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Going forward it will be more and more difficult to get your money out of
the financial system.
The reason for this concerns the actual structure of the financial system.
As I’ve outlined previously, that structure is as follows:
1) The total currency (actual cash in the form of bills and
coins) in the US financial system is a little over $1.36 trillion.
2) When you include digital money sitting in short-term
accounts and long-term accounts then you’re talking about roughly $10
trillion in “money” in the financial system.
3) In contrast, the money in the US stock market (equity
shares in publicly traded companies) is over $20 trillion in size.
4) The US bond market (money that has been lent to
corporations, municipal Governments, State Governments, and the Federal
Government) is almost twice this at $38 trillion.
5) Total Credit Market Instruments (mortgages, collateralized
debt obligations, junk bonds, commercial paper and other digitally-based
“money” that is based on debt) is even larger $58.7 trillion.
6) Unregulated over the counter derivatives traded between the
big banks and corporations is north of $220 trillion.
When looking over these data points, the first thing that jumps out at the
viewer is that the vast bulk of “money” in the system is in the form of
digital loans or credit (non-physical debt).
Put another way, actual physical money or cash (as in bills or coins you
can hold in your hand) comprises less than 1% of the “money” in the financial
system. Suffice to say, one of the biggest concerns for the Federal Reserve
is what would happen if a significant percentage of investors decided to move
into physical cash.
Indeed, this is precisely what happened in 2008 when depositors attempted
to pull $500 billion out of money market funds.
A money market fund takes investors’ cash and plunks it into short-term
highly liquid debt and credit securities. These funds are meant to offer
investors a return on their cash, while being extremely liquid (meaning
investors can pull their money at any time).
This works great in theory… but when $500 billion in money was being
pulled (roughly 24% of the entire market) in the span of four weeks, the
truth of the financial system was quickly laid bare: that digital
money is not in fact safe.
To use a metaphor, when the money market fund and commercial paper markets
collapsed, the oil that kept the financial system working dried up. Almost
immediately, the gears of the system began to grind to a halt.
When all of this happened, the global Central Banks realized that their
worst nightmare could in fact become a reality: that if a significant
percentage of investors/ depositors ever tried to convert their “wealth” into
cash (particularly physical cash) the whole system would implode.
As a result of this, the Fed and the regulators are looking to implement
moves that would make it much harder to move money into physical cash.
If you find difficulty in taking my word for this, consider the recent
regulations implemented by SEC to stop withdrawals from
happening should another crisis occur.
The regulation is called Rules Provide Structural and
Operational Reform to Address Run Risks in Money Market Funds. It
sounds relatively innocuous until you get to the below quote:
Redemption Gates – Under the rules, if a money market fund’s level of
weekly liquid assets falls below 30 percent, a money market fund’s board
could in its discretion temporarily suspend redemptions (gate). To
impose a gate, the board of directors would find that imposing a gate is in
the money market fund’s best interests. A money
market fund that imposes a gate would be required to lift that gate within 10
business days, although the board of directors could determine to lift the
gate earlier. Money market funds would not be able to impose a gate for
more than 10 business days in any 90-day period…
Also see…
Government Money Market Funds – Government money market funds
would not be subject to the new fees and gates provisions. However,
under the proposed rules, these funds could voluntarily opt into them, if
previously disclosed to investors.
http://www.sec.gov/News/PressRelease/Detail/P...ease/1370542347
In simple terms, if the system is ever under duress again, money
market funds can lock in capital (meaning you can’t get your money out) for
up to 10 days. If the financial system was healthy and stable, there
is no reason the regulators would be implementing this kind of reform.
This is just the start of a much larger strategy by the Fed to declare War
on Cash.
Indeed, we've uncovered a secret document outlining how the Fed plans to
incinerate savings to force investors away from cash and into riskier assets.
We detail this paper and outline three investment strategies you
can implement right now to protect your capital from the Fed's sinister
plan in our Special Report Survive the Fed's War on Cash.
We are making 1,000 copies available for FREE the general public.
To pick up yours, swing by….
http://www.phoenixcapitalmarketing.com/cash.html
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