We wrote about this point recently. But we are saying it again because the message is so important. IF YOU DON’T HOLD IT THEN YOU DON’T OWN IT (IYDHITYDOI).
IYDHITYDOI is becoming a clear fact to people who had never considered it as a problem.
Bankers and finance people use the term ‘counterparty risk’ which is a complicated way of saying that its possible someone will not deliver on their contract obligation (which in other words is a promise to deliver a good, or service, or money at a specific date and time).
It matters not whether they wish to deliver but cannot because of circumstances such as a change in law or other reasons.
Or if they simply choose not to deliver on the contract. In either case, your plans go unfulfilled.
If it happens that your plan was wealth and security by ownership of important assets that are now not delivered, then the consequences are formidable.
The only responsible approach other than physically holding something yourself is attaching your name to the asset in a way that cannot be reversed.
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At Goldcore we call this method ‘fully allocated’ and or ‘fully segregated’ held under bailment.
Your physical metals are in your name whilst no one, including us or even a Judge, could show them as an asset belonging to anyone but yourself.
In essence, this structure means that you are still holding your metals even when you are not physically standing in the vault.
Our team is always happy to explain the details so call anytime.
Meanwhile, this essay will continue exploring IYDHITYDOI experienced by people who are not [yet] Goldcore clients.
Physical Metals- An Asset with Zero Counterparty Risk?
Physical metals like gold and silver have zero counterparty risk.
That is the great advantage during wartime for physical holders that no one else is counterparty or has to deliver on their obligation to maintain your wealth.
Furthermore, no one else has to even know about your physical metal holdings, and no one tempts to treat your wealth as their own wealth.
2022 has shown that IYDHITYDOI is very much true for companies and countries.
Below we site three recent examples of ‘counterparty’ risk or wealth being confiscated or held by the counterparty.
In each case, the counterparty risk was unexpected because a fully allocated or segregated bailment was not used.
The list does not limit to physical precious metals. There are many more examples of IYDHITYDOI and as the year is only one-third complete many more instances are sure to show up in 2022.
2022’s next lesson regards a different element, uranium. Uranium is the key element in nuclear weapons.
Uranium and Ukraine: The Nuclear Connection
During 1992 Ukraine inherited thousands of nuclear weapons as USSR collapsed.
Those weapons had been stationed inside Ukraine for decades to ensure NATO never invaded Ukraine and or invaded the USSR.
The deterrent was effective. NATO never came close to invading Ukraine or USSR because the prospect of nuclear war means the death of NATO too.
Thus, the holding of nuclear weapons meant the ownership of security from invasion.
Yet by 1996 Ukraine agreed to give up all its nuclear weapons. Nuclear weapons left Ukraine in exchange for written pledges from USA and Russia to protect Ukraine’s borders by never invading.
As 2014 and 2022 show, now Ukraine has neither nuclear weapons nor security from invasion.
Once again it becomes clear that in a complex world; if you don’t hold it then you don’t own it.
One wonders if in this example, Ukraine kept its nuclear weapons vaulted inside the country under a United Nations bailment stating Ukraine owned them and planned defensive use only, Russia would have dared to invade in 2022, or even 2014.
Worst Crisis: LME Suspends Nickel Trading
Nickel futures have doubled in price this week.
This should be great news for nickel investors who were long the futures contract because they wanted to take physical delivery of the metal.
But again, it turns out IYDHITYDOI. Apparently, some Chinese businessman is so short of nickel futures that he cannot cover his positions via deliveries of physical nickel into exchange warehouses.
In what seems like an unfair unilateral move the London Metals Exchange has suspended the ability to settle nickel futures in physical metal.
Therefore futures investors who wanted physical metal delivered to them cannot get it. Instead during this time of crisis when physical metal matters most, the LME says all trades will settle in fiat cash only, not nickel metal.
This episode exposes once again a key problem for people using futures contracts to buy metals; when you really need it, the counterparty risk is too great since if you don’t hold it then you don’t own it.
Banks legally confiscating your money
Our final IYDHITYDOI this week is the Canadian protest truckers.
Last month the federal government in Canada seized wealth that belonged to people protesting against pandemic lockdowns.
The government used its control over regulated banks to confiscate money donated for helping protestors.
To accomplish this government sanctioned banks to freeze personal bank accounts.
People who thought they owned their money learned that because money held in a bank account is treated under the law as unsecured credit.
Thus subject to government interference; if you don’t hold it then you don’t own it. Again bailment would have helped the situation.
To conclude this week’s essay, we reiterate Goldcore’s business model to serve physical metals investors is the best, and the only, way we know how to ensure you own what you own.
Our offerings are designed to tackle the IYDHITYDOI problem regardless of whether you hold physical in your own vault or the bailment storage options we provide.