The Personal Blog of Michael Ginsburg - Internet entrepreneur, Financial markets trader, thinker, dreamer and doer. Proud citizen of the world. Nature is my religion and the Earth is my place of worship.
Tuesday, March 4, 2014
Monday, September 2, 2013
Zeitgeist - The Phenomena
Zeitgeist is a word in German which means "The Spirit of the Times".
It is also a series of monumental documentaries created by an American guy called Peter Joseph.
These documentaries are monumental and have completely changed my life and outlook on the world.
HIGHLY HIGHLY Recommended!
http://www.zeitgeistmovie.com/index.html
It is also a series of monumental documentaries created by an American guy called Peter Joseph.
These documentaries are monumental and have completely changed my life and outlook on the world.
HIGHLY HIGHLY Recommended!
http://www.zeitgeistmovie.com/index.html
Thursday, August 15, 2013
The Seven Stages of Empire
"Those who do not know history's mistakes are doomed to repeat them" George Santyana
“The farther back you can look, the farther forward you are likely to see.” Winston Churchill
Sunday, June 16, 2013
We can all get 'Cyprusified'...
Make no mistake: the recent events in Cyprus are unprecedented! Also, this is far from being over.
The media of popular opinion will lead you to believe that the crisis is over. Cyprus got its cash from the European (read: German) paymasters, there will be no sovereign default by the Cyprus government , banks have reopened and business is back to normal. All's good right? WRONG!
The chain of events in Cyprus sets a very dangerous precedent whereby ordinary depositors who's only 'crime' was to have their savings deposited in a bank are now fair game for a 'haircut' (i.e loss of capital). Up until now, this risk was restricted to share and bond holders only.
Furthermore, the original plan in Cyprus (which was rejected by their parliament due to mainly, in my opinion, their fear that ordinary citizens will riot in the streets and burn down the parliament) was for everyone to take a 'haircut' including people with deposits of less then 100K which, under European banking rules, are insured and government guaranteed.
It is one thing for something like that to happen in a 3rd world country using 'funny money' (like Zimbabwe during its financial crisis) but it is an entirely different thing altogether when that happens in Europe in a country using the 2nd most important currency in the world.
Furthermore, Cyprus might have reopened its banks but the government has also implemented capital controls that can be described as nothing less then draconian and something you would usually only see when a country is at war. Not to mention also that the EU treaty strictly prohibits capital controls and any other measures that restrict the flow of money and goods between its members yet this is happening in front of our eyes right now.
A few days ago, the Dutch Finance minister, who is also the current chairman of the Eurogroup, spooked global markets by saying that the bailout of Cyprus could be used as a "template" when bailing out other EU nations in the future. Seeing the impact his words had, he quickly retracted his comments saying instead that Cyprus is a "special case".
GIVE ME A BREAK! Does anyone honestly believe that? I reckon even the guy who said that doesn't buy his own words.
Now, we get to the interesting bit....
Many people around the world think that this is simply a European problem and that their money in the bank is safe and sound. People think that Europe as a whole is a basket case (which it is) and that their banks are safe and their governments are responsible and would never even contemplate doing something like that. Unfortunately, this could not be further from the truth.
Right now, governments in several so called 1st world developed nations are quietly preparing to "Cyprusify" their citizens .
These are not some conspiracy theories but facts reported by mainstream media. Here are just a few examples:
New-Zealand
The country's Finance Minister is proposing a solution whereby depositors will 'participate' in the bailout of a bank if it was about to go to the wall. This will be done through a mechanism with the very innocent name of "Open Bank Resolution" or OBR. You can read more about it here and here.
The media of popular opinion will lead you to believe that the crisis is over. Cyprus got its cash from the European (read: German) paymasters, there will be no sovereign default by the Cyprus government , banks have reopened and business is back to normal. All's good right? WRONG!
The chain of events in Cyprus sets a very dangerous precedent whereby ordinary depositors who's only 'crime' was to have their savings deposited in a bank are now fair game for a 'haircut' (i.e loss of capital). Up until now, this risk was restricted to share and bond holders only.
Furthermore, the original plan in Cyprus (which was rejected by their parliament due to mainly, in my opinion, their fear that ordinary citizens will riot in the streets and burn down the parliament) was for everyone to take a 'haircut' including people with deposits of less then 100K which, under European banking rules, are insured and government guaranteed.
It is one thing for something like that to happen in a 3rd world country using 'funny money' (like Zimbabwe during its financial crisis) but it is an entirely different thing altogether when that happens in Europe in a country using the 2nd most important currency in the world.
Furthermore, Cyprus might have reopened its banks but the government has also implemented capital controls that can be described as nothing less then draconian and something you would usually only see when a country is at war. Not to mention also that the EU treaty strictly prohibits capital controls and any other measures that restrict the flow of money and goods between its members yet this is happening in front of our eyes right now.
A few days ago, the Dutch Finance minister, who is also the current chairman of the Eurogroup, spooked global markets by saying that the bailout of Cyprus could be used as a "template" when bailing out other EU nations in the future. Seeing the impact his words had, he quickly retracted his comments saying instead that Cyprus is a "special case".
