SGM Metals: IMF- Trillions in Bank Derivatives are Built Upon YOUR Rehypothecated Assets

PRLog (Press Release) - May 22, 2012 - wealthcycles.com reports: [ LTRO2 has come to an end, as European banks have no money-good assets left to pledge, yet cash outflows persist, and they need the cash to remain solvent.

Again, the IMF paper "Money and Collateral": “Unless there is some rebound in the pledgeable collateral market (by either an increase in ‘source’ collateral, or its velocity or re-use rate), the likely asymmetry in the demand and supply of good collateral may entail some difficult choices for the markets and the regulators.

The key providers of primary (or source) collateral to the ‘street’ (or large banks) are: (i) hedge funds; (ii) securities lending (via custodians) on behalf of pension funds, insurers, official sector accounts, etc. The securities they hold are continuously re-invested to maximize returns over their maturity tenor. Source collateral is collateral that can be re-pledged, creating collateral chains. The term re-pledged is a legal term and means that the dealer receiving the collateral has the right to re-use it in its own name. Since a single piece of source collateral can be re-used several times by several different intermediaries, the aggregate volume of re-pledged collateral reflects both the availability of collateral (that is collateral from the “source) as well as the re-use rate of source collateral.”

This should be starting to get pretty scary, and is where the phrases such as “chain-reaction” and “dominoes collapsing” rightly enter the news stream. Nothing has changed.

“In fact, by 2007, re-hypothecation had grown so large that it accounted for half of the activity of the shadow banking system. Prior to Lehman Brothers’ collapse, the International Monetary Fund (IMF) calculated that U.S. banks were receiving $4 trillion worth of funding by re-hypothecation, much of which was sourced from the UK. With assets being re-hypothecated many times over (known as “churn”), the original collateral being used may have been as little as $1 trillion—a quarter of the financial footprint created through re-hypothecation…  In the UK, there is absolutely no statutory limit on the amount that can be re-hypothecated. In fact, brokers are free to re-hypothecate all and even more than the assets deposited by clients,” according to Reuters. Trillions in off-balance sheet liabilities, counting assets as such an infinite times over, unbelievable!

Yes this applies to gold as well. Imagine when the demand-sucking paper gold instruments give way to investors demanding their own, real money. ]

Well now that the IMF is back peddling and admitting the fragile house of cards that is the western fractional reserve banking system & the intricacies of its corrupted architecture simply to be able to claim they warned the world. Currently the ‘leveraged derivative fueled shadow banking system’ made possible through fiat money is reaching a tipping point that will uncover the 'grey area' accounting tricks that have been permitted out of desperation in hopes of keeping the banks standing for just long enough to get a real recovery moving. Now that the very system that many have warned would eventually come to a flash point is actually nearing that moment of fate, the ‘fellows’ in the global banking paradigm are beginning to create distance between themselves and the collapsing fiat empire in order to save face and appear to be on the outside of the system itself.

It is slightly ironic that the rats are jumping ship finally but we all knew at some point we would see this take place. What is concerning is that these fractional reserve rats obviously know more of the intricacies of the rehypothecated collateral that has been applied over and over again by multiple banks and is shown as an asset of collateral on multiple banks balance sheets on multiple continents and the collateral damage that this phenomenon will create when the system gives way to a free market correction. The mentality of a degenerate gambler is one of ‘the next hand dealt will be a royal flush, keep the cards coming dealer’ and this is not too far removed from the Wall Street & investment banking mentality except that the gambler is wearing ripe 2 day old clothes at the casino table and the banker is in a $10,000 Armani suit. This is probably why the banking system has been able to create these ‘financial weapons of mass destruction’ as the Oracle calls them without the lack of common sense & true oversight being called into question.

None the less, we are on the edge of an epic day of reckoning that will change the landscape of the world in profound ways forever more. You see there have been major flashpoints over the past decades where the banking system has been on thin ice and without valid collateral and these events SHOULD have crashed these banks who were operating outside the realm of regulatory graces. But under threat of creating a vacuum that would eviscerate the wealth of savers & investors alike the regulators were ‘pressured’ into letting the rehypothecation take place just to make it through these rough patches. The banks made sure it was seen as a necessary evil to save the life savings of retirees and baby boomers which represented re-election votes for the politicians. But once the grey area was ‘on the books’ the banks maxed this option out quickly and upon the next crisis point materializing the regulators then asked “hey, why do you have all of these rehypothecated assets on your balance sheets which have made this crisis 1,000 times more of a disaster than the last time? We gave you permission to do this one time before to cover your last disaster why have you expanded it?” And so the monster grew.

Now the regulators probably don’t want to admit just how big the monster actually is and more worrisome is the fact that they probably don’t have anyway of knowing exactly how big it is. With the unraveling of this nefarious system will come the realization of just how all encompassing it really is and how many banks have been ‘tweaking the books’ which has falsely earned them the reputation of being ‘the most profitable banks in the world’. With this day of shame will come an exodus of the people out of the fiat empire that has been portrayed as being infallible and a necessary evil in the Keynesian system but unfortunately when this begins it will be too late for most. There have been over 100 examples of fiat collapses throughout the history of paper monies and the only ones who make it out with a fraction of what they acquired while unwittingly participating in these systems are those who ‘saw the forest for the trees’ and made the transition into the only non-fiat money source on the planet, gold & silver bullion. Now would be a good time for you to establish your “Plan B” in physical gold & silver bullion and begin to participate in the sound money debate with the real money that has served as the conscience of the fiat systems for over 6,000 years. It is the physical precious metals that serve as the base assets for this entire monstrosity at the very bottom and have been also multiplied through fancy book keeping tricks by the banks. Whatever gold & silver bullion you own will remove some of this foundation from their balance sheets and transfer it onto your balance sheet. Tick, tock.

Photo:
http://www.prlog.org/11881283/2