12 December 2013

Holding Gold or Silver In Unallocated Storage Or in ETFs and Brokerage Accounts

"This is what economics now does. It tells the young and susceptible (and also the old and vulnerable) that economic life has no content of power and politics because the Firm is safely subordinate to the market and the state, and for this reason it is safely at the command of the consumer and citizen.

Such an economics is not neutral. It is the influential and invaluable ally of those whose exercise of power depends on an acquiescent public. If the state is the executive committee of the great corporation and the planning system, it is partly because neoclassical economics is its instrument for neutralizing the suspicion that this is so.”

John Kenneth Galbraith, Power and the Useful Economist

This is not a criticism on any particular precious metal institution, mint, bank, or brokerage. Rather, it is the new normal, a sign of the times.

Trust is a commodity that is in short supply, and for some very good reasons having to do with some longer term trends that I would hope are reaching their zenith.

I know that safe diversification is not always easy to accomplish.

These are the post-MF Global times in which we live.

The ultimate solution will be to reinstate a political system that is responsive to and serves the needs of its own people as its first priority, and not the interests of a global overclass as described by David Malone in The Emerging New World Order.

The most powerful impediment to this reform is the marriage of political power and big money, and the reduction of fundamental values such as freedom and dignity to mere accounting entries in the inhuman calculus of corporate selfishness and greed.   If there is any room for unreasoning optimism it is that these trends tend to be cyclical, and we have been on this current trajectory for the past forty years.

“In the old framework, cash was a risk-free asset.

In the new paradigm of systemic risks, no asset (even cash) is risk-free so long as it is in custody of a financial institution. Investors and depositors no longer have clear title to their own assets if they are held in financial accounts.

There is now a body of law (including Dodd-Frank) that allows custodial assets to be swept into the bankruptcy estate and be subordinated to senior claims.

Hand in hand with the evolution of the banking laws is the subtle but pernicious evolution of the practice of banking: “Various rules and practices have made it almost impossible to use cash and securities. Go try to make large cash withdrawal or cash deposit and see what paperwork you would be forced to complete.”

Simon Mikhailovich, Eidesis Capital LLC, Grant's Interest Rate Observer Nov 15