GIVE ME A BREAK! Does anyone honestly believe that? I reckon even the guy who said that doesn't buy his own words.
Now, we get to the interesting bit....
Many people around the world think that this is simply a European problem and that their money in the bank is safe and sound. People think that Europe as a whole is a basket case (which it is) and that their banks are safe and their governments are responsible and would never even contemplate doing something like that. Unfortunately, this could not be further from the truth.
Right now, governments in several so called 1st world developed nations are quietly preparing to "Cyprusify" their citizens .
These are not some conspiracy theories but facts reported by mainstream media. Here are just a few examples:
New-Zealand
The country's Finance Minister is proposing a solution whereby depositors will 'participate' in the bailout of a bank if it was about to go to the wall. This will be done through a mechanism with the very innocent name of "Open Bank Resolution" or OBR. You can read more about it here and here.
Canada
The country's Finance Minister has introduced to their Parliament on March 21st something called "The Economic Action Plan 2013" which forms part of the annual budget. According to this plan, the government will introduce something called a "Bail in" (instead of the commonly known bailout) whereby "The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants…"
The term "certain bank liabilities" is simply a fancy term for DEPOSITS since when you make a deposit in the bank, the bank is liable to give you that money back when you need it. Your cash is an asset to you but a liability to the bank you deposited it in since they have to return it at some point and also potentially pay you interest while they hold it (depending on the type of account you have). This is the exact opposite to a loan which is an asset to the bank (since you pay them interest on it) and a liability to you (since you are charged interest on the money borrowed and also have to repay the capital itself). This has been the most basic and fundamental principle of banking for 500 years!!
UK
A joint paper prepared in December 2012 by the US FDIC and the Bank of England proposes a mechanism to convert bank liabilities (again, read DEPOSITS) into operating equity for the bank to use. This means that your deposits will not be yours anymore. They will be converted from being the bank's liabilities to being the banks assets to do as they please with them. In return for your hard earned cash that they robbed, they will give you equity in the failing bank which means you will get shares that would almost certainly be completely worthless.
USA
If you think Europe is a basket-case, the US of A is, as usual, in a league of its own. After their government bailed out any financial institution under the sun (and a certain car maker too) and their central bank has created an unprecedented amount of currency units (I don't like to use the term 'money printing' since it is misleading and inaccurate given most of the currency that was created exists as nothing more then numbers on a computer screen), the "land of the free and the home of the brave" has become the biggest debtor in human history! The debt they have accumulated can NEVER be repaid and they actually never planned on repaying it anyway.
As long as the 'greenback' is the world's reserve currency and as long as the Fed is the only entity on the planet legally allowed to create more of it, they will simply keep the cycle going Ad infinitum.
Bank deposits in America are 'protected' by something called the FDIC which is a quasi-government entity through a pool of cash called DIF (Deposit Insurance Fund) and the premise is that in the event of a bank failure, all deposits under 250K will be covered by the FDIC by taking money out of their DIF and repaying any lost capital to the insured depositors. This sounds great on paper but the problem is that the said DIF is grossly under-funded and if any of the major banks in the US fails, they simply do not have enough money in their jar to repay everyone.
In addition to that, the US has a long and 'proud' history of confiscations and one-sided moves by the government with little or no warning. The gold confiscation in the 30s and 'Nixon shock' in the 70s being a prime example.
Here is a great article from Steve Forbes (the founder of Forbes magasine) about why confiscation of bank deposits CAN and WILL happen in the US.
I have been following the recent events in Cyprus with great amazement and complete shock and my personal conclusion is that the perceived safety of putting your money in the bank is no more. People should treat their bank deposits as any other kind of investment and constantly assess the investment risk (chance you will lose some or all of your money) and sovereign risk (chance the government will do something unanticipated that will mean some seriously bad news for you).
Here are some suggested safety measures:
1. Choose your bank very carefully: Are they a strong, stable and profitable business? Do they have a big investment arm that speculates on the financial markets and could potentially 'bring down the house'? Have they been involved in lending money to weak companies and countries?
Going for the perceived safety of a big bank is not always the right course of action, and often quite the opposite will be true as the 'big boys' are involved in anything under the sun from operating dubious investments to criminal market manipulation (Barclays libor scandal) and outright criminal acts such as money laundering (HSBC).
I've attached a list I found from a company called Weiss Research which is a small US-based rating agency that has a very good track record at correctly assessing and warning people about dodgy banks. For example, they downgraded both of the 2 biggest banks in Cyprus at the centre of the current scandal to 'weak' back in April 2012. In December of 2012 they downgraded them both again to "on the brink of failure". If only those Russian mobsters read and acted on those ratings on time....:-).
You can check many banks and companies on their website for free but I must admit that they are quite US-centric so it is possible that your bank was not rated by them
2. Assess the deposit insurance scheme in your jurisdiction (if one even exists).
How much is it for and what other terms and conditions are attached? Who's providing it? Is it the government directly or some quasi-government agency?
