Is this Nightmare good for Precious Metal ?
Stew
Posts: 1,002
Watching a financial meltdown unfold can be quite an unnerving experience; I believe it is better to be informed of such things than to be caught by surprise by them. I am not sure what this will mean for our precious metals market. I am sure it will add to the already high level of volatility that we have been seeing lately. I have tried to explain what I found to friends and family members. Most of what I get is the glazed eye look that you get from a teenager when trying to explain how important it is to keep your bedroom clean. 
I truly hope this helps some people. I by no means am a financial expert. I am just a coin collector who by studying my chosen hobby and the metals that make up the coins in my hobby ended up learning about financial matters around the world in discussions with my fellow coin collectors.
I know what I have posted below is a little on the lengthy side. I feel though that it is well worth the time to look into to it and draw from it what makes sense for you and your family.
Any thoughts or opinions on how this might affect the Precious Metals Market are greatly appreciated
{CDS Primer: A credit default swap is exactly as the name implies. It's an insurance policy that a creditor purchases against the default risk of the debtor. For example, Party A carried default risk of Party B because Party A owns some of Party B's bonds. To insure against default of Party B, Party A buys a CDS from Merrill Lynch at a price that isn't even close to reflecting the true risk being passed on to Merrill. If Party A has $100,000,000 in Party B's bonds and then B defaults, A loses its $100MM. However, Merrill is so confident of B's financial strength that they take on the entire $100MM in potential liability, often for just a paltry 2-3% premium. So, Party A pays $3MM to insure their default risk through an unregulated insurance policy, issued by Merrill Lynch. Merrill now is on the hook for the entire $100MM should Party B default.}
The counterparties to Merrill's $53,000,000,000,000 (yes, that's $53Trillion!) in CDS are getting antsy that they'll never get paid for their side of the "bets". So, to shore up the impression that Bank of America will be able to pay off any of the losing CDS bets, Bank of America has transferred the liability of the Credit Default Swaps from their Merrill subsidiary to their regular, U.S. banking subsidiary. By doing this, Bank of America has essentially pledged as collateral the $1,000,000,000,000 (yes, that's $1Trillion!) in retail deposits (YOUR DEPOSITS) it currently has on its books.
Tuesday, October 18, 2011
Bank of America quietly moved $53 trillion in derivatives from its holding company to its subsidiary that holds $1 trillion in customer deposits and is insured by the FDIC. If any parts of these derivatives blow up, the Taxpayer will then be on hook for the $1 trillion in deposits.
http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html
10/26/2011
Barclays Explains Why A 50% Greek Haircut "Would Be Considered A Credit Event, Consequently Triggering CDS Contracts"
http://www.zerohedge.com/news/barclays-explains-why-50-greek-haircut-would-be-considered-credit-event-consequently-triggering
Oct. 27, 2011
EU agrees debt deal; 50% Greek debt haircut
SYDNEY (Market Watch) — European leaders announced a deal early Thursday in which private investors in Greek government debt will take a 50% writedown on the value of their holdings as part of a wide-ranging package of measures designed to stem the euro-zone debt crisis.
(Must take out the space between Market and Watch in link CU Computer thinks a dirty word)
http://www.market watch.com/story/greek-bondholders-to-take-50-haircut-2011-10-26?siteid=rss
I truly hope this helps some people. I by no means am a financial expert. I am just a coin collector who by studying my chosen hobby and the metals that make up the coins in my hobby ended up learning about financial matters around the world in discussions with my fellow coin collectors.I know what I have posted below is a little on the lengthy side. I feel though that it is well worth the time to look into to it and draw from it what makes sense for you and your family.
Any thoughts or opinions on how this might affect the Precious Metals Market are greatly appreciated
{CDS Primer: A credit default swap is exactly as the name implies. It's an insurance policy that a creditor purchases against the default risk of the debtor. For example, Party A carried default risk of Party B because Party A owns some of Party B's bonds. To insure against default of Party B, Party A buys a CDS from Merrill Lynch at a price that isn't even close to reflecting the true risk being passed on to Merrill. If Party A has $100,000,000 in Party B's bonds and then B defaults, A loses its $100MM. However, Merrill is so confident of B's financial strength that they take on the entire $100MM in potential liability, often for just a paltry 2-3% premium. So, Party A pays $3MM to insure their default risk through an unregulated insurance policy, issued by Merrill Lynch. Merrill now is on the hook for the entire $100MM should Party B default.}
The counterparties to Merrill's $53,000,000,000,000 (yes, that's $53Trillion!) in CDS are getting antsy that they'll never get paid for their side of the "bets". So, to shore up the impression that Bank of America will be able to pay off any of the losing CDS bets, Bank of America has transferred the liability of the Credit Default Swaps from their Merrill subsidiary to their regular, U.S. banking subsidiary. By doing this, Bank of America has essentially pledged as collateral the $1,000,000,000,000 (yes, that's $1Trillion!) in retail deposits (YOUR DEPOSITS) it currently has on its books.
