Note: This is a guest post from our very own Barbara Ann.
This post (my first, and depending on how it goes maybe my last) concerns the Great Taking (GT) The Great Taking is a term coined by a guy called David Webb for what can only be described as the biggest planned heist in history. This post is a summary of David’s idea. If you wish to ask questions in the comments, please watch David’s video first (link below). I have no affiliation with David and just thought this it something the Committee would be interested in. What follows is my best attempt to reflect David’s views. E&OE.
So, who is David Webb? David is a retired hedge fund manager from Cleveland, Ohio. He was highly successful in his career and sets out his bona fides in the first 15 minutes or so of his video. I’d encourage everyone to form their own idea of the man and his motivations.
And what then is the Great Taking? Well, it is a conspiracy theory, but this hardly does it justice – in fact it could be termed a kind of Grand Unified Conspiracy Theory – to use a physics analogy. David says he has uncovered the plan to perform a controlled demolition of the global financial system. The result will be all securities assets, and pretty much everything else financed by debt being transferred into the ownership of the banks that comprise the central banking system (e.g. the Fed). David says the scope is global, although his evidence is limited to a focus on the US and EU. The legal and regulatory framework necessary to achieve the GT in a completely legal fashion has already been put in place over the last few decades. Here is an outline of the enabling steps (the ‘how’) I’ll explain David’s ideas as to the ‘who’ and ‘why’ below:
1) The “dematerialization” of stock certificates which began in the 60’s resulted in a legal concept called “security entitlement”. This means the legal owner of financial securities is actually the custodian. You, the beneficial owner, have a pro rated claim on the custodian’s pool of each particular security held either in your name or via a nominee (securities in “street name”). This is a distinction without a difference in normal circumstances
2) The legal owner is permitted to use the stock as collateral and all securities everywhere have been collateralized to underpin the gargantuan derivatives market, which dwarfs the global securities markets. Again, no real news so far
3) The fun starts in the event of a bankruptcy of a custodian. Financial organizations have an obligation to separate client assets from their own and in an ordinary bankruptcy situation you’ll get your assets back. But, as collateral is deemed necessary to support the too-big-to-fail institutions, rules are in place such that a “protected” class of banks are secured creditors above you, the beneficial owner. This is advertised as a safeguard in case of a systemic failure – i.e. a mechanism to capitalize the systemically important banks, should the need ever arise. This “safe harbor” legislation came in in the US in 2005
4) In 2008 the concept of client assets being used in this way was cemented into case law for the first time with the collapse of Lehman Brothers. JP Morgan won a suit brought by Lehman’s clients whose assets had been used to capitalize JPM – and were thus lost. Client money had never been ‘taken’ in this way before
5) A process of “harmonization” has been underway in Europe to replicate this legal and regulatory model, such that it is now in fact impossible to hold securities in a way that ensures you have a higher claim than the “protected class” of banks, in the event of the insolvency of the legal owner. In the US this legal owner is the DTCC. In the EU the term used is “Legal Certainty” (that is, certainty for the protected banks, not for you). All barriers to cross border transfer of collateral have been removed in recent years
6) In the event of another financial crisis, the capitalization of the key institutions holding the system together (e.g. the DTCC, or in Europe the Central Clearing Counterparties) is wholly inadequate to prevent a systemic collapse. In such an event, hedging risk (with derivatives) is impossible – as your counterparty will have gone bankrupt
7) The “everything bubble” with all asset prices inflated by years of zero interest rates, means there is a great risk of another crisis. The Fed is only preventing a collapse now through ongoing – since 2008 at least – ‘emergency’ monetary policy. The next systemic crisis will be a collapse leading to all collateral passing through institutions in a cascade of failures, all the way up to the protected banks. Your 401k, savings etc, will all be gone. The end result will be a very few financial giants owning pretty much all publicly traded assets
David’s most important claim is that the system as described above has been built over a period of decades with step 7, the Great Taking itself, as the purposeful end goal. The architects are the (private) owners of the central banks. The culmination of their plan is to be the transfer of all securities to the ownership of a small group of privileged banks resulting in these banks’ shareholders’ control over, essentially, everything. David’s most controversial assertion, I guess, is that the power behind this banking elite transcends nation states and that, effectively, they run the world and have done in a dynastic sense, for at least a century.
Extraordinary claims require extraordinary proof and David sets out both in his video (72 minutes – stiff drink in hand advised). Alternate link. Check the usual internet archive sites if the video has been taken down. David has a free downloadable book on the subject on his website: https://thegreattaking.com. There is also a paperback version. The book includes much detail on the legal and regulatory changes referred to above and I’d recommend it for anyone seriously interested in the subject.
So, there you have it. Is David just another a crazed conspiracy theorist or is he a very smart guy who has rumbled a diabolical plot to engineer the greatest concentration of wealth and power ever seen? I ask the Committee to decide.
Barbara Ann. Ties up with a lot of what the rogue economist Hudson writes. The man you sum up with such clarity is visualising the ultimate in “Financialisation”. But is this process a result of impersonal market forces – or are there real people sitting around talking of and planning this process?
Must watch the video and read the book before asking more. But I’ve always believed that although free market capitalism is the best way of running an economy, the evolution of unregulated free market capitalism must lead to undesirable concentrations of wealth. The attempts to regulate the process – the anti-trust laws, Glass-Steagall, the increasingly ineffectual SEC – did not succeed in arresting it.
Of course ownership of assets is the key. But one wonders now how real those assets are. The gradual deindustrialisation of the West and the energy we put into trading financial instruments rather than into production is leaving us all a bit short on real assets. If the Masters of the Universe do exist as schemers rather than as unwitting beneficiaries of an impersonal process, and if they do succeed in grabbing all the loot, they might well find that in the end there isn’t an awful lot of loot to grab.
“…and depending on how it goes maybe my last” I do hope not. Loved the article.
Interesting, Barbara Ann.
First off, what Webb describes is not – and cannot be – a conspiracy. The involved realities and systems and chaos factors are far too complex to be controlled by a few conspirators. Webb himself kind of puts a foot on the conspiracy theory path, takes a step, and then later backs off and, by the end of the video, basically, states what I just did. As he ends up saying, it is a vast system in which everyone plays in their lane and hopes the guys in the other lanes have it under control. There is no other way it could be given the scope and scale of international economies and all of the politics and human psychology involved.
Rather than a grand conspiracy, Webb – and I – see it as individuals (that includes you, me, your neighbor, organizations, both private and government) engaged in self-interested, but often myopic, greedy, poorly informed decision-making processes; all of which have organically culminated in the current economic situation. The current situation may represent a looming international economic crisis of massive proportions. That is all true.
Webb doesn’t touch on the importance of government spending in his breakdown. He should have. It is a major root cause. He prefers to deflect onto the financial system. Spending on wars, foreign aid, social programs like Medicare, Social Security, Medicaid, pensions and then the covid panic, is outstripping the economy and taxes collected. The government must “print more money” (which really means issue more bonds) to cover the cost. Then it has to pay interest on those debt instruments. So now the US govt is spending incomprehensible amounts on interest payments on the debt, in addition to paying out on all of the programs I mentioned above. We are far beyond the point where taxes could be increased to cover the cost; even if govt confiscated all of the billionaires’ and millionaires’ money. So yet more money is printed. Hence increasing inflation. The govt is now trying to gaslight us into believing what we see at checkout line isn’t real. When the price of things inflates much faster than wages (as is happening now) people stop purchasing, which then leads to a recession (or even the dreaded ‘D’) on top of inflation. Stagflation.
However, it gets worse, everyday people in this inflationary spiral have debt – car loans, house loans, they bought their entertainment system and the sofa they watch from on credit. They continue the lifestyle they have become accustomed to, but can’t afford, by increasing use of credit cards and similar financial mechanisms. Indeed, personal debt is at record highs in the US, much of it credit card at usurious interest rates. Their debt to income ratio is at a point where they will have to begin to default. They simply cannot continue to pay the interest and feed their families. This is why the financial institutions that Webb speaks to are seeking ways to protect themselves from the coming Sunami of defaults and resulting banking implosions. It did not emerge as some cosmically nefarious plot to control the world. Smart money – powerful money- is merely positioning to survive when the whole shit house goes up in flames – and who can blame them?
An aside – I used to argue with Col Lang about government spending philosophy. My point was that spending should only occur when there is a positive ROI. He scoffed at the idea that govt should act like a business. To me, even Social Security and Medicare could have some kind of a pay-off. Seniors could run day care centers, educate the young in exchange for their checks. He made fun of me for being a “business guy”. His institutionalized thinking is what has brought us to where we are now. Government people just don’t understand money, finance or accountability.
Another aside – I agree with Webb’s advice. Get yourself debt free – no mortgage, no car loans, no credit card debt. Be happy with what you have. If you can save in debt free real assets like real estate, gold, guns, whatever people will want and need, then hang on and wait. If you’re young enough, when the disaster has reached full force, there will be lots of opportunities for those who were not wiped out.
