By Anna Von Reitz
What has happened? After ten (10) years of shilly-shally and delays and ignoring Basel III compliance requirements, the cards have been called. It's more a matter of the timing and the specific conditions under which the Basel III compliance is being enforced, and how it is being enforced, that are noteworthy and arguably wonky.
The Federal Reserve is on the ropes because they still have a seven trillion dollar debt left over from the Big Short in 2008, because the Treasuries market has gone soft, and because the entire basis that they operate on is based on unauthorized and undisclosed "borrowing" of assets belonging to the American people.
Bottom line, they have nothing extra to loan other banks that may be in trouble because of changes to the "volatility index".
This is a year-to-year evaluation of "asset classes'. Assets are rated from Tier 1 to Tier 3. Cash and actual precious metals are rated as Tier 1 assets and considered liquid and stable. Tier 2 assets, things like mortgages, are relatively not as liquid and may not be as stable, either, but still represent known value. Tier 3 includes all the risky, locked down, regulated, and questionable assets --- like unallocated silver delivery contracts --- that a bank may carry on its books.
As a result of what has just gone on in the silver market and the gaping hole it revealed between silver on paper, in the form of delivery contracts which proved to be undeliverable, and actual silver in hand, "unallocated silver" went from being a Tier 1 asset to being a Tier 3 asset overnight.
This means that the banks must suddenly "cover" that risky Tier 3 asset by holding at least 85% of its purported value as additional Tier 1 assets --- and if it doesn't or can't provide that additional (usually an additional 75% of the value of the silver delivery contracts the bank is holding) Tier 1 liquidity to back the "unallocated silver" contracts, the bank loses its license to operate in the BIS system.
This may soon become a -- yuck-yuck -- silver lining and unforeseen benefit to the smaller banks that are forced out of the central bank system because they got caught holding "unallocated" silver contracts they couldn't cover.
The bank system will try to imply that these banks that couldn't cover the "extra 75%" of value demand were somehow doing something illegal or wrong. They weren't. They were playing by the central bank system rules -- which turned out to be risky. Now, to cover its own butt, the central bank system has changed the rules with only 72 hours notice. Over the weekend, no less.
This becomes a game like Musical Chairs. There is only so much actual silver in the market, and the math says that it is leveraged 32:1. That is, they have 32 ounces of paper silver liability for every one ounce of actual silver held by the banks.
How about cash? They are in short supply of that, too.
No matter how you cut it, there aren't enough Tier I assets available in the (very) short term to cover the unallocated silver contracts --- that is, not enough chairs for everyone, and the music just stopped.
This process will expose large banks that skated the edge of legality without common sense, betting that the fractional reserve of about 10% of the actual metal, was sufficient to carry the demand for physical silver long enough for them to meet their existing delivery contracts.
They were betting on the come, similar to kiting a check -- which is a fraud scheme infesting all banks and brokerages that practice "fractional reserve banking".
The customer thought (and was left to assume) that he was buying actual silver, whether it was "allocated" to him specifically, or was "unallocated" as part of a big pile of silver presumably sitting in a warehouse somewhere.
Instead, there was no big pile of warehoused silver waiting to be allocated.
The banks greedily oversold silver delivery contracts without having the actual silver in hand. This would be like selling you a horse and giving you a saddle, instead. The unallocated silver contracts have value because they are a bank liability -- but a saddle isn't a horse and a silver delivery contract isn't silver.
The banks never bought the silver they promised to deliver when they received the Buyer's funds and sold the delivery contracts. They just took the funds and skated along, betting that if the customer ever asked for physical silver, they could hurry up and buy enough silver to fulfill the order on the open market.
The Buyer could do the same. That's just the point.
Now that the Dirty Deal, an institutionalized Substitution Fraud Scheme in which silver delivery contracts have been passed off as silver bought and paid for is obvious to the public --- now and only now, the Bank for International Settlements leaps out the closet like the Bogey Man and says, you've got 72 hours to cover these silver delivery contracts with Tier 1 assets, or you are out of business....
You can see why this reeks on all sides.
The banks that the BIS is punishing were allowed to do this by the BIS. All the banks involved had cause to know that they were doing something risky and fundamentally dishonest, so did the BIS, but it was allowed anyway. Now, many of these banks will not be able to meet the new Tier 1 holdings requirements in addition to the devaluation of the paper silver contracts from Tier 1 to Tier 3 assets.
The banks have only three options: somehow come up with enough physical silver or enough physical cash to add to their balance sheets, or face being cut off from the SWIFT monopoly which is a death sentence for them, or -- and here's the third option: they can come home to the land and soil jurisdiction, have their debts paid off,
and join the Global Family Bank network as a Prosperity Center.
Among all the other things that people have forgotten, including the difference between fact and fiction, it's time to remember the jurisdiction where all physical assets naturally belong.
If your local bank is being forced to close its doors because of exposure to derivatives or because it is coming up short and is unable to cover silver delivery contracts it is holding, make sure that they know there is a Third Option.
Joining the Global Family Bank network is easy and fast and provides new avenues and new customer bases outside the monopolized central bank and SWIFT systems. Within a week they can be back up and running with a new asset base, no monopoly to deal with, and a new mission that offers far better rewards.
Granna
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