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As the financial house of cards collapses around us, investors who
think they are holding real assets with the claim ticket being a stock certificate,
bond or even precious metal warehouse receipt better wake up.
The latest revelation from the MF Global ponzi
debacle proves, yet again, that if it’s not in your possession you
don’t own it. Take heed.
It’s one thing for $1.2
billion to vanish into thin air through a series of complex trades, the
well-publicized phenomenon at bankrupt MF Global. It’s something
else for a bar of silver stashed in a vault to instantly shrink in size by
more than 25%.
That, in essence, is what’s
happening to investors whose bars of silver and gold were held through
accounts with MF Global.
The trustee overseeing the
liquidation of the failed brokerage has proposed dumping all remaining
customer assets—gold, silver, cash, options, futures and
commodities—into a single pool that would pay customers only 72% of the
value of their holdings. In other words, while traders already may have
paid the full price for delivery of specific bars of gold or silver—and
hold “warehouse receipts” to prove it—they’ll have to
forfeit 28% of the value.
That has investors fuming. “Warehouse
receipts, like gold bars, are our property, 100%,” contends John
Roe, a partner in BTR Trading, a Chicago futures-trading firm. He personally
lost several hundred thousand dollars in investments via MF Global; his
clients lost even more. “We are a unique class, and instead, the
trustee is doing a radical redistribution of property,” he says.
Roe and others point out that,
unlike other MF Global customers, who held paper assets, those with warehouse
receipts have claims on assets that still exist and can be readily
identified.
Source: Barron’s via Yahoo
The entire paper system – from stocks to bonds – is coming
unhinged. There are trillions of dollars in debt across the world, and all of
it is nothing but a number on someone’s balance sheet. In essence, the
majority of it exists only in the virtual world. While you may think you have
claim to a physical asset in exchange for that certificate, receipt or note,
what you really have is a promise from an entity that may very well be
insolvent and unable to make good.
Financial institutions and brokerage houses like MF Global are just
the tip of the iceberg. The accounting practices of our government are far
worse, and the consequences of collapse significantly more dangerous.
When MF Global collapsed, customers lost access to their precious metals and
other investments. When our monetary system, predicated on the same ponzi scheme as insolvent financial companies, crashes,
holder of US dollars, much like those MF Global warehouse receipts, will be
wiped out in terms of purchasing power, and it will likely be a devaluation
much more than just 25%.
But when that happens the holders of those
notes won’t be trying to cash them in for precious metals. Rather, they
will find that their paper Federal Reserve Notes will buy far less food and
gas, if at all.
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