” First off, what Webb describes is not – and cannot be – a conspiracy. The involved realities and systems and chaos factors are far too complex to be controlled by a few conspirators ”
A sect can.
Because it’s a cult.
People no longer hide it, but you have to have the courage not to be afraid… of taboo subjects, otherwise your analyzes will always be biased.
The financed world is governed by the Kabbalah.
Suzanna,
Is this another one of those “Jewish space lasers” ideas?
Thank you BA, I am curious to see other commenters opinions.
Rulers rule, actually. There are no ‘rights’ to any of this. If you thought you had ‘something,’ you were deluded. All you have is what the rulers of you let you have. You have only ever played their game, the game they’re currently playing. If you have no plan to destroy their world, you have nothing.
Transition to cryptocurrency.Going as planned..
All
I’d firstly like to thank our host; TTG for the opportunity and honor of being published at turcopolier.com.
The most obvious objection to Webb’s allegation of a conspiracy is articulated well by Eric Newhill above in his second paragraph; i.e. that the legal and regulatory measures Webb highlights are simply a result of self-interested market participants building an imperfect system – there are no ‘hidden hands’. If you had come to me with the GT theory even 5 years ago I would likely have agreed with Eric’s view. In order to explain my view today, some context is necessary, sorry for the long comment:
We humans are programmed to expect things to continue much as they are indefinitely and most of us are ill suited to detecting paradigm-shifting changes before they happen. This skill requires the ability to both recognize and ‘step out of’ the existing paradigm in order to look in at it from the outside. In the video Webb uses the analogy of a game of Monopoly in which the banker simply takes all the players’ money and property (perhaps there was a rule permitting this that the players had failed to notice). We have all been playing this game of Monopoly so long it seems like it’s the only game in town. I’d take Webb’s analogy further. The ‘hidden hands’ in this analogy have very surreptitiously placed themselves under the Monopoly board. Immediately after the banker takes all they will fold the board up whip it away and before we know what’s hit us a new board will have been laid before us, a board for a new and totally unfamiliar game.
The new game will not use ‘money’ as we have come to understand it. It will use Central Bank Digital Currencies (CBDC’s) – or Good Behavior Tokens* as I like to call them. Coins, notes and even digital dollars and Euros will be no more. Banks themselves, outside of the central bank issuers of CBDC’s, are unnecessary in this game. You will work and be paid in FedCoin or something similar. Lest you think CBDC’s a far off concept, feel free to browse the development of CBDC’s globally using the Atlantic Council’s tracker tool: https://www.atlanticcouncil.org/cbdctracker . Webb’s point is that what we think of as the financial system is just a financial system and a replacement one has both been devised and built. When it is ready to go the old one will simply be dispensed with. Money is merely a proxy for power & control and most of us are happy to make do with a relatively modest amount. Megalomaniac sociopaths take a different view and it is important to understand that it is this mindset that conceived of the Great Taking.
*The degree of control the CBDC system will offer is an authoritarian’s dream. All purchases will be linked to your biometric info and a single, central point of control will allow any incorrect behaviors to be punished in real time. It’ll make the Chinese social credit system look clunky and antiquated.
The WEF is completely open in its message of what the Great Reset is about: Capitalism has outlived its usefulness and must be replaced (they blame Global Warming & other things). They call the replacement system “Stakeholder Capitalism” – feel free to look it up. That’s right, the folks who meet annually in Davos to plan the New World Order, massage each others’ egos and eat overpriced canapés, want to tear down the system by which they became fabulously wealthy. Are you not even a little curious as to why these folk have suddenly become all public spirited?
Of course the reality is that many of them believe the new system will benefit the very few right at the very top even more. I say “believe” because doubtless many of the WEF themselves and probably all the politicians in attendance are being used as useful idiots in the plan. There is no conspiracy of thousands – a few know the full extent of the plan and a great many more are spun various versions of it so as to engage their participation. Many, even in the WEF, may genuinely think they are doing something good – that cartoonish Bond villain Klaus Schwab included. Nevertheless, I acknowledge that the scale of the thing is hard to get your head around. Direct evidence of a conspiracy will of course never be forthcoming, but the circumstantial evidence is IMO now overwhelming.
Webb uses the word “reset” once in his video. In his book he refers to the “Great Reset” 4 times. He begins the final paragraph of his book as follows:
This is the CBDC system I described above. I have understood the Great Reset in exactly these terms for several years now. Webb’s Great Taking is the mechanism by which the Great Reset will be achieved (i.e. how you will get to “own nothing”). When I saw David’s video it felt like I’d found a missing jigsaw piece which tied together several others. Did you think we’ll get to “own nothing” by being asking to voluntarily surrender our stuff? If you are waiting until this gets discussed in Congress or your parliament, I fear you will be disappointed. Governments will be as much the victims of the GT as you and I.
As for the conspirators, I am not actually that interested in who they are, just their plan. David has not met them, although he recounts a very interesting meeting with George Soros to whom he was asked to explain his hedge fund’s strategy (page xxvi in the book).
”They” are not the WEF, “they” are above the WEF and set its agenda. “They” will ensure that you own nothing after they (legally) steal everything. David Webb explains how it will be done.
Barbara Ann,
Mr. Webb has the wrong bankers in his sights. He needs to focus on the EU. The London bankers are especially pissed that Powell managed to get SOFUR going to replace Americans reliance, and victimization by manipulation of, LIBOR. Raising rates is ruining the eurodollar and liberating American (commercial) banks from indirect manipulation from Europe. That’s why the EU states were so desperate to get more Ukraine funding and why Estonia is pushing for ‘war bonds’. The EU commission, not having any taxing authority, got away with floating ‘sure’ bonds during the ruinous covid lockdowns (not that it ruined elites), those are underwater about 40%. The EU needs a giant bailout and they are happy to get us to do it, just like Obama did in 2008.
Ms. Ann Like you right state will the populace just stand aside and let them rip off?. During the finacial crisis of 2008 and after being elected to office Pres Obama made a statement that he is the one standing between the Bankers and people with pitch forks. At that time many people believed in him and probably thought he would do the right thing. Oh well he bailed the Bankers but let the home owners drown. However at that time economy was not too bad and there was a semblance of return to normalcy. Can you kindly clarify your statement “When I saw David’s video it felt like I’d found a missing jigsaw piece which tied together several others. ” In other words what is piece that tied all these pieces, I had been trying to figure this out myself for a very long time. Your insights will be highly appreciated. Thanks
Muralidhar,
“If you like your doctor, you can keep your doctor” and other slogans from Biden’s mentor in chief. As to homeowners drowning, a friend who now is tenured at the University of Oklahoma suggested I just ‘walk away’ from my underwater mortgage and let the taxpayers pick up the tab. She saw nothing financially or morally wrong with that idea. Ten years late I sold that home to relocate, making a small capital gain on top of things as sometimes real estate doesn’t stay underwater. She’s still a loyal D and a fan of Obama.
Muralidhar Rao
David Webb describes the plan as “insane”. I’d not argue with that, but then I’m not a megalomaniac sociopath. You need to appreciate how out of touch with reality these folk are. They are literally telling us (via the WEF) that they plan to (re)introduce a form of (digital) serfdom. Of course they don’t use that word in the marketing material – instead it’s called “Stakeholder Capitalism”.
Webb addresses the issue of the reaction of the populace in the video. The collapse will be presented as a fait accompli, shoulders will be shrugged and the technocrats now running the world will present themselves as saviors through the CBDC system – which just happens to be waiting in the wings. You’ll be told to download the CBDC app on your phone so you can buy stuff to eat. 99% of people will simply comply in order to avoid starvation. The ones with pitch forks will be dealt with. I think they have underestimated the American citizenry big time, but it is important to understand the contempt these Masters of the Universe have for we, the common people. They also think we are so stupid and docile we’ll just let it happen and so from their POV it is not mad.
This post was aimed at promoting a discussion of David Webb’s views, not a vehicle for promoting my own, but being as you asked here are some other pieces of the jigsaw:-
1) The Great Reset itself which I covered above.
2) COVID – or more particularly the extreme reactions to it (lock downs, vaxx mandates & vaxx ‘passports’ (the latter a biometrics harvesting exercise for the CBDC system IMO). Rather than listen to my theories on this here is Sen . Ron Johnson’s view. As well as war gaming viruses, the WEF has an unhealthy interest in war gaming the effect of cyber attacks (look up Cyber Polygon). Lots of folk suspect the cover for the Great Reset will include a massive cyber attack – blamed on the usual suspects of course.
3) The unsustainability of the US spending & debt referred to by Eric Newhill above. None of this is not a problem of course if you are going to collapse the system and roll out a new one. In fact this is one of the strongest arguments for the fact that huge disruptive change is required.