The country's Finance Minister has introduced to their Parliament on March 21st something called "The Economic Action Plan 2013" which forms part of the annual budget. According to this plan, the government will introduce something called a "Bail in" (instead of the commonly known bailout) whereby "The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants…"
The term "certain bank liabilities" is simply a fancy term for DEPOSITS since when you make a deposit in the bank, the bank is liable to give you that money back when you need it. Your cash is an asset to you but a liability to the bank you deposited it in since they have to return it at some point and also potentially pay you interest while they hold it (depending on the type of account you have). This is the exact opposite to a loan which is an asset to the bank (since you pay them interest on it) and a liability to you (since you are charged interest on the money borrowed and also have to repay the capital itself). This has been the most basic and fundamental principle of banking for 500 years!!
UK
A joint paper prepared in December 2012 by the US FDIC and the Bank of England proposes a mechanism to convert bank liabilities (again, read DEPOSITS) into operating equity for the bank to use. This means that your deposits will not be yours anymore. They will be converted from being the bank's liabilities to being the banks assets to do as they please with them. In return for your hard earned cash that they robbed, they will give you equity in the failing bank which means you will get shares that would almost certainly be completely worthless.
USA
If you think Europe is a basket-case, the US of A is, as usual, in a league of its own. After their government bailed out any financial institution under the sun (and a certain car maker too) and their central bank has created an unprecedented amount of currency units (I don't like to use the term 'money printing' since it is misleading and inaccurate given most of the currency that was created exists as nothing more then numbers on a computer screen), the "land of the free and the home of the brave" has become the biggest debtor in human history! The debt they have accumulated can NEVER be repaid and they actually never planned on repaying it anyway.
As long as the 'greenback' is the world's reserve currency and as long as the Fed is the only entity on the planet legally allowed to create more of it, they will simply keep the cycle going Ad infinitum.
Bank deposits in America are 'protected' by something called the FDIC which is a quasi-government entity through a pool of cash called DIF (Deposit Insurance Fund) and the premise is that in the event of a bank failure, all deposits under 250K will be covered by the FDIC by taking money out of their DIF and repaying any lost capital to the insured depositors. This sounds great on paper but the problem is that the said DIF is grossly under-funded and if any of the major banks in the US fails, they simply do not have enough money in their jar to repay everyone.
In addition to that, the US has a long and 'proud' history of confiscations and one-sided moves by the government with little or no warning. The gold confiscation in the 30s and 'Nixon shock' in the 70s being a prime example.
Here is a great article from Steve Forbes (the founder of Forbes magasine) about why confiscation of bank deposits CAN and WILL happen in the US.
I have been following the recent events in Cyprus with great amazement and complete shock and my personal conclusion is that the perceived safety of putting your money in the bank is no more. People should treat their bank deposits as any other kind of investment and constantly assess the investment risk (chance you will lose some or all of your money) and sovereign risk (chance the government will do something unanticipated that will mean some seriously bad news for you).
Here are some suggested safety measures:
1. Choose your bank very carefully: Are they a strong, stable and profitable business? Do they have a big investment arm that speculates on the financial markets and could potentially 'bring down the house'? Have they been involved in lending money to weak companies and countries?
Going for the perceived safety of a big bank is not always the right course of action, and often quite the opposite will be true as the 'big boys' are involved in anything under the sun from operating dubious investments to criminal market manipulation (Barclays libor scandal) and outright criminal acts such as money laundering (HSBC).
I've attached a list I found from a company called Weiss Research which is a small US-based rating agency that has a very good track record at correctly assessing and warning people about dodgy banks. For example, they downgraded both of the 2 biggest banks in Cyprus at the centre of the current scandal to 'weak' back in April 2012. In December of 2012 they downgraded them both again to "on the brink of failure". If only those Russian mobsters read and acted on those ratings on time....:-).
You can check many banks and companies on their website for free but I must admit that they are quite US-centric so it is possible that your bank was not rated by them
2. Assess the deposit insurance scheme in your jurisdiction (if one even exists).
How much is it for and what other terms and conditions are attached? Who's providing it? Is it the government directly or some quasi-government agency?
If it's the government directly then how strong are they financially? How much debt do they have? What is their sovereign credit rating?
If it's a quasi-government agency like the FDIC then how much money they actually have and will that be enough to cover everyone if a major bank goes byebye?
3. How easy will it be for you to get your money out at a moment's notice and/or easily send it overseas? If your money is locked away for more then 3 months in a term deposit (or CD as they are called in the US) and it is held in a country where the government's finances are questionable, I'd be thinking long and hard about whether the risk you are taking is acceptable.
Finally, here is a great piece by Peter Schiff, a guy who predicted the GFC back in 2005 and 2006, about how this is all going to end with regards to banking.
Make no mistake, the cat is out of the hat and the flood gates are now well and truly open!
3. How easy will it be for you to get your money out at a moment's notice and/or easily send it overseas? If your money is locked away for more then 3 months in a term deposit (or CD as they are called in the US) and it is held in a country where the government's finances are questionable, I'd be thinking long and hard about whether the risk you are taking is acceptable.
Finally, here is a great piece by Peter Schiff, a guy who predicted the GFC back in 2005 and 2006, about how this is all going to end with regards to banking.
Make no mistake, the cat is out of the hat and the flood gates are now well and truly open!
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