(Kitco News, Wed. Feb. 8th, 2023) – A bank can legally confiscate its clients’ money in the event it needs to stay afloat, and most retail investors are not aware of this, said Lynette Zang, Chief Marketing Analyst at ITM Trading, who stressed that such legislation is already codified in the Dodd-Frank Act.
Zang, who has decades of experience in the financial sector and worked as an investment banker at Larson Lehman/American Express, said that these bail-ins could be part of a bigger systemic monetary reset.
She explained how following the 2008 financial crisis, big banks were deemed too big to fail, resulting in government bailouts at the expense of taxpayers.
Financial reforms ushered in with the Dodd-Frank Act in 2010 eliminated bailouts and opened the door for bail-ins.
Speaking with Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News, at the Vancouver Resource Investment Conference, Zang noted that bail-ins allow banks to convert debt into equity to increase their capital requirements.
Zang points out that Dodd-Frank replaces bailouts with “bail-ins,” in which depositors’ funds can be used to rescue a failing bank. The legislation makes depositors into “unsecured creditors,” allowing the bank to reclassify deposits as equity.
The risk is then shifted to unsecured creditors or depositors. This can particularly impact those with deposits of more than $250,000, which is greater than the amount insured by the Federal Deposit Insurance Corporation or FDIC.
“Practically everybody is going to be bailed in,” Zang forecast. “They’ve printed so much money… and yet we’re having problems with liquidity in all of the markets, but particularly the U.S. Treasury market, which underpins global markets.”
Bail-ins and bailouts are both designed to prevent the complete collapse of a failing bank, but the difference between the two lies primarily in who bears the financial burden of rescuing the bank. Dodd-Franks shifts the burden onto the customers -the people using the banks.
Real-Life Bail In
Zang pointed to Cyprus as an example of a “bail-in.” In 2013, the Mediterranean country faced a banking crisis, and sought help from the European Union and International Monetary Fund. As part of the bailout package, the EU and IMF insisted that Cyprus use depositors’ funds to rescue banks; almost 7 percent of insured deposits, up to €100,000, were taxed. Withdrawals were also capped.
“The normal person in Cyprus did not have access to their money until 2015, other than a little bit every day,” said Zang. “The French and German banks got out [of the country] before the bail-in, leaving the average person, who is just about the right size to fail, in the system and bailing in their money.”
She added that, based on recent meetings, the Federal Deposit Insurance Corporation (FDIC) is aware that there could be a major issue in the U.S. financial system, and is openly discussing the likelihood of implementing bail-ins. There are discussions and deliberations over whether making retail bankers explicitly aware of the legal bail-in stipulations would create panic and exacerbate the potential problem.
“They’re laughing at us,” she said. “[They’re saying that] normal retail clients don’t need to understand that there’s really no money in the FDIC deposit insurance fund, and they should be expected to be bailed in.”
 |
Gold is vulnerable to a pullback as Powell prepares to signal ‘seriousness’, but will hit an all-time high in 2023 – Adrian Day |
A ‘Surveillance Economy’
Countries around the world are poised to adopt Central Bank Digital Currencies (CBDCs), programmable forms of fiat money which allow central banks to track, trace, and even freeze a person’s funds. This, along with de-dollarization and the digitization of hard assets, will be part of The Great Reset, according to Lynette Zang, Chief Market Strategist at ITM Trading.
“The World Economic Forum says… you will have nothing and be happy,” she explained. “Well, you may have nothing, but I’m pretty sure you won’t be happy because wealth never disappears. It merely shifts location. So, if you don’t own it, somebody else owns it, and as we all know, then you’re renting everything.”
The Great Reset is a World Economic Forum proposal which suggests that “stakeholders,” such as big corporations, governments, and international NGOs, control and manage all wealth in order to mitigate alleged threats such as climate change.
Posted by:
Jack Dempsey, President
401 Gold Consultants LLC
jdemp2003@gmail.com