4) The idea that a supranational elite exert a high degree of influence/control over policy-making, at least among Western governments, is hard to argue against. One vivid demonstration of this was the WEF’s “build back better” slogan. Most folk like to cling to the comforting and convenient falsehood that government policy is set by democratically elected politicians. The reality is that an archipelago a foundations, endowments and NGO’s are largely responsible for the big idea stuff. Many of these are in turn financed by the super wealthy. The WHO’s biggest donor, for example, is not a nation state, but Bill Gates – the guy who told us in 2010 that vaccines would be used to control world population.. In the US the Dodd report highlighted the dangers of this state of affairs way back in the 50’s.
There are others which I may share on an open thread if anyone is interested.
Barbara Ann,
I’m really trying to not harp too much on a certain point, but I do think it must be mentioned until it is clear as day.
If there is a plot like Webb describes, it necessarily involves the elimination of private property. Additionally, the villains would have to make it illegal – with punishment harsh enough to be a true disincentive – to trade in anything other than the approved digital currency. If you hid a gold coin during the great taking and then later dug it up and tried to buy something with it from a neighbor, you’d subjected to the harshest treatment. Bartering would be highly illegal. Of course, if the conspiracy were implemented perfectly, no one would own anything to barter.
That scenario is not operationally feasible.
Also, there are vast layers of well-off people beneath the cabal who would have to participate in the conspiracy as the architects of their own demise. You enjoy your mansion and nice cars? Not anymore! They are now property of the Borg Masters.
Would some stupid deluded cohort be tricked into going along with the plan? Sure. Most likely. Does such a plan have the WEC’s Clause salivating? Probably. Even deranged nut cases can dream. IMO, this thing has 0 chance of getting off the ground.
That said, the dreamers can inflict damage on us all as they move towards the point where the whole thing fails. I think this is limited to the western world and I think trade partners in other economic power centers would calculate the damage that would spread to their realm and put an end to the whole thing. They would most likely even take advantage of our self-destructive path, at first. Some of tat is happening now.
Barbara Ann,
Money is, first and foremost, a representation of value. Being a symbol of power, etc. is only a second order effect.
No one can take all the “money”. That would literally mean that some cabal has seized ownership of ALL real assets and all means of production and allocation – and is able to then put a gun to everyone’s head and force them to work. There is no way any little group could accomplish that because the ripped-off 99.999% of the world would kill the cabal before they could be enslaved. How could the cabal even enslave everyone? Seriously, who would be the cabal’s enforcers? Robot storm troopers?
How could the cabal gain buy-in from countries, races and religions as diverse as Chinese, Iranians, various African nations, India, Singapore? All of these other people are too stupid to see the conspiracy unfold and not recognize it? Then they will just submit when they too late discover what has been sprung on them?
Diversity is not our strength, but it is our insurance that a One World cabal can never take the whole thing. A divided humanity can never be united as a herd of lemmings; can never be doomed to extinction by cultural evolutionary mistakes, can never be totally ruled. In this regard, the more we hate and distrust each other, the better. Let us compete to see who is the most fit. Let us act as if, in the end, there can only be one. Many fools have dreamed of ruling the world. None have achieved it.
Yup, you right. But, no plan is perfect.
David webb published article on the site
https://www.tftc.io/about-tftc/
There mission statement point no.3
Supporting Bitcoin’s Promise: We believe that Bitcoin is more than just a digital currency; it’s a force that empowers the individual and tips the scale of power back toward a level playing field. We’re here to educate you about the potential of bitcoin, how to use it and how it can change the world.
mcohen
I can’t see David Webb’s post on that site can you provide a direct link, thanks?
Being an opinionated penseuse, you may not be surprised that I have a view on Bitcoin. Back in 2014 when it first came to attention and before I bought any, I did my own due diligence to find out what it was all about and in particular who created it and why. If this topic is of any interest to folk I’d maybe consider doing a separate post on the subject sometime. Anyhow, I agree with that quote re its design purpose being individual empowerment. It is exactly what Satoshi (a proud Deplorable btw) intended. Many folk these days see all digital currencies as alike. Nothing could be further from the truth.
Hi barbara.They put his article up on there website.Not sure if he is a regular contributor
https://www.tftc.io/the-great-taking/
Digital currency is here to stay.If they can solve the encryption and power problem.Companies will issue cryptocurrency to replace share certificates.Maybe you could write about it
Bitcoin was part of a large secret project to rescue the financial system in 2007-08 – a Manhattan style project. (Remember they had to borrow money from the mafia?) A large number of technocrat financial wizards from UK and Switzerland and various other places gathered and put to work brainstorming – many in Scranton PA. The Satoshi story is window dressing of sorts. Think of it as a secret government project with international collaboration.
F&L
I fail to see how Bitcoin could rescue the financial system.
Can you elaborate?
It was one of a number of tools which were developed, some were implemented, some not. Bitcoin was an experiment which was allowed to run and be observed in realtime. They understood that they could end it anytime and as necessary. As it proceeded other cryptocurrencirs were released as experience was gained. One of the ideas was to create supplies of liquidity separate from the traditional supplies of cash, metals and securities. Also an idea to work on getting money to people more generally especially those in subgroups who don’t usually have access to much money, especially so-called minorities and the unemployable poor. Again – it was not the entire project by any means. I don’t know that any one cryptocurrency could rescue the financial system.
Basically, money is a form of magic. Creation ex-nihilo.
F&L
Interesting, that’s not at all what my own research turned up. I’ll maybe take this up further with you on an open thread. In the meantime I’d love to read your source material, would you post it here?
BA,
Personal sources. I had a very close friend (no longer alive) who worked undercover and unofficially with fbi and homeland security during the GWOT especially post 911. He was so talented that he was used for all sorts of unusual stuff. He was set to sniff out what some gatherings in Scranton were all about during 2008. He got to know someone who explained that it was a Manhattan Project 2.0. I guess it was one branch of our government spying on a secret government project. I surmised, based on conversations, that Bitcoin emerged or likely emerged as part of one of this financial taskforce’s projects which were several. I have no links. Two years ago I read something about a high ranking fbi officer being critically involved in Bitcoin – the story set off minor alarms in my head, but it dovetailed nicely with what my friend had discovered and I too the story as a sort of confirmation that Bitcoin and crypto more generally are government projects.
F&L is making important observations. BA, why do you repeatedly refer to “an open thread,” with you directly. Do you think you are so much of an intellectual force that you can commandeer your own thread? Maybe, but I’m not so impressed. But, of course, I am nobody.
F&L
Thanks. Given what Bitcoin has become there are all sorts of theories about now. If your friend’s source was relating events witnessed back in 2008 or before that would be much more valuable of course. All I have is the result of my own OSINT, but some of it goes back to 2005 and before. I seem to have triggered someone here, so I’ll save it for a comment on the next OT.
mcohen,
Ah – now we have a motive for Webb to write what he did. He’s a bitcoin guy.
Yes.Priming the pump.
Checkout Solana crypto.Look at the chart.Went to $300 then crashed to $30 now back up to $300.u shape
Imho crypto has being financing the ru/ukr war.
Pump and dump
Crypto = NSA
https://archive.org/details/CryptographyOfAnonymousElectronicCash/page/n1/mode/2up
Suzanna,
The NSA has always been deeply into all things crypto including the concepts behind crypto currency. That’s not sinister. Both the espionage world and the criminal/terrorist worlds make use of the anonymity provided by crypto currency. Before that they used the anonymity of cash. There are other methods of moving/transferring money used by spies and criminals. I’ve used them successfully for years. None of that makes crypto currency or any other money moving method a bad thing.
Suzanna
This goes to my point about the perception of all digital currencies as the same – and the result of government spookery. Cryptography (public key cryptography in this case) is a technology made possible by a mathematical oddity with prime numbers. Yes, it was first discovered by someone at GCHQ, but as TTG says, the technology itself is not sinister. In fact the work of Chaum (referenced in your article) inspired the libertarian group known as the cypherpunks. These guys (maybe there were some gals) included Phil Zimmermann. Zimmermann was so keen that people get access to cryptography algorithms to enhance their own right to privacy that he broke the law on US export of munitions (his pgp code was once classified as such). Other cypherpunks ran anonymous remailers – like the one Snowden used. These attempt to defeat NSA email metadata tracking, which as Rumsfeld famously admitted is used to kill people, without even identifying them. Bitcoin – an invention designed to give people absolute sovereignty over their money (i.e prevent government interdiction/confiscation) was the brainchild of a cypherpunk*. CBDC’s do exactly the opposite btw.
*to the best of my knowledge.
Cryptography is just a technology and like any other, it is how it is used and by who that matters.
Do the Kabbalah or some other secret sect run the world? They wish. You and I run the world, so long as we stand up for what we believe and for what is right. David Webb has stood up for what he believes is right and I applaud him for doing so.
