Last weekend the banks, along with the ISDA (International Swaps and Derivative Association) reset $80 trillion derivatives contracts in a test getting ready for the bigger contract resets that will occur in 2021, just a couple of months away. As of this writing, all is quiet on the derivative front…eerily so.

Some may think that is because they didn’t see markets implode, that all went well, but I think we don’t yet know the results of this most current experiment. Recent history (just since 2008) shows us that QE money printing can hide a lot of destruction and danger.

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Some also think that the only reset is a big, over night blow up. But the reality is that many small resets occur all along the way and by the time you see the big one, it’s too late to prepare. So the big question is, when do you want to know about the reset that is already underway?

According to the ISDA, the notional value of global derivatives as of June 2019, was $640.4 trillion, which is almost five times the global GDP. Keep in mind that that does not reflect the true value at risk, just the stated value of the derivative contracts.

But with the IBORs going away by the end of 2021 and global central banks attempting to create new robust markets for their respective new benchmarks (in the US it’s SOFR), out of that $640 trillion derivative contracts, only $5 trillion have been written using the new benchmarks. Therefore, with time running short, the push is on. Scott O’Malia, ISDA CEO, looks at it as a “once-in-a-generation opportunity to restructure the foundations of the market” but I’m thinking that there is no choice. This reset of the entire foundation of the markets HAS TO HAPPEN.

Some may think it’s no big deal, but I’m not one of them, I think when an economy, society and financial system reset, it is a VERY BIG DEAL and what I see today, is way more than what I saw in the 1960’s and 1970’s.

Additionally, Kristalina Georgieva, Managing Director of the IMF is calling this “A New Bretton Woods Moment.” You might recall that in 1944 the Bretton Woods Accord reset the global monetary and financial system from a gold backed system to a dollar backed system. Though at the time the US dollar was backed by gold, so it was still a quasi-gold backed system. Of course that ended in 1971 when Nixon took the US dollar off the gold standard and we went to an intangible debt based system controlled by central banks.

And what do central banks know about? Debt contracts and interest. What is “financial innovation”? Manipulating and leveraging those contracts for profit. But wealth never disappears, it merely shifts ownership. And inflation has gradually reset the purchasing power value of the dollar toward the few and from the many. Simply put, when governments and central banks control money, citizens pay the price.

They can talk all they want about fixing income and wealth inequality, but it is their policies and manipulations that have enabled and created this disparity, along with the fact that almost all of the purchasing power has been removed from the government fiat money and a reset of the system is required again. This is why bankers and central bankers are openly talking about it.

The damage done by the corona virus, socially as well as economically, has created their opportunity to reset the entire system. And while I cannot prove this catastrophe was planned, I can say it’s pretty convenient for resetting the system in a way that would continue to benefit the few at the expense of the many, because if most wealth is held in intangible form, it is easier to control and easier to steal.

That makes owning physical gold and silver in your possession more important today, than it’s ever been. Some might question the form, but history tells us to keep in mind that desperate governments do desperate things. Personally, since I’ve lived during a time when it was illegal to hold more than five ounces of gold, I consider that to be a strong possibility again, particularly when you see central bankers massively accumulating gold. Therefore, my personal level of comfort is in owning collectible gold coins that were exempt from confiscation in the past.

Some say that won’t happen again, but history does not support this opinion. In fact there are many laws on the books that enforce the right of the government to confiscate gold once again. So I always ask myself, what if I’m right and what if I’m wrong. With collectible gold it doesn’t matter because I’m able to buy it substantially below fundamental value, which is where it will go when the big reset happens. Therefore, I consider them stealth wealth because they fly under the radar and that’s helps me sleep well at night.

 

Have more questions that need to get answered? Call: 844-495-6042

Slides and Links:

1.     http://assets.isda.org/media/ad658249/f9a2ca23-pdf/

http://assets.isda.org/media/ddcb20e0/76dd3ab8-pdf/

http://assets.isda.org/media/3554b1ef/a2b936b7-pdf/

https://www.isda.org/a/cuQTE/2020.05.14-Pre-cessation-Re-Consultation-Report-FINAL.pdf

https://www.isda.org/a/wVrTE/Collaboration-and-Standardization-in-Derivatives-and-SFT-Markets.pdf

https://www.isda.org/2019/10/14/isda-common-domain-model/

  1. http://assets.isda.org/media/ad658249/f9a2ca23-pdf/
  2. https://www.isda.org/2020/10/09/isda-board-statement-on-the-ibor-fallbacks-supplement-and-protocol/https://www.isda.org/2020/05/11/benchmark-reform-and-transition-from-libor/https://www.bis.org/review/r190318f.pdf
  3. https://www.imf.org/external/mmedia/view.aspx?vid=6200738336001https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020
  4. https://www.imf.org/external/mmedia/view.aspx?vid=6200738336001https://stats.bis.org/statx/srs/table/d7?f=pdfhttps://www.yardeni.com/pub/peacockfedecbassets.pdf
  5. https://fred.stlouisfed.org/series/GFDEGDQ188S
  6. https://www.cbo.gov/publication/56598#:~:text=In%20CBO’s%20extended%20baseline%20projections,than%208%20percent%20by%202050.https://www.google.com/search?ei=qFWOX4C5Jo6Uhttps://www.occ.gov/news-issuances/news-releases/2020/nr-occ-2020-121.html-gT585CABA&q=bank+of+canada+crag+database+2020&oq=bank+of+canada+crag+database+2020&gs_lcp=CgZwc3ktYWIQDDoECAAQRzoFCCEQoAFQvSFYkCNgszVoAHACeACAAZoBiAGcApIBAzAuMpgBAKABAaoBB2d3cy13aXrIAQPAAQE&sclient=psy-ab&ved=0ahUKEwiArbHUmcLsAhUOip4KHfk5BEAQ4dUDCA0
  7. https://www.imf.org/external/mmedia/view.aspx?vid=6200738336001https://fred.stlouisfed.org/series/W270RE1A156NBEAhttps://www.epi.org/publication/ceo-compensation-surged-14-in-2019-to-21-3-million-ceos-now-earn-320-times-as-much-as-a-typical-worker/
  8. https://www.govinfo.gov/content/pkg/CFR-2004-title31-vol2/pdf/CFR-2004-title31-vol2.pdf