Tuesday, October 18, 2011
Bank of America quietly moved $53 trillion in derivatives from its holding company to its subsidiary that holds $1 trillion in customer deposits and is insured by the FDIC. If any parts of these derivatives blow up, the Taxpayer will then be on hook for the $1 trillion in deposits.
http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html
10/26/2011
Barclays Explains Why A 50% Greek Haircut "Would Be Considered A Credit Event, Consequently Triggering CDS Contracts"
http://www.zerohedge.com/news/barclays-explains-why-50-greek-haircut-would-be-considered-credit-event-consequently-triggering
Oct. 27, 2011
EU agrees debt deal; 50% Greek debt haircut
SYDNEY (Market Watch) — European leaders announced a deal early Thursday in which private investors in Greek government debt will take a 50% writedown on the value of their holdings as part of a wide-ranging package of measures designed to stem the euro-zone debt crisis.
(Must take out the space between Market and Watch in link CU Computer thinks a dirty word)
http://www.market watch.com/story/greek-bondholders-to-take-50-haircut-2011-10-26?siteid=rss
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Comments
Major turmoil in the banking industry will affect all markets negatively, with the exception of PMs. It will boil down to a choice of which money is real.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
I do not believe that it will all come tumbling down upon us anytime soon because TPTB can simply print money at will to paper over the situation.
I do believe that at some point the current monetary system will be replaced and if it is it will need to be backed up by something tangible and this is where PM's will probably be revalued much higher simply because there is not enough Gold and Silver at current price levels to back up all the debt floating around out there.
There could be a situation in the next few years where Gold and Silver will skyrocket on their own merit due to hyperinflation as the current system unravels and it could happen unexpectedly at any time. It is anyones guess when any of this could happen but I do believe it will at some point in time and when it does the people holding dollar denominated assets will be wiped out.
<< <i>Bank of America quietly moved $53 trillion in derivatives from its holding company to its subsidiary that holds $1 trillion in customer deposits and is insured by the FDIC. If any parts of these derivatives blow up, the Taxpayer will then be on hook for the $1 trillion in deposits.
http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html
>>
If the derivatives make money the bankers roll in the loot and if they lose
the taxpayers bail them out. This is blatant fraud of the highest order. (At
least it seems unlikely there are too many frauds greater than $53,000,000
000,000.00 going on today)
The worst that will happen is the bank will be driven out of business by reck-
less speculation and the bankers golden parachutes will deploy. But rather
than being shunned they'll get new jobs in business or government where
they can cause more havoc. These people have experience and Harvard ed-
ucations so can always find another million dollar job. (at least until they've
utterly destroyed western civilization)
hey, let's not understate the problem. These guys are going to destroy this entire region of the galaxy. There will be no star system in this spiral arm spared. All will be reduced to dust and quarks
Liberty: Parent of Science & Industry
<< <i>All will be reduced to dust and quarks >>
Well that makes me feel much better, No need to worry about things, just sit back have a drink and become a quark
(Great Line Baley)
I thought pessimism was shunned upon in Baleyville
I have a very strict gun control policy: if there's a gun around, I want to be in control of it - Clint Eastwood
We're the last ones to know anyways, right?
I am confident though that when the history books are written it'll say one of (if not the best) sector to be invested in the years 2000 to 2020, will be precious metals.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Bank of America quietly moved $53 trillion in derivatives from its holding company to its subsidiary that holds $1 trillion in customer deposits and is insured by the FDIC. If any parts of these derivatives blow up, the Taxpayer will then be on hook for the $1 trillion in deposits.
http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html
Didn't Wells Fargo move 70 trillion into it's FDIC insured folder?
US GNP is what? 15 trillion a year? Want to sink the country? Let the bankers do it, they are pros!
Thomas Jefferson said that he was more afraid of the bankers than he was of standing armies.
bob
<< <i>"utterly destroyed western civilization"
hey, let's not understate the problem. These guys are going to destroy this entire region of the galaxy. There will be no star system in this spiral arm spared. All will be reduced to dust and quarks >>
I've lost most of my faith in the people running things. With one hand they rake
in the wealth of the world and with the other they lay off all the risk on those be-
ing robbed. No one will step forward and say it's wrong. It is this last part that is
most disturbing.
<< <i>hey, let's not understate the problem. These guys are going to destroy this entire region of the galaxy. There will be no star system in this spiral arm spared. All will be reduced to dust and quarks
I thought pessimism was shunned upon in Baleyville >>
He's starting to open his eyes.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
That's as "anaconda (snake)" as it gets !!!
<< <i>
hey, let's not understate the problem. These guys are going to destroy this entire region of the galaxy. There will be no star system in this spiral arm spared. All will be reduced to dust and quarks >>
OK, let me put it this way then. They usaed to say there were enough nuclear weapons
to destroy the earth ten times over. I never really believed this because I know the earth
is a pretty resilent place and we couldn't destroy it with polution as they said we were and
we probably couldn't even blow it up.
But the size of the derivatives market is some quadrillion dollars which is some ten times
larger than world GDP and economies are infinitely more fragile than planets. The earth isn't
dependent on the good will of each individual of every species. The economy is.