Barbara Ann,
I’m more aligned with Eric Newhill and his skepticism about the Great Taking. Webb seems to consider bonds, securities and stocks as property. I don’t see any of that as property. Such creatures as securities and derivatives are nothing but the appearance of wealth and property in my opinion. They are bets in a casino. Even bonds and stocks are bets. Most of the world’s population live outside of that world. I think governments have to worry about what Webb is talking about along with those who think owning debt is owning property or anything of real use or worth.
I see Bitcoin and other digital currencies as just another room in this great global casino. It’s all ones and zeros on some server somewhere. Nothing real.
Now the concept of government taxes on individual’s real property is something to be concerned about. That eats away on the concept of property ownership.
The only real hedge against any of this stuff that may threaten financial and societal collapse is knowledge. All those years of dabbling in gardening, farming and animal husbandry is insurance against the effects of a collapse. The “Mother Earth News” readers are “banking” real worth in the knowledge they gain and salt away.
TTG,
Webb also says that intellectual property, like patents, would be “taken”.
What Webb is describing is like a super sonic version of the Soviets, NoKo and the worst days of Chinese communism.
So on the one hand we are to believe that there exists a cabal of genius central bankers. So genius that they can pull off a vast conspiracy of unprecedented scope and scale. On the other hand, these same geniuses don’t understand the destruction that servere socialism/communism/feudalism (give it a name) wrought upon humanity. They don’t recall that the even the Chinese had to lighten up and allow private property and capitalism? I find that assertion absolutely incredible.
No patents? No right to intellectual property? Who’d invent and produce the things that the even cabal would need to continue their own existence?
Who, specifically, are the people comprising this cabal? Webb never says. How convenient – he knows what the cabal is up to without even knowing who they are. This kind of alarmist conspiracy theory material sells. Kennedy assassination conspiracies, 9/11 conspiracies, Space aliens designing and controlling humanity, satanic panic of the 1980s, Mein Kampf.
I am convinced of spiritual realities. I also am pretty sure our economy is heading for a serious meltdown due to short sighted politics and a confluence of negative human characteristics. But this conspiracy stuff? Nope.
Btw – with you on bitcoin. It is all speculation and not grounded in any reality. Stocks though, that is a certification of a percent ownership in a company. Bonds are a promise from the government. While people may – and do – speculate with those instruments, they do represent something real. There is a real company with real balance sheets and products and employees. There is a real government with a GPD, etc. There are laws against what Webb thinks is going to happen. Lots of them. There is no way Webb sees something coming the CEOs of Fortune 100 – 500 companies do not. If that threat existed, the CEOs and majority shareholders would be all over it. The power against such a thing far outweighs the powers for it (if there are any).
Bravo!
TTG
You are firmly rooted in the reality-based community, to your great credit. As Webb points out in the conclusion to his video, the whole thing is a construct and the real economy is stuff you can touch and see.
My interest in Webb’s idea is not the economics, still less the spectacularly boring area of international banking law and regulation. It is the implications for liberty, if he is right. Thanks again for the opportunity to post.
Barbara Ann,
People sell themselves into bondage for all kinds of reasons and there’s always a devil ready and gleeful to receive them. Mostly it’s because they don’t love God and their own divine connection to that source above mammon. It’s an ancient problem that has grown disproportionately to the population increase due to the exponential global wealth increase and the availability of “stuff”. For all the bitching and moaning of the so called “have nots”, the typical middle class person today enjoys a quality of life and, indeed an opulence, that was unknown to even most royalty in ancient times. It still isn’t enough.
I believe that Webb would agree (having watched a few of his interviews now) that what would make the “great taking” theoretically possible (to his thinking; not mine) is that every day people are buying everything they can on credit. He notes sadly – as do I – that household debt is at a record high, and growing. Most people consume way more than they need to. They don’t save.
Everywhere I go I encounter younger working class people complaining about the cost of living, yet they are covered in tattoos and planing the next one. They have the latest “smart” cell phone and maximized service with all the bells and whistles, They have the latest and greatest entertainment center and subscriptions to movie services, etc. They drive the most expensive car and/or motorcycle that they can be approved to purchase on credit. They go on relatively expensive vacations. They eat out a lot. They always have new clothes. If female, they have expensive eye lash extensions and hair extensions, whatever that is that makes them have puffy lips. If they go to college, they are doing it on student loans and studying for degrees that won’t result in employment that will return on that investment. Neither Lehman Brothers nor the WEC forum is forcing them to piss away their money and go into debt like that. These are vacuous idiots who were, apparently, raised by vacuous idiots who failed to pass on solid values and wisdom; totally divorced from reality and, worse, divorced from their own souls and the rewarding experience that being closer to the source offers.
It is an urban and suburban culture for the most part. Country people still understand that hard times follow good times. Still appreciate the simple things, like nature, good neighbors and hard work.
Of course this is utter nonsense and shows a complete misunderstanding of the global financial system, derivatives, and clearing houses.
Where to start…the idea that the DTCC has stocks as collateral for derivative contracts just shows they don’t understand the difference between settling and clearing trades, and actual derivative clearing houses. The DTCC facilitates the transfer of securities from one owner to another, a derivatives clearing, for example the London Clearing House (LCH) house functionally becomes your couterparty, which does not happen with the DTCC.
After the global financial crisis in 08, we transitioned from bilateral contracts between derivative counter parties to a centrally cleared system where each member pays in and “stands up” to each others contracts. Prior to 08 there were thousands of separate agreements between individual counterparties that governed this system.
In order to talk about global derivatives, it’s important to understand that while the outstanding notional of contracts is staggeringly high (probably close to 400 trillion, more than the amt of money on earth) the actual NET (longs + shorts) of these contracts is much much (much!) smaller and well within the bounds of the amount of money on earth. Why is there such a big difference? Because it is standard practice (and economically more advantageous) to simply write new offsetting contracts rather than close old ones. For reference I’ve had thousands and thousands of individual derivative contracts (both swap and options) but the overall net of those is much more manageable.
Now prior to 08, let’s say I have 10 separate derivative contracts of 100mm each that all net to 0 overall exposure, but one of those contracts in the 10 is with Lehman Brothers, what was yesterday flat is now a 100mm hole, this more than anything else is what spiraled the banks and necessitated without serious discussion the bailout of the banks (and AIG, not really Fannie and Freddie though that was a little different). The damage that would be done had we not done that would be indescribable and would have made the bread lines of the depression look like a party. I will note that the government investments (bailouts) in the banks and Fannie Freddie were extremely lucrative for the taxpayer with the investment in Fannie Freddie likely the best financial investment in modern history and funding about 1trillion dollars in US govt spending since the 08 crisis.
It is true that if a top 3 or 4 bank failed it would risk the central clearing system, say JP Morgan, but the thing is JP Morgan can’t fail without the US failing, and we have really good tools to stop banks from failing so this is not reality as long as our nation is a reality.
This whole thing about protected classes and what not makes no sense and is not connected to reality, the fed only buys securities in the open market via its “emergency” monetary policy.
So yea at best total nonsense and ignorance of the system from the former HF manager who should know better! Of course no offense to Barbara Ann and more than happy to talk about any of this further
Landis,
Thanks. I’d like to hear more from you on this. I earned a masters in economics and then went into actuarial (work for a US Fortune 100 company), but I really don’t understand derivatives, and clearing houses, etc – especially as they behave in the wild. That is all far outside my wheelhouse. I try to keep these discussions at a working person’s level. Might be good to step it up a notch or two if the point requires it.
of course, share as you like, happy to share sources for any of this info. I highly recommend the HBO produced film Too Big to Fail (and associated book, although I think the film is really fantastic and as accurate a look into what happened as you will find in condensed visual form) to understand the mechanics of the bailout and the necessity of it better.
There isnt an ounce of hyperbole to say that the bailouts and similar actions ensured the continuance of our comfortable western way of life. The issue with events like these, is that every bank, company, and individual is connected to the financial system, and the wonderful growth that we have been able to enjoy and that has built our wealth and prosperity in the post WW2 era is necessitated on that fact that system keep working and capital keep flowing, bc the overall amount of the economy far exceeds our individual wealth at any time. This is a blessing, made possible in part due to fractional reserve banking and our modern monetary system. If people really think that this is a bad thing and we should go back to the gold standard and let all the banks fail then I encourage them to take 20% of all they own and burn it and then report back.
Landis –
Thanks also.
I’d like to hear more detail on your comment that “the government investments (bailouts) in the banks and Fannie Freddie were extremely lucrative for the taxpayer”.
the government investments (bailouts) in the banks and Fannie Freddie were extremely lucrative for the taxpayer”.
I heard that too. They were no ‘simple bailouts’* as people assumed but really loans?
* simple bailouts like: taking peoples tax money and giving it to banks freely? It may have been slightly different over here in Europe. That is why we may have heard about it.
