THE LIBERTARIAN ENTERPRISE
Number 485, September 21, 2008
"The American Empire, like all empires, is about to end."
Attribute to The Libertarian Enterprise
Jim Willie has a new essay on Kitco this week. Kitco is owned by Bart Kitner, a distinguished precious metals dealer from Montreal. Here is Jim's essay:
Please take note of this paragraph:
"This is so important a topic, that it deserves top billing!!! Hidden inside the AIG bailout funding package, surely hastily cobbled together, but carefully enough to include a totally corrupt clause, was a handy dandy clause that permits raids. The conglomerate financial firms are permitted at this point to use private individual brokerage account funds to relieve their own liquidity pressures. This represents unauthorized loans of your stock account assets. So next, if the conglomerate fails, your stock account is part of the bankruptcy process. Finally the corrupt USGovt and corrupt Wall Street houses are desperate enough to put into policy, stated by the US Federal Reserve, outlining the authorized raid of your money. Beware."
This matter represents a threat to your stock portfolio and the portfolios of your friends and family.
What can you do? One important step is to take delivery of the share certificates, bond certificates, and any other documents which would independently validate your ownership position. If your brokerage firm has your share certs, and they encumber your shares, and they go into bankruptcy, you may have difficulty getting any of those documents. So, demand delivery of whatever you own. Your broker has a legal obligation to provide you the original share certificates of your shares.
Another thing to consider is whether your broker is both liquid and solvent. Liquidity means they have current cash to cover current cash requirements. Solvency means that they can meet their liabilities, both current and long term.
Recently, my parents began to wonder about these things. They happen to have a brokerage account with Wachovia. After reviewing that company's current situation, it was my recommendation that they either move their account or liquidate it. Obviously, your mileage may vary, so do what you think best.
This wealth transfer process to end panic is a big issue, and it is unlikely to work itself out over a few days, weeks, nor even months.
Obviously, the prohibition on short selling of financial stocks in August (affecting the stocks of about 19 firms) did not work. Once the ban was lifted, the stock prices crashed, and we had this past week to illustrate the extent to which the bloodbath was already proceeding. Now, today, the SEC has banned short selling of 799 stocks, the entire financial sector (give or take a few not with any connections amongst the bureau-rats). How is it going to work any better this time?
I would view this ban as an early sign of coming capital controls. When the government limits the options of capital, capital goes on strike. That is one of the obvious implications of the much higher gold price this week.