The “protected class” is granted “safe harbor” only because their bets are so risky that to let them fail could crash the economy. But why let them bet at all?
Just read your Derivatives Time Bomb article. Definitely mind bending to understand the puzzle that has been created but you are making it clearer, thank you. I may be way off base here, please correct me, but I am trying to expand the picture of what would happen.
If I understand it correctly, anything financed by debt is at risk?
So a house that you’ve paid a mortgage on for 20 years with only 10 years left could be taken by Cede and Co as the collateral for the loan, if the bank or mortgage company that made that loan becomes bankrup, Ames Cede exercises their position as legal owner? Same with a business?
If that is true, the reality would be that 90% (I am guessing) of all homes could be taken from the “beneficial owners” and renters as collateral for such failed institutions, leaving the occupants effectively squaters or homeless?
Business CEOs would have a new Board of Directors, appointed by Cede, even if they were allowed to keep their position?
Just as California enacted anti- eviction laws to protect renters during and past the Pandemic, it would seem likely that something similar would have to be done to keep the system going. Just as courts cannot allow a judgment that would cause chaos, even if legally correct, I think the same would apply here.
Perhaps Cede would allow residents to stay put, but now as perpetual renters, rather than beneficial owners, having no opportunity to ever own the property free and clear? Is that what Klaus Schwab means when he says “ you will own nothing and be happy”?
It seems the government would require the collateral owners to keep the system going, keep the corporations functioning, keep grocers and vendors supplying food, but now almost everything would come under a more centralized control, returning much of mankind to the dark ages of Lords, Feudal Lands, and Serfs working for them, with the Cede and Co “knighted” Board of Directors “directing” everything?
While you cannot exchange gold or silver directly at the grocery store, there would likely be a way to exchange it for whatever currency or CDBC that is then the legal tender?
Things owned outright with no debt could be exchanged for gold or silver by private parties. Since it is mostly seniors who own their homes free of debt, they might have an advantage. But inflation and the high cost of maintenance might quickly evaporate their ability to afford the maintenance.
Whew… my brain is tired! Seems the real solution lies above: see Daniel 2:44.
As I understand it what is in play under the UCC are “securities” held in an account. A mortgage can be securitized as in a mortgage backed security and if you own some of that it is fair game. But recall that is the flip side of your position as a mortgagee. You owe as a debtor and your mortgage is itself not a security. In turn your house, which is collateral under the mortgage loan is itself not a security.
I think what we are talking about here are financial assets like stocks and bonds not houses or even hard assets like gold held in a vault. Shares in gold stocks on the other hand are fair game in that they are securities.
I heard today that SD has refused to advance the legislation so that says something about the feasibility of UCC change, at least in the current moment. If and when this sinks in with the public the political (and even the financial) situation may change quickly.
I think there are entities that can hold stock that have limited or no derivative exposure. If there is a derivatives collapse on Monday maybe you will still own your stock on Tuesday, unlike your pal at JP Morgan Chase whose positions would have vaporized overnight.
Your firm may be in tough shape given that a derivatives collapse will have large consequences and could put a lot of firms out of business. But it would seem to me you would be better off with your account at a firm with no derivative exposure since you might at least have a little time.
Indeed I think the buy low sell high thing to do would be to start a firm that has no derivative exposure and whose costs are converted the old fashioned way—fees for holding the account. The documents establishing the account would notwithstand the UCC and contractually bind the firm to not take the securities. A firm like that would be turning them away at the front door once the vulnerablity of accounts is clear. Moreover a slimmed down firm like that might well be anti fragile enough to survive big shocks. At the least the ownership of the securities will be in place
Thanks. I hadn't heard the SD bill got denied! Anyway the good of getting ideas out there is that when the economy collapses and politicians are looking around for solutions, they might recall those former proposals and explore them. In the 1930s, Roosevelt's govt passed things that would never have been passed in ordinary times, and they actually succeeded in putting people back to work and rebuilding the country.
Hello Ellen, Thanks for your work. I would like to do a collab with you. Currently I write The Weekend Freelancer where I teach about Data Analytics, One of my ongoing series is domain - https://theweekendfreelancer.substack.com/s/domain where I write about domain knowledge from each industry. I would love if you can write a guest post explaining what are the top areas that people should have knowledge about in Banking domain. Feel free to reach out if you would be interested. Thanks
What if confiscating the assets in brokerage accounts is the intended outcome (as I strongly suspect)? Then there's no incentive to "fix" the system. Better to find brokerages without this exposure. No? Outside the US? Or perhaps take delivery (and ownership) of the share certificates. I really don't expect this defect to be fixed as long the big players are so heavily invested not fixing it
Ellen
Just read your Derivatives Time Bomb article. Definitely mind bending to understand the puzzle that has been created but you are making it clearer, thank you. I may be way off base here, please correct me, but I am trying to expand the picture of what would happen.
If I understand it correctly, anything financed by debt is at risk?
So a house that you’ve paid a mortgage on for 20 years with only 10 years left could be taken by Cede and Co as the collateral for the loan, if the bank or mortgage company that made that loan becomes bankrup, Ames Cede exercises their position as legal owner? Same with a business?