In the cases of the banks, AIG, and Fannie and Freddie the government bailout was structured in the form of the government taking preferred equity in the institutions themselves with an annual interest payment of around 10%. For the banks, these investments were on the order of less than 20% of the outstanding equity. For Fannie and Freddie, they took I believe 70% of the equity, and maybe close to 90% for AIG. Fannie and Freddie were also placed under government conservatorship with a new regulator developed to oversee them (among other things). This conservatorship meant the govt had significant say in how the institutions were run. In the case of fannie and freddie, they also owed a 10% interest payment to the government, but did not have a net profit in order to make good on these payments. So the terms of the equity were restructured such that instead of a fixed 10% interest, the govt would essentially take or “sweep” all of the net profits of fannie and freddie (less some small reserves) instead. In the beginning the govt got much less than they would have, however in the decade or so since fannie and freddie have been extremely profitable, making something like 100bn a year the last couple years. So this roughly 1 trillion dollars in dividends and pure profit goes directly to the US government and funds its expenditure. Its one of the key reasons why no matter what happens fannie and freddie will never go fully private. The other reason is as has been suggested there just isn’t enough capital to ensure that they can stand on their own under all conditions. I think the last study suggested they would need something on the order of 350bn of capital to go private, even if that number is boosted by lets say 150 billion im still not sure that is enough. Keep in mind these are INSANE numbers, but fannie and freddie insure something like ~7 trillion worth of homes in america in addition to other key business lines.
All the banks and AIG paid back every dollar borrowed plus interest on a couple hundred billion in principal and as mentioned the investment in fannie and freddie has been a mint. I believe the only bailots which lost some money for the government were in the auto sector, but the magnitude was much smaller, maybe on the order of hundreds of millions.
All the banks and AIG paid back every dollar borrowed plus interest on a couple hundred billion in principal and as mentioned the investment in fannie and freddie has been a mint.
Thanks, Landis, highly appreciated. Not only for this but your contributions on this topic more generally. As far as my little comment is concerned: I immediately felt I should have put it differently.
Problem is, I tended to avoid financial matters as much as possible most of my life, thus restructering & debts don’t surface on mind easily. Maybe it could have since I followed an banker with 40 years of worldwide experience in the trade on the Greece Crisis. 😉
Thanks for the response Landis.
If you don’t mind I’ll print out your response and pass it to a couple of acquaintances. They, and I, for years have thought that the government and the taxpayers got ripped off during that bailout. Guess I read too much into books like ‘Meltdown’ by Tom Woods that claimed the bailout only made the crisis worse.
Landis
No offense taken. Thanks for your comment, I’m glad we have someone here putting forward counter arguments.
I guess it is possible that Webb has simply misunderstood the role of Central Clearing Parties, though given his bona fides I’d be more inclined to beleive a ‘bad faith’ argument laid against him, if he is wrong. Anyhow, in order to rule out the fact that I may have ‘mistranslated’ his argument in my post would you be willing to read the relevant chapter of his free, downloadable book (chapter VII on CCP’s is only 6 pages)? If you can point to factual errors there which demolish his argument I guess we can all rest easy.
Also, as I understand it, the “protect class” of banks concerns the priority claim the big banks have over securities in the event of custodian insolvency, it is nothing to do with how the Fed buys securities. Chapter VI of the book covers “safe harbor” and is just 4 pages. Likewise, if you can point out where Webb has got it wrong there we can perhaps put the matter to rest.
Landis
Apologies, I did not address your point on collateral. Again, perhaps my summary was misleading. Webb’s point on collateral (my point 2) has nothing – at least nothing directly – to do with the DTCC (point 5). His main points are 1) that collateral management systems have been set up so as to enable the collateralization of all types of client assets (via swap contracts) without the client’s knowledge and 2) that the demand for such a system is artificial – i.e. not driven by market demand. Webb’s controversial (a word that hardly seems strong enough here) claim of course is that the whole aim is to permit the wholesale taking of all collateral at the appointed time.
As you did kindly volunteer your expert opinion and at the risk suggesting you to read the whole book, can I again ask for your views on Webb’s own words? Chapter V of his book (just 5½ pages 🙂 covers collateral management systems.
Barbara Ann,
Webb is putting his carts before his horses. Or in this case his derivatives before the creation of the market mechanism.
Fred
Yes, big time, in fact his argument is that the whole edifice is at root a gigantic long con dressed up as a system designed to last into perpetuity. He alleges that the architects have always envisioned its ultimate collapse and that the demolition charges have been baked in. For example, he argues that the creation of the derivatives-based collateralization management system was not market-driven, but instead a scheme to move control of collateral to the largest secured creditors – so that when the collapse comes they take it all. From page 26 of his book, after quoting the BIS:
Btw, no one would like to see this theory comprehensively disproved more than me. I’ll see if I can get hold of David Webb and persuade him to contribute directly.
Barbara Ann,
There’s a vast difference between creating a system meant to collapse and roll up all the collateral, and taking advantage of the market mechanisms and regulatory structures. Enron and the California energy market came to mind. Then there’s the great legal professionals like Mr. Weismann who imploded Author Anderson with zero blowback to himself after losing 9-0 at the Supreme Court. By then a few thousand honest accountants were out of work. A great deal of bad economic outcomes, and worse political outcomes (especially in CA) came about as a result of Kenny Boy Lay’s shady deals. (and Weismann’s creatively destructive prosecution) But then he had a lot of college credentialed help.
Apologies I’m still familiarizing myself with the comment trails here so missed this. I read the chapter on collateral, and come to a similar conclusion that he is conflating things, mainly the collateral that is put up against market exposure and securities that create that exposure themselves. In fairness describing collateral management and by extension securities finance in a complete way would take my own chapter much longer than 5.5 pages so I will try to debunk his argument as I did before, by starting with his opening premise and then appealing to common sense to show why that makes no sense.
“As we will see, the objective is to utilize all securities as collateral, and hence to have the real practical means to take all securities as collateral.”
So first off, as a practical matter when we were talking about the CCPs, I mentioned posting collateral multiple times, its necessary to understand that the only things eligible to be posted as collateral are cash and government guaranteed securities. Low quality or even medium quality securities are not eligible or accepted, let alone “all securities”.
This inherently should make sense, why would you lend someone money against an asset that was worthless, when your legal recourse was to the asset, meaning you could seize the asset in case of non-payment. What good what it do to seize worthless assets? In particular when we consider that the scenario where you would need to seize the assets would likely be one of economic and market turmoil, making all assets inherently more risky, so in that case you would only want the highest quality assets. Happy to go more in detail on any of this but this is where it starts to get really complicated to explain the plumbing of our securities finance system and to illustrate why mentions of collateral shortages mentioned in the quoted parts are far more innocuous than the author makes them seem.
“Apologies I’m still familiarizing myself with the comment trails here so missed this.”
How funny…
So you are not/were not a regular visitor.
How did you manage to join this thread spot on to explain David Webb “misunderstandings”?
I’ve been reading this blog regularly for more than a decade (my family is from Syria so I have long benefited from the learned perspective of the late col and others) but have only commented a few times over the years and I don’t think since its moved this site, always on matters of finance where I thought I might be able to help increase the level of understanding.
BA – thx, very relevant post! Fits nicely with my comment on the Ocheretyne thread describing US/NATO global strategy being molded by a [not clearly defined] Western Financial Empire.
Sorry to say, but I don’t have the patience to sit through a 72-minute video, though I’ve probably already spent that much time reading about other people’s versions of Webb’s theory.
I strongly agree with the “What” – that the TBTF Banksters have rearranged our financial system (& laws) to give them control of [almost] all financial assets when the current Everything Bubble inevitably pops. My sources are probably more lefty than yours, but I’ve read very similar descriptions of the weird trick used to invisibly take control of widely held Stocks, in particular.
EO referenced “Hudson” in his comment at the top of this thread; I presume EO means Michael Hudson, who often has interviews posted on the Naked Capitalism blog. Hudson’s big catchphrase is “Debts that can’t be repaid won’t be repaid”; he has written about how Bronze Age Kings would often declare a Debt Jubilee when they took the throne – intentionally popping the Debt Bubble, releasing farmers from debt slavery & kickstarting a new economic boom. Sadly, that went out of fashion millennia ago (after financial Oligarchs invented “Lobbying”?).
The great thing about Capitalism is that it leads to concentration of “capital” (essentially, stored “labor”) that can then be used to make the whole system work better (mostly by building infrastructure and inventing new technologies). The terrible thing about Capitalism is that it leads to concentration of capital into the hands of fewer & fewer people, so it all blows up on a semi-regular basis. So yeah, it’s all gonna blow again, but when?
The two main sources of my skepticism about Webb’s theory are (1) the allegation that the GT is an explicit, intentional conspiracy, and (2) that it’s “Global”.
