“On Nov. 16, the G20 will implement a new policy that makes bank deposits on par with paper investments, subjecting account holders to declines that one might experience from holding a stock or other security when the next financial banking crisis occurs. Additionally, all member nations of the G20 will immediately submit and pass legislation that will fulfill this program, creating a new paradigm where banks no longer recognize your deposits as money, but as liabilities and securitized capital owned and controlled by the bank or institution.”
Russell Napier Declares November 16, 2014 The Day Money Dies
On Sunday in Brisbane the G20 will announce that bank deposits are just part of commercial banks’ capital structure, and also that they are far from the most senior portion of that structure. With deposits then subjected to a decline in nominal value following a bank failure, it is self-evident that a bank deposit is no longer money in the way a banknote is. If a banknote cannot be subjected to a decline in nominal value, we need to ask whether banknotes can act as a superior store of value than bank deposits? If that is the case, will some investors prefer banknotes to bank deposits as a form of savings? Such a change in preference is known as a “bank run.”
Each country will introduce its own legislation to effect the ‘ bail-in’ agreed by the G20 this coming weekend. The consultation document from the UK’s Treasury lists the following bank creditors who will rank ABOVE depositors in a ‘failing’ financial institution:
- Liabilities representing protected deposits (in the UK the government guarantee protects 100% of deposits up to the value of GBP85,000)
- any liability, so far as it is secured
- Liabilities that the bank has by virtue of holding client assets
- Liabilities arising with an original maturity of less than 7 days owed by the banks to a credit institution or investment firm
- Liabilities arising from participation in designated settlement systems
- Liabilities owed to central counterparties recognized by the European Securities and Markets Authorities… on OTC derivatives, central counterparties and trade depositaries
- Liabilities owed to an employee or former employee in relation to salary or other remuneration, except variable remuneration
- Liabilities owed to an employee or former employee in relation to rights under a pension scheme, except rights to discretionary benefits
- Liabilities owed to creditors arising from the provision to the bank of goods or service (other than financial services) that are critical to the daily functioning of its operations
The above list makes it clear that deposits larger than GBP85,000 will rank ahead of the bond holders of banks, but they will rank above little else. Importantly, both borrowings of the banks of less than 7 days maturity from other financial institutions and sums owed by banks in their role as counterparties to OTC derivatives will rank above large deposits.
Cash Under Mattress May Be Better Than G-20 Bank: Opening Line By – Nov 13, 2014
With the G-20 summit coming up this weekend in Brisbane, Australia, it might be worth wondering when or whether you can have too much money in the bank.
Citing information from uber-analyst Russell Napier, the blog Zero Hedge writes that Napier is declaring Nov. 16 as “the day money dies.” (That’s their headline, anyway.)
According to Zero Hedge, Napier says the G-20 will announce “that bank deposits are just part of commercial banks’ capital structure, and also that they are far from the most senior portion of that structure,” and as such, following a bank failure, “a bank deposit is no longer money in the way a banknote is.”
If this is the case, depositors with more on account than would be covered by deposit insurance would find themselves in line with everyone else trying to recoup what they can from an insolvent institution.
“Large deposits at banks are no longer money, as this legislation will formally push them down through the capital structure to a position of material capital risk in any ‘failing’ institution. In our last financial crisis, deposits were de facto guaranteed by the state, but from November 16th holders of large-scale deposits will be, both de facto and de jure, just another creditor squabbling over their share of the assets of a failed bank,” Zero Hedge writes.
The solution? Basically, stuff your money in a mattress. Or in this scenario, a warehouse. The blog helpfully measures the size of 500-euro note, measures the size of a standard shipping pallet, locates a typical storage warehouse in Northern Ireland and measures it, too. After crunching the measurements and comparing the cost of the deposit rate in Europeto the cost of renting the warehouse, well, you get the idea.
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