Haystack November 2011

[Rasta]

We continue here from last months thread.

[Boefke]

This might be the occasion to start the snowball running. As anticipated by leap 2020, Europe would be the trigger......and USA the detonator. At MF global, all this started probably with high risk investments in Italian bonds.....http://www.zerohedge.com/news/presentin ... -mf-global

And to make it even worse, investing money of clients for their own business.
http://www.zerohedge.com/news/someone-g ... -customers

I would like to highlight the next sentence:
so thousands of MF clients are about to realize that money they thought they had, even if completely unencumbered with other assets, read pure cash, read money not at risk, is now gone forever, and they will have to wait years until the bankruptcy process determines if the claim deserves priority status to the unsecured bondholders. Best case: assume a 70% haircut on the money, if it is every to be seen again at all.

This implies the counter party risk on MONEY. It's a promise nothing more.......when people start discovering this, it's already to late for most of the people to react.

[Rasta]

And to make it even worse, investing money of clients for their own business.
http://www.zerohedge.com/news/someone-g ... -customers

I was just reading the Zerohedge piece. What a mess.... And how is this different then Madoff?

Sign of our times, with more stress in the system, it is more difficult to hide accounting fraud in the ledgers?

[Paul]

This is just theft and has nothing to do with counterparty risk at all.

one could state the same about the libian gold

[Rasta]

Pure theft, but here there may be some fall-out due to the theft. We might see contagion due to this....

[Boefke]

This is just theft and has nothing to do with counterparty risk at all.

one could state the same about the libian gold

What's the difference with inflation here

[Paul]

Pure theft, but here there may be some fall-out due to the theft. We might see contagion due to this....

yep
could be big. it was a primary dealer.
scary thing is, probably no one knows how much and where the contagion emerges.

will probably also depend on who the customers were, but wouldn't surprise me if they get a 100% bailout/refund/garantuee here.

[Blondie]

The counter-party risk was with MF Global rather than with the money itself.
If MF Global had been holding gold on behalf of their clients the result would have been the same.

I agree with Paul, it appears to be theft, but the facts are few and the conjecture rife.

Contagion quite probable, IMO.

[Blondie]

What's the difference with inflation here

Inflation occurs with our collective consent.
Monetary authorities openly target it.

[Boefke]

The counter-party risk was with MF Global rather than with the money itself.
If MF Global had been holding gold on behalf of their clients the result would have been the same.

I agree with Paul, it appears to be theft, but the facts are few and the conjecture rife.

Contagion quite probable, IMO.

I should better state it this way. When money (I prefer currency) is in the possession of someone else but you (Bank, broker whatever) then there is a counter party risk. Besides this is the clear counter party risk on currency itself......as it is a promise as a store of value.

In my eyes, when theft is involved.....your buying power is gone quick .

But with inflation ( official numbers are far from real!!) your buying power will diminish slowly.......

Thus only difference is the time factor in here....on a long enough time line result is the same. Why is the first option worth a jail sentence, and the second one isn't?

Just wondering.

Maybe I should be more clear next time, as I know what I was thinking....but reading it wasn't clear.