The first (explicit conspiracy) is an extraordinary claim, which as you note, require extraordinary proof. Other comments above express doubt about this, and some indicate that Webb doesn’t claim to have direct “proof”. This doesn’t mean it’s *not* true, but it increases the probability that the truth lies somewhere in the middle (“a loose affiliation of Millionaires and Billionaires…”).
My biggest concern about claiming that this conspiracy is “Global” is that I find it hard to believe that China is in on it. I’m very comfortable saying that a “Western” Financial Elite is moving in this (GT) direction, but I don’t believe that they have anything like reliable influence or control over China (or other countries now referred to as “the Axis of Resistance”).
IMO, the “Western Financial Empire” has been working for decades to extend its reach globally, but they doomed the project by (1) botching the job in Russia, (2) imagining that they could subvert China, and (3) by alienating so many other countries with Sanctions or overt/covert warfare.
Frankly, I view the war in Ukraine as another piece of this “Game”. As Wiki puts it, “Euromaidan began in response to President Yanukovych’s decision not to sign” a free trade agreement with the EU, choosing instead to continue economic ties with Russia. The biggest effect of the war so far is the severing of economic ties between Europe and Russia, which weakened both. It has also pushed Russia closer to China, clarifying the likely framework for international relations for the next generation or so: essentially Cold War II, but with China leading the East rather than Russia.
But this time, the West might not have the advantage in economic power which led to our victory in CWI. IMO, that’s precisely because our Financial system has metastasized into a parasite which is now strangling its host (plz pardon the mixed metaphors here). Wall Street has sucked the blood out of Main Street, and now goes abroad in search of more victims. The US FIRE (Finance/Insurance/Real Estate) sector is now twice the size – relative to GDP/etc – that it was a few decades ago; Home Ownership is way down, and Life Expectancy is declining. Hospitals and supermarkets in rural areas are closed because they aren’t profitable *enough* for Wall Street’s bloated appetite. Young people have dogs because they can’t afford to have children!
And all this is facilitated by campaign finance “laws” which allow Zillionaires to rent politicians to change the laws, making it easier for Zillionaires to rent politicians…
Bottom line: Yes, I think that some TBTF Banksters are moving us toward Webb’s GT scenario, but I’m certain it will fail. Sadly, that failure will make things even worse for the rest of us, and most of them will probably avoid the fate they so *richly* deserve. (China recently executed a corrupt Real Estate mogul…)
Nice post Barbara Ann. Even though I side with TTG & Eric. I’m leery of big banks and the gangsters managing them. But I don’t believe such a diabolical plot could ever succeed IMHO. I would expect such a plot may have existed on a small scale among guys like Mnuchin and others of the Goldman Sachs/JPMorgan/BofA mafiosi. No way they could have made it happen on a grand scale.
Please do another post again, on whatever subject you choose. I would like your (and others) opinion on credit unions though. My local one is where I park my cash.
Thanks leith, but I fear such ‘expertise’ as I may claim in anything is outside of any subject as narrow as credit unions (which I know next to nothing about). As you may have noticed, my interests tend to gravitate to big picture ideas which cut across siloed areas of knowledge. In fact if my intellectual life has been defined by anything, it is a pathological aversion to dedicated focus on any one field.
I agree such a plot would probably fail. Of course that does not mean that it cannot exist, and if it does, that they will not try.
So if I own $10,000 worth of stock in the S&P 500 but if the brokerage I use (fidelity, Vanguard, etc) goes bankrupt, then I can lose my entire $10,000 to a higher priority creditor despite the fact that face value of the S&P 500 is still $10,000, correct?
There was a statement that something like this actually happened to clients of Lehman brothers, but I cannot find the details of what type of holdings were vaporized. Did customers of Lehman brother clients who owned stocks and bonds have those assets taken from them or was it a different class of investments?
CJC,
No. I don’t understand that to be the case – and I think it would be completely illegal. You own the stocks. You own a percent of whatever the company is that issued the stocks. Lehman doesn’t own the stock and no right to it.
Now if you owned some Lehman specific instrument, that would be subject to bankruptcy law and just might go to a higher priority creditor.
It would be nice if some lawyers would weigh in on this topic. I think what Webb is saying is outrageously incorrect; though when it comes to matters of law I recognize the folly of making layman’s assumptions.
https://libertystreeteconomics.newyorkfed.org/2019/01/customer-and-employee-losses-in-lehmans-bankruptcy/
“After LBI was put into a Securities Investor Protection Act (SIPA) liquidation proceeding, most of the remaining customer accounts were transferred quickly to solvent broker-dealers. Early on, about $45 billion worth of customer claims (out of a total of about $190 billion) was transferred to Neuberger Berman. On September 19, 2008, Barclays Capital acquired select customer accounts of LBI and, by September 23, about $43 billion of LBI customer claims had been transferred to Barclays. The rapid transfer of customer accounts to rival broker-dealers suggests that opportunity costs to LBI customers were small.
In contrast to these mostly retail customer accounts, LBI’s institutional customers—in particular, its prime broker accounts—faced delays in resolving their claims. Lehman was a prime broker providing financing and custodial services to hedge funds. Barclays unexpectedly refused to accept these accounts from LBI, and it ended up taking about five years to resolve these claims. While prime broker customers were ultimately made whole, there is some evidence that they incurred opportunity costs. A recent study finds evidence that Lehman’s failure inhibited some hedge funds from trading, possibly because their assets were trapped in bankruptcy. As a result, some of these funds failed.”
In fairness to Webb, he does suggest that the laws have changed since 2008. Again, it would be good to hear what a lawyer with experience in securities has to say.
Eric, what you say makes perfect sense to me. From the article you posted, “by law, customer assets and Lehman’s own assets were segregated”
———————————————
I’d like to note that Paul Craig Roberts had a series on ‘the great taking’ which echoes the OT. I don’t believe it to be true but let’s just say that PCR can get rather passionate about certain things and leave it at that.
CJC,
To my mind, the great taking is coming due to out of control government spending. The cowardly politicians don’t want to raise taxes to pay for everything because the increase would have to be so large that the people would reject it. That would mean the politicians would have to curtail the freebees that they use to bribe the people and all the pork from which they receive kickbacks. So they create more money which leads to more inflation (as it must and always does).
However, we are all beginning to pay for the run away big government via said inflation. It’s going to get a lot worse. People will eventually lose their ability to afford decent housing, cars and most everything else. Their credit will be destroyed when they default on debt. When they stop purchasing all but the most basic essentials (like food) – out of necessity – businesses go under and they lose their jobs too.
We are on the precipice of a great economic disaster. It will have the same effect as the conspiracy theory. All but the biggest and best positioned international banks will go under along with the populace. Most people will be left with nothing, but they won’t be happy. Then comes massive social unrest. The only survivors will be those who owned real assets free and clear, mostly in the country side, have good communities and plenty of guns.
A good post but a unified theory of finance is beyond my grasp.
With the fall of the Soviet Union, there was the chance to create economic/political systems that served human beings. But the West used Shock Treatment to seize Russian assets. With the privatization of state industries, Managers became obscenely rich Oligarchs. Greed triumphed. Russian life expectancy crashed in the 1990s until Vladimir Putin reversed it. American life expectancy has been falling since 2014 but it’s really accelerated since 2020.
The Axis of Resistance was formed in response to decades of Western economic exploitation, sanctions, and forever wars. The West forced Russia, China and Iran together. Not brilliant but rather incompetent hubris. Eurasia has the inner logistic lines of transport and communication and can get by without North America’s and/or Europe’s labor and depleted resources. The USA does not have the manpower, armament, or logistics to seize Yemen that Egypt and Saudi Arabia couldn’t conquer to reopen the Red Sea and the Suez Canal to Western shipping.
Inflation will skyrocket if goods from Asia are torpedoed if the proxy World War 3 spreads there along with the 95 billion dollars of military spending going to Ukraine, Israel and Taiwan. Shortly all of the Western financial instruments will lose 75% of their value once the collapse of the global hegemon becomes common knowledge.
The best of all possible alternatives is if UN Armistices are signed between the combatants, DMZs built on the lines of contact, and the Cold War 2 restarts. But this time, the West will be the sick de-industrialized block of nations.
VV,
How much of Russia’s assets did you as a Westerner get? Oh, right, it was not men like you and I screwing Russians. Inflation is already going strong and Chinese imports or lack thereof are not the cause. Eurasia has inner lines of communications? For what, international trade? Why haven’t they been using them before? Egypt and Saudi Arabia couldn’t conquer Yemen? I was unaware Egypt has tried, at least not since the last Pharaoh, which was a long time ago.
Fred,
Yes, it is one of my pet peeves that the forever wars are of no benefit to Americans, as such, unless they work in the Military Government Industry Nexus. Russia enriched western bankers and corporations until it didn’t anymore with the start of western sanctions and then the invasion of Ukraine kicked off the proxy WW3 with NATO.