If that is true, the reality would be that 90% (I am guessing) of all homes could be taken from the “beneficial owners” and renters as collateral for such failed institutions, leaving the occupants effectively squaters or homeless?
Business CEOs would have a new Board of Directors, appointed by Cede, even if they were allowed to keep their position?
Just as California enacted anti- eviction laws to protect renters during and past the Pandemic, it would seem likely that something similar would have to be done to keep the system going. Just as courts cannot allow a judgment that would cause chaos, even if legally correct, I think the same would apply here.
Perhaps Cede would allow residents to stay put, but now as perpetual renters, rather than beneficial owners, having no opportunity to ever own the property free and clear? Is that what Klaus Schwab means when he says “ you will own nothing and be happy”?
It seems the government would require the collateral owners to keep the system going, keep the corporations functioning, keep grocers and vendors supplying food, but now almost everything would come under a more centralized control, returning much of mankind to the dark ages of Lords, Feudal Lands, and Serfs working for them, with the Cede and Co “knighted” Board of Directors “directing” everything?
While you cannot exchange gold or silver directly at the grocery store, there would likely be a way to exchange it for whatever currency or CDBC that is then the legal tender?
Things owned outright with no debt could be exchanged for gold or silver by private parties. Since it is mostly seniors who own their homes free of debt, they might have an advantage. But inflation and the high cost of maintenance might quickly evaporate their ability to afford the maintenance.
Whew… my brain is tired! Seems the real solution lies above: see Daniel 2:44.
Have a great day
George Cooper
As I understand it what is in play under the UCC are “securities” held in an account. A mortgage can be securitized as in a mortgage backed security and if you own some of that it is fair game. But recall that is the flip side of your position as a mortgagee. You owe as a debtor and your mortgage is itself not a security. In turn your house, which is collateral under the mortgage loan is itself not a security.
I think what we are talking about here are financial assets like stocks and bonds not houses or even hard assets like gold held in a vault. Shares in gold stocks on the other hand are fair game in that they are securities.
I heard today that SD has refused to advance the legislation so that says something about the feasibility of UCC change, at least in the current moment. If and when this sinks in with the public the political (and even the financial) situation may change quickly.
I think there are entities that can hold stock that have limited or no derivative exposure. If there is a derivatives collapse on Monday maybe you will still own your stock on Tuesday, unlike your pal at JP Morgan Chase whose positions would have vaporized overnight.
Your firm may be in tough shape given that a derivatives collapse will have large consequences and could put a lot of firms out of business. But it would seem to me you would be better off with your account at a firm with no derivative exposure since you might at least have a little time.
Indeed I think the buy low sell high thing to do would be to start a firm that has no derivative exposure and whose costs are converted the old fashioned way—fees for holding the account. The documents establishing the account would notwithstand the UCC and contractually bind the firm to not take the securities. A firm like that would be turning them away at the front door once the vulnerablity of accounts is clear. Moreover a slimmed down firm like that might well be anti fragile enough to survive big shocks. At the least the ownership of the securities will be in place
Thanks. I hadn't heard the SD bill got denied! Anyway the good of getting ideas out there is that when the economy collapses and politicians are looking around for solutions, they might recall those former proposals and explore them. In the 1930s, Roosevelt's govt passed things that would never have been passed in ordinary times, and they actually succeeded in putting people back to work and rebuilding the country.
Brown never fails to nail the underlying reason for the threatened collapse of western financial system. THANKS Ellen.
Thanks Cloret!
https://rumble.com/v4dhku9-irrefutable-federal-reserve-responce-to-the-european-legal-certainty-group.html addendum to The Great Taking. David Rogers Webb has a longer video and free PDF book explaining it all.
I see him mentioned in the Scheerpost. Great work Ellen.
interesting, S. Dakota and maybe Tennessee… wonder if you need to be a resident or just use a brokerage headquartered in the state?
Don't know. Hasn't passed yet.
The Moving Contradiction
it's not Malthus after all...
https://tomg2021.substack.com/p/the-moving-contradiction
Hello Ellen, Thanks for your work. I would like to do a collab with you. Currently I write The Weekend Freelancer where I teach about Data Analytics, One of my ongoing series is domain - https://theweekendfreelancer.substack.com/s/domain where I write about domain knowledge from each industry. I would love if you can write a guest post explaining what are the top areas that people should have knowledge about in Banking domain. Feel free to reach out if you would be interested. Thanks
Raghunandan
theweekendfreelancer@gmail.com
Are other non-financial assets at risk?
Only if they're held by a bank or broker, i.e. a mortgage or auto lease that isn't fully paid.
What if confiscating the assets in brokerage accounts is the intended outcome (as I strongly suspect)? Then there's no incentive to "fix" the system. Better to find brokerages without this exposure. No? Outside the US? Or perhaps take delivery (and ownership) of the share certificates. I really don't expect this defect to be fixed as long the big players are so heavily invested not fixing it
I've read that it's very difficult to take share certificates in your own name, or to trade them once you have them.