stored in the impervious rock vaults they own beneath New York City. Is it any surprise that the DTC physically holds all the remaining non-book entry issued stock and bond certificates in the same place? Technically, our entire nation is still under the Executive Order declaration of the War Powers Act and in a continual state of national emergency (See Clinton’s 1994 Executive Order 12919). The President can enforce any new emergency at any time under Executive Order or Presidential Directive. In 1995, we [the former North Bridge News] published that we expected a new national “dollar” emergency to be declared within a year or two. Just like we thought at the time, they have now blamed it on the purported drug dealers who are allegedly destroying our currency by money laundering schemes. Since late 1996, old U.S. $100 FRB notes issued by the Federal Reserve Bank are being exchanged for new $100 FRS issued by the Federal Reserve System.
These new notes have scanable magnetic platinum encryption on the plastic strips embedded inside the bills. The U.S. Treasury claims this is for “the blind”. Now, new $20 and $50 FRS’s are replacing the older notes as well. What people don’t realize is that very soon, the older FRB notes will no longer be ‘legal’ and there will be a penalty for hoarding them. This is what happened to those Americans holding gold and gold coins after 1933. “We are most gratified with the successful introduction of the new $100 and $50 notes and look forward to the same success with the new $20s,” Chairman Greenspan said. For the first time, a machine-readable capability has been incorporated for the blind. A new feature in the $20 will facilitate the development of convenient scanning devices that could identify the note as a $20. -U.S. Treasury, Office of Public Affairs, RR-2449 released May 20, 1998. Why new paper ‘money’ and for what purpose? Because the new FRS notes in your pocket can be scanned and whoever scans them can know exactly how much money you have on you. The older FRB notes are not encoded to do this. This writer knows firsthand of at least one machine, manufactured by Diebold, Inc. (a/k/a InterBold) that scans the money in your pockets, wallet or purse no different in theory than a credit card scanner, but much more sophisticated. I participated in a ‘test’ of this machine at a U.S. international airport in 1998. To me, it looks much like the standard metal detector scanners you walk through at all airports. I was asked (by who I believe was a U.S. Treasury Agent, as he introduced himself and flashed his ID quickly in my face so I couldn’t read it) if I had any of the new $100 or $50 bills in my pockets.
I looked in my wallet and saw I had one new $100 FRS note. I told him “yes”, then he said “Good, but don’t tell me how much”. After saying he would “really appreciate it” if I would help them with a test, he asked me to walk through what looked like a typical airport scanner. No beeps. No noise. No sound at all. He looked at a computer screen and said “Do you have a new $100 bill?”. When I confirmed that was true, he thanked me and told me to please move on. I tried to ask him how the machine knew that, but he ignored my question. I took a good look at the scanning system and believe I have now spotted them at Kennedy, Atlanta, Miami and Los Angeles airports. The odd part about this is that these machines seem to all be located in the customs areas where you enter the U.S. from a foreign country. Obviously, they want to know if someone is carrying more than $10,000 into the U.S. Common sense dictates that they should be more concerned about people leaving with more than $10,000 if they’re really trying to thwart the drug dealers…. until you begin to realize that there must be some other hidden agenda:
They are apparently going to stop money from entering the U.S. for a reason. Will the President call for the confiscation of all gold bullion and bullion coins as Roosevelt did? Who will end up with it? The Federal Reserve System owners, just like before. Since June 1998, international gold supplies have been so low that some private Swiss Banks have been paying a premium above the market wholesale value for gold bullion. This was confirmed to us by a gold and diamond mining Chief Executive from Rex Mining in Guinea, West Africa, who supplies raw gold to a major Swiss Banking company smelter and processor The spot gold market has been manipulated to keep the price low so that the Federal Reserve System owners can purchase all that is available through their various trusts and corporations. World gold availability on the open market is now at a record low and mining production of gold is also at a record low output. What happened to ‘supply and demand’ with gold and silver?
Normally, when supply is high the price decreases. When supply is low, precious metal prices increase. Perhaps the private FED will peg the new dollar to gold prices, as many experts have already speculated. What will stocks and bonds purchased with old dollars be worth then? Pennies to the dollar, so to speak. Who ends up being the only winner? The Federal Reserve System stockholders. They control the circulation amounts of paper money in the U.S. Combine that with the new scanner to stop large amounts from entering into the U.S., and the scenario amounts to a planned shortage of paper FRS notes, the banning of the older FRB notes, and the soon to be astronomical price of gold which most Americans will be forbidden to have or hoard, once again.
The facts we’ve presented in this report all point to this. People will be at the mercy of the federal government for daily food and for jobs. Checks are soon to be totally phased out. Banks issue ATM debit cards and tell you they must charge more for your account if you use a real live human teller instead of the machine. The switch is being turned on. This is not speculation. This is the truth of reality. It’s already been tested, and their new system works. Just ask Jim McNeff of the DTC. The day has come when you must decide to accept or reject the beast and the New World Disorder.