“In the North Yemen civil war from 1962 to 1970, Egyptian President Gamal Abdel Nasser supported the republicans with as many as 70,000 Egyptian troops and weapons. Despite several military actions and peace conferences, the war sank into a stalemate by the mid-1960s. Clashes continued in parallel with peace talks until 1970, when Saudi Arabia recognized the Republic, and a ceasefire came into effect.”
https://en.wikipedia.org/wiki/North_Yemen_civil_war
Colonel Lang was a military attaché in Yemen after Vietnam. I remember his comments here about the failures of Egypt and Saudi Arabia and military prowess of the Yemeni mountain people. The US/UK/France Navies and Air Forces can continue to attack Houthi missile sites until they run out of armament but the only way the Red Sea and Suez Canal will open for safe and shorter trips by Western shipping is an agreement with the locals to get a cut of the transit fees and Armistices between NATO, EU and Israel with the Axis of Resistance.
The USA could withdraw back to Fortress America, give up on being a global Empire, and return to a conscript Army and Navy. Plus, if healthcare, shelter and good nutrition was restored for Americans, they could man the armed services defending the coasts and borders eliminating the need for foreign mercenaries. This means the dream of cashless global digital currency was always just a western financier’s nightmare since digital commerce will stop dead in its tracks with actual electrical blackouts.
VV,
Unfortunately, the isolationist dreamtime has dissipated, never to return. I myself would like to enjoy such a thing. However, the Wild West Frontier is settled and INCONUS resources have been tapped to near maximum. Therefore, the only way to maintain, let alone grow, a robust economy is to trade globally. Our politicians have f’ed that up big time by allowing trade imbalances with China and other countries; regardless a global economy is here to stay; done right or done wrong.
Therefore, the US must protect its economic interests abroad. This is where Trump was on the right track. Yes, we are the biggest economy, next to China, and yes, we thus have more to lose, but the EU has much to lose as well and they need to step up and make their contribution to the defense of our system (aka “or way of life”). Same for Japan + other Asian nations, India and Israel.
A bunch of violent a-hole backwards Houtis (or Iranians) cannot be permitted to damage the system. They must be destroyed and could be, easily, if we’d stop playing patty cake with them and got serious. Go full Iraq shock and awe, minus the nation building. That would do it and would serve as a cautionary tale for other aspiring jerk-off death cults. How many of their own have they killed by bullets, starvation and otherwise? How many of their own would be happy to be free of the oppressive rulers?
That said, we also need a far better educated workforce. We need STEM and trades. We need a cohesive culture that doesn’t wish death upon our own country. We need to get government spending under control (I hope it’s not too late). We need to incentivize domestic manufacturing and exporting of goods. Again, we need the Trump policies and programs. Four more years of the current course and I guarantee you the country will be lost forever. The economic destruction alone will be of an order of magnitude equal to what Webb describes; just for a different reason
No thats not correct at all. In fact the idea of a brokerage “going bankrupt” has no bearing whatsoever on what stock people own, as those assets held in custody were never part of the actual assets of the firm, so they are not even in the discussion in terms of bankruptcy proceedings. The issues with Lehman were very complicated and had to do with what I described above. Also recognize the issues with Lehman all related to intuitional investors and accounts not retail accounts like fidelity. To comingle customer and firm accounts at a firm like fidelity is expressly illegal and I assure you is not happening.
Barbara-Ann I read the chapter, and feel with the utmost confidence that we can rest easy. There is a lengthy quote excerpt from the head of the DTCC which explains the structure that is necessary to understand to debunk this (at the end he says “see they are designed to fail!”, which I will also address). The best way to understand these clearing corporations is as utilities, that serve a necessary role in order for financial markets to operate properly and the global economic, fiscal, and monetary system to operate. This is because they provide the underlying legal and economic framework that allows accredited, institutional investors (not mom and pops) to transact with each other in a cost efficient manner.
I think it is best to separate the business of providing that utility service, for which the firm does have a balance sheet and makes a business by providing this utility service (this is what you are investing in to the extent you look at publicly traded CCPs) and the separate clearing house which they serve as operator for but is not capitalized with their own funds outside as a basic stakeholder.
This separate entity is actual comprised of and “owned” and most importantly capitalized by its members, ie the banks and financial intuitions who are a party to it. The amount of capital that each member intuition provides is based upon a formula and their respective usage and participation of the CCP. This amount of capital is also subject to and does change daily based on market conditions, increasing as conditions worsen. This structure is a large part of why most quotes in the chapter of CCPs note that there can be more capital called upon without too much seeming worry, which the author sees as a weakness.
So to take it further if we look at the opening paragraph of the chapter, we can use it to debunk his argument:
Central Clearing Parties (CCPs) take on counterparty risk between parties to a transaction and provide clearing and settlement for trades in foreign exchange, securities, options, and most importantly derivative contracts. If a participant fails, the CCP assumes the obligations of the failed clearing participant. The CCP combines the exposures to all clearing members on its balance sheet.
Here you can see he is clearly conflating the role of the utility (the company that is publicly traded) and the separate entity that has its member institutions. In the case of the utility yes it has a balance sheet in terms of assets/liabilities, where the assets would be its cash on hand, fixed buildings and intellectual property, and its liabilities would be its wages payable to its employees, the money it borrows to operate its business, and other accounting items. The CCP that is owned by its members (which to be clear is the thing that actual matters and has all of the risk in it, including the notional of all derivative contracts) does not have an analogous balance sheet. The key idea here is that there is no cash actually ever originating from the CCP that ends up in any members hands on any contract (interest or final payout or whatever). The sole purpose of the CCP is essentially to “wash” the funds of counterpart risk. Lets say firm A owes firm B 5mm payment on a contract, Firm A gives the 5mm to the CCP who then gives the 5mm to Firm B. Note the CCP never needed to front any of its own cash, despite the fact that it has a large capital base paid in by its members. Through the course of normal business that capital is never touched. Only in the event of a failure of one member, does that kick in, again all by express and at least in good-faith very conservative formula.
So long story short, the idea that the firm that is publicly traded or privately owned is ever really in the mix of the actual risk/exposure/value is totally wrong.
I know I’ve written a ton, but briefly to address the designed to fail point, after 08 all TBTF banks/insurance cos/ and other intuitions were added to a list called globally systemically important financial intuitions that required them by law to create what is know as resolution planning (the exact term used by the DTCC chair) and to develop a “living will” in the event of a catastrophe that would cause someone to fail or a depression whatever. This is why he was so open about what he was talking about. Hopefully some of this helps, happy to discuss any further
Landis
Your long response and indulgence of time invested in Webb’s book is much appreciated, thanks. I see your point re the conflation of CCP utility capital with the capital provided by members. The Lehman scenario was unusual in many respects and as you correctly point out it represented a loss for institutional investors only.
I think Webb’s key point revolves around this part of your comment; “Only in the event of a failure of one member, does [the CCP’s capital] kick in”. As I understand it, Webb’s argument is not that the wholesale taking of collateral will happen in the relatively normal course of business – even in a stressed situation of one or more brokerage firms collapsing. His whole argument is predicated on a total systemic collapse of the kind that was feared, but did not materialize back in 2008.
Would your arguments hold up in the event of a global financial crisis which exceeds the scale of 2008? Webb is envisioning this very scenario, where the calls on the capital on a CCP exceed the capital available – i.e. a wide scale catastrophic failure of banks, brokerage firms and other institutions across the board. The evidentiary support Webb provides for the fact that the present system is not “bomb proof” is taken from regulatory documents. For example, he quotes a 2022 BIS Financial Stability Board scenario planning document as including the sentence “Therefore, system-wide effects were not considered” – I’ll not quote the whole thing. I guess no system based on fractional reserve banking can ever be totally “bomb proof”, but Webb’s argument re the capital calls system being a weakness applies, AFAICT, only in the event of a total failure.
Webb’s whole thesis seems to be predicated on two contingent assumptions; 1) that a system designed to withstand a certain amount of stress can nevertheless see the failure of CCP’s – and 2) that the “everything bubble” bursting will result in just that. His evidence that the DTCC acknowledge the first possibility themselves lies in what Webb says on p40; “The start-up of a new CCP is planned and pre-funded”. He says this after quoting the DTCC themselves saying “..in the event of the resolution of one of our CCPs, [we] definitely see the logic in having the operating capital to start up a new CCP pre-funded”.
The great difficulty we have, I think, is in reconciling the orthodox view that the existing system is built, as best it can be, to function within whatever standard deviations of normal economic stress – with Webb’s view that it is engineered to fail and ‘take’ everything in that one time black swan event. It is easy to write Webb off as paranoid and his evidence of failure-by-design as simply the result of an unthinkable, extreme case scenario. It is also quite natural that all of us kind of assume the system is built with the best intentions in mind to support the economy. Webb sees the banks’ “living wills” as analogous to a relative suggesting you write a will leaving everything to them – whilst simultaneously plotting your murder! The difficulty is, he can only provide circumstantial evidence of the supposed plot.
