Cockamamie spin doctors have come to apply the term "shadow banking" to financial operations conducted in this country with funds garnered outside our Federal Reserve System (Fed) and the public credit markets. By definition then, almost all shylocking taking place prior to 1913 got hidden in these shadows, wherever
they are, so we’ve never been quite certain what to make of the silly concept. 1913, of course, was
Our
best guess is that nail-biting bureaucrats, threatened by stuff going on that they
don’t even know about, let alone try to regulate, have to invent catchy hooks to
make sensible flights away from Big Government sound really, really onerous, and “shadow banking”
seemed sinister enough for this one.
Anyway,
near as anybody around here can tell, what’s left after you take out “sunlit
banking”, our term for what today's moneylending regulators do manage to wrap their arms around, is a proud, centuries-old tradition carried on by what used to be known
as “private banks”, a staid arena crammed chock full of conservative institutions
that politically correct troublemakers are now spinning as “non-banks”. Really.
We kid you not. Non-banks because
they don’t take, what are these days, %$#&ing Government handouts to keep %$#&ing bought and paid-for politicians in %$#&ing office.
The
Orwellian nature of this nonsensical assault on private enterprise is mind-numbing. Do we actually live in a world where the
morons who still can’t figure out how to throw bank CEO’s in jail for
destroying the civilized world and Iceland half a decade ago are to be given something
else to %$#& up?
Valued
subscribers, despite all the jibber-jabber about these practices, in 2013, shadow banking isn’t even the point. The paper instrument is. Nowadays, with a traditional portfolio
consisting of common or preferred stock, U.S. Government, municipal, or
corporate bonds, claims on physical assets like gold or silver, and such, you hold stuff that at least represents a binding
legal ownership interest in what it purports to be. Dally in options, futures, swaps, and/or God
knows what, the arenas where all that nefarious shadow banking is said to take place, and you’ve got yourself a side bet with some unknown entity through what
amounts to a casino, and any successful outcome therefrom is solely and totally
dependent upon that party’s ability and desire to pay you off if you win and
he/she/it loses.
That’s
counterparty risk, folks, and the investing public didn’t know this threat even existed until Lehman went under and AIG turned up insolvent and Washington had to
find some way of keeping afloat every too-big-to-fail counterparty those gamblers had booked bets with, (well, everyone favored by Washington at the time, which is how Lehman got thrown under the bus,) or let the world financial system collapse under the weight of all those
he/she/its stripped of the ability and desire to pay anybody off.
But
hold on here. There’s more. Even with a traditional portfolio in 2013, you’ve
got a problem if your investments are held by a Crime Family, and whose investments
aren’t? The U.S. Government only insures
the first $500 thou of securities in your account. Private insurance covering amounts over $500 thou, offered by the Family’s
insurer, will be subject to, guess what, counterparty risk, that insurer thence
becoming your counterparty, and in another financial apocalypse, with
Washington saying they’re going to let financial institutions just go ahead and
fail now, you would do well to think about opening separate accounts with other
Crime Families for every $500 thou you’ve got and spread your stash around that
way to rely totally on the portfolio insurance offered by Uncle Sam and his magical ability to pay off anybody and everybody simply by printing up the cash.
Invest traditionally and stick it in $500 thou accounts to obviate counterparty risk, and you should keep the shadow banking
bugaboo at bay.