TTG
Landis has made some very good points here and I can only support the arguments of a third party in an area in which I have limited knowledge up to a certain point. If I attempt to reach out to David Webb would you be willing to host a further discussion with the man himself defending his ideas? We could maybe ask David Webb to post here in person (taking into account Landis’ counter arguments) – or maybe arrange a video Q&A – or perhaps some other format.
Barbara Ann,
I’m pleased you started this discussion. It’s a subject I know damned little about and, even as Landis and others attempt to explain it, I’m sure I’ll never fully understand it… or buy into it. I do believe this is not fully explainable through an “economics as a science” model. The basis of this high finance stuff lies in a societal belief system. If you or anyone knows of an anthropological study addressing Wall Street and international banking, I’d like to read it. The psychology, I think, is related to the mind set that powered the tulip bulb craze back in the 17th century. I might go back and reread Weber’s “The Protestant Ethic and the Spirit of Capitalism.”
If you could convince David Webb to comment here, that would be great. I’m not going to arrange any video Q&A. That’s way more effort than I care to spend on this. He does a lot of interviews. Perhaps you can point out one or a few where he tries to answer our questions and doubts.
Finally, thanks for creating and submitting this article. I greatly appreciate your effort and interest. Looking forward to future submissions.
TTG,
Any chance we can get some Ukraine analysis? You have proven to be the most astute observer but you have been real quiet lately.
Whenever a government starts out of control printing not much can be done but buy real assets and brace for impact. Unfortunately the media did not explain this to people receiving covid checks to not buy flat screens from Walmart and put down payments on new cars. Put a down payment on a house before the interest rate goes through the f#$%*&^ roof would have been the right course of action.
As bad as that was however, we likely could have pushed through the printing. I felt confident we would but that was before the US weaponized the only thing it had which was the dollar. All bets are off now. We are waiting for the Great Depression II. No CBDC or any other financial slight of hand is going to can kick it either. Only hard times will fix it.
I think the key misunderstanding is that this is not at all how the system is designed or has operated in practice: 1) that a system designed to withstand a certain amount of stress can nevertheless see the failure of CCP’s
After the 08 Crisis we realized that the system would never really be able to stand on its own outside of public support in a crisis. It was a recognized lesson learned that allowing Lehman to fail was a mistake. It was made because there was a lack of understanding of how all of these thousands of individual contracts would be handled in the event of a bankruptcy preceding. We also knew it was necessary to backstop the banks, AIG, and Fannie and Freddie, which we did expertly.
So after these events, and this deep recognition that the system would never be able to fully stand on its own, we began a number of key reforms, namely the Basel bank reforms, and the reforms to shift counterparty risk to central clearing. The idea being that ok if there is always a risk that we have to bail it out, lets at least make the system as safe as we can, so that it operates normally the vast majority of time and we can quickly and efficiently fix the problem if something unforeseen imperils it, as always seems to happen. So the system is not designed to withstand some expected set of market conditions, rather the system is designed to limit systemic risk and react swiftly and overwhelmingly with fiscal and monetary authority should the system be at risk.
Would your arguments hold up in the event of a global financial crisis which exceeds the scale of 2008?
In response to this I would say without any reservation that not only would it, it did!
Covid and the 2020 crisis was actually far worse in magnitude than 08. What took weeks and months in terms of market correction and deterioration in 08 happened in hours and days. The reality is the fact that you aren’t acutely aware of that fact is a testament to how well the system worked. I assure you that we were just as close if not certainly closer to losing everything in 2020 as we were in 08 were it not for the global coordinated fiscal and monetary policy (although not necessarily those 2 together in one place, as in the US they are not coordinated, despite conspiracy theorists that suggest they are) that restored order to the system. Swift action from central banks that restored market liquidity at a scale that dwarfed the response in 08.
Another recent example was the failure of Silicon Valley Bank and more importantly Credit Suisse. Again, the fact that Lehman rolls of the tongue but CS, who was just as big if not bigger than Lehman and a top securities dealer in the aftermath of the 08 crisis, does not or maybe has a faint memory shows how strong the system is. This is not to say that government and central banks are perfect. But rather to illustrate that all of these actions comport with what I said (and which they have said publicly repeatedly, especially in recent years) is an overall framework of reduced systemic risk with a hard and fast official backstop.
All of these leaves alone that this idea of “taking everything” doesn’t actually even make sense since none of the securities that are held in custody at for example the DTCC ever enter anyone’s hands under any circumstances that would be a creditor to the DTCC itself, and any number of a myriad of other reasons that reflect how these assets are legally separate. It seems to me his argument is based loosely on the existing legal framework and not a rogue element coming in and changing securities laws globally. In the interests of space and not writing a novel maybe I’ll pause there and see what is most helpful or what questions you may have.
Landis,
“Covid and the 2020 crisis was …”
The economic shutdowns were caused directly by government actions.
“It was a recognized lesson learned that allowing Lehman to fail was a mistake.”
Recognized by whom?
“We also knew it was necessary to backstop the banks, AIG, and Fannie and Freddie, which we did expertly.”
No. Many of those institutions should have been allowed to go bankrupt. Obama and congress were wrong to bail them out.
I am talking early in mar 2020 when everything was brand new, and before stimulus was even passed. Financial and credit markets devolved rapidly and the global economy shrunk by nearly a third.
The global central banking and regulatory and academic community.
If any of those failed western civilization would be over as we know it in hours. There would be no money anywhere, no corporation in America or the western world would be solvent, or be able to make any payments including payroll. All money in banks and retirement accounts would basically just be gone instantly. If Fannie and Freddie failed credit would cease to exist, period. Total collapse.
Landis
Hence the “Great” in “Great Reset”. I suspect the scenario you describe is exactly Webb’s idea of what it will look like – i.e. the near instantaneous total erasure of the old financial system. No wonder he describes the idea as “insane”. I’d like to hear Webb expand on his views of how the theorized new system would be started up (he says it will be CBDC based and seems to envisage a ready-to-go system waiting in the wings). I’ll ask him if I get the opportunity.
Landis,
Businesses being ordered by the government to shutdown is not devolution nor are markets biological organisms. You are making excuses for bad government policies. Civilization won’t end because badly run banks go out of business anymore than when Jackson crushed the Second bank of the United States.
Landis
Thanks again, your message is clearly the system is working as advertised.
I’ll pause there too as I am not knowledgeable enough to pursue David Webb’s arguments further. His book is freely available, so anyone interested can read it and decide for themselves. I have reached out with a suggestion that David may wish to represent himself here if he wishes.
Landis – I hope you’re right when you say that Webb’s description of the DTCC is false/incorrect. As BA notes, Webb calls the GT plan “insane”, and I completely agree with that, mostly because us humans wouldn’t put up with it. (It *might* work if they build enough Robocops first, though…).
When Obama completed the GFC Bailout started under Bush/Cheney, I supported it, because I have enough of an Econ background to imagine how disastrous a complete breakdown of our banking system could be. But of course, details matter, and I have come to view the US government’s reactions to the GFC much more cynically.
First, the lack of criminal prosecutions established that it’s not just the Banks that are Too Big To Fail, but also that the people who run them. (IIRC, only *one* person went to jail, a low-level Swiss trader).
Second, by entrusting the repair of our banking system to the same people who blew it up, Obama guaranteed that (1) it will happen again, and (2) those Banksters would profit handsomely from the bailout.
Our government (counting the Fed as part of “gov’t”, which is admittedly iffy, but it *should* be) pumped a few $T into the *top* of the economy – a sad case of Democrats trusting the “Trickle Down Theory”. The immediate result was a decade of huge inflation in [large] Asset prices – high end Real Estate, Big Art, and Stocks – and the continued decline of rural America. And oh yeah, it created a bunch of new Billionaires who are keenly aware that investing in politicians can be very profitable.
Congress took some half-steps toward resurrecting Glass-Steagall, but Banksters dig new loopholes way faster that our sclerotic government(s) can plug them.
We are now stuck with a “system” that sucks ever more “value” into the Financial Sector, at the expense of the Real Economy (People making Things and Stuff). US Government runs constantly increasing deficits to try to keep things afloat until the next election (except when a GOP Congress tries to tank the economy to drive a Democrat out of the White House…).
I appreciate your explanation of the details that expose the paranoia in Webb’s GT theory, and I really do hope that you’re right about that. But the current Financial “System” of the USA/West is just not sustainable. IMO, the real question is *when* – not if – it will blow up [again].
Elkern,
Yes to both 1&2. Turned me off to Obama when that came about.
I have always believed money is worthless if you cannot buy anything of value.The poverty of identity is the direct result of a valueless society.
Another webb for a good laugh.worth poking around his site
https://webb-site.com/articles/bitcoinponzi.asp