Bank Bail-Ins, 'Unsecured Creditors' and Precedents for Global Crises

So, the world's top central banks have held interest rates at or around zero in recent years...Unfortunately, this was never intended to help them achieve any real economic growth, nor a balanced inflation rate, thinks Thomas Hughes.

However, what it did contribute to, is the creation of mind-boggling bubbles in a variety of markets and the astronomical growth in national debts. And yet, central banks continue to use this particular approach despite its evident inefficiency. In the event that already-low interest rates prove to be ineffective, they would go down to zero, or even turn negative; and this is already underway in the United States, Europe, and Japan.

Increasing interest rates right now would hasten the economic collapse and cause many countries to declare bankruptcy. On the other hand, a decline in interest rates to negative numbers can and will, completely wreck the financial system; there will not be many people eager to take their wealth to the bank if they have to pay to keep it there, and individuals will recognise that it is preferable to have cash on hand. However, the issue is that banks do not nearly have enough money to cover all of their clients. The sobering fact to remember here, is that the whole financial system does not contain as much wealth as it claims on paper and online.

The entire system would crash if there was a large-scale need for currency, therefore banks and governments naturally work to prevent it. However, because the implementation of negative interest rates is all but certain, getting rid of cash may just be their only option to prevent the system's collapse. Their solution is thus to ensure that the people's sole remaining alternative is to retain our money inside the banking system and use it to make payments, at our expense. This makes it quite evident that finding ways to preserve our wealth outside of the banks is now more important than ever.


It is no secret that the government takes legislative measures to recapitalise failing financial institutions. This is known as a ‘bank bail-in’, which involves making its shareholders and creditors bear the costs. For instance, the practice was implemented in the United States with the Dodd-Frank Wall Street Reform and Consumer Protection Act. In 2009, the Dodd-Frank bill was presented to Congress as a solution to the 2008 financial crisis. While the Dodd-Frank Act was heralded as the saving regulator of the economy, it has instead put an end to small banks, limited small businesses' borrowing power, and considerably slowed down the economy.

In the UK, the Financial Services (Banking Reform) Act 2013 had a similar effect. It made substantial changes to UK financial services law, including granting Her Majesty's Treasury and the Prudential Regulation Authority the power to carry out the Independent Commission on Banking's recommendations regarding the ring-fencing rules for the banking industry.

Ultimately, the main takeaway here is that the effect of these laws is to officially declare depositors, (i.e. the bank's individual customers) as "unsecured creditors" of the banks in which they have accounts. Considering the aforementioned bank bail-ins, the issue in this situation is that an unsecured creditor is a person or organisation that lends money without receiving specific assets as security in return. If the bank, in this case - the borrower, fails to repay the loan, the creditor will be left with no protections and hence faces a much higher risk.


Meanwhile, the pretext and excuses for the collapse of the world banking system are actively mounting up, preparing the population to accept the downfall of the current economy (and thus our funds held within it), not for its aforementioned unsustainable practices, but for such reasons as ‘cyberattacks’, for example. In order to justify their avarice, we've seen institutions like the World Economic Forum (WEF) begin spreading warnings of ‘hackers’ that could bring down the whole banking system.

Further reinforcing their narrative of blaming the imminent crash on ‘hackers’, the WEF and its allies staged a simulated worldwide cyberattack on July 9th, 2021, known as Cyber Polygon 2021. This year's date has been indefinitely postponed from July 8th, but Cyber Polygon 2022 will once again bring together the WEF, Interpol, and BI.ZONE to discuss digital resilience in the era of cloud computing. The last training simulation, called a "cyber pandemic," consisted of a simulated massive cyberattack on a company's supply chain to test real-time reaction to this threat.


The central banks deliberately caused the last collapse, and are doing the same thing this time. We have spoken about how institutions like the Federal Reserve and the European Central Bank have worked together to use interest rates as an instrument to burst the biggest financial speculative bubble yet. Meanwhile, the underlying cause of the current global economic crisis, is being concealed by blaming ‘other’ factors such as ‘cyberattacks’ or ‘energy prices'.

Indeed, do expect even more food and energy price inflation this year as a result of worldwide fertiliser shortages and skyrocketing natural gas prices, which are of course being put on the perfect scapegoat that is the conflict in Ukraine. Due to the European Union's deliberate decision to decline Russian oil supplies in the absence of a suitable replacement, and Germany pursuit of a "green" agenda by shutting down additional coal-fired facilities along with its last nuclear reactor, it is to be anticipated that this winter will see a substantial number of energy shortages across the eurozone and an increase in natural gas costs.

In the midst of it all, one can easily forget that banks do not merely stash your money in a safeguarded vault. The majority of your money gets reinvested, and not necessarily in the best manner, so keep in mind that large banks only tend to hold onto about 10% of your accounts in actual currency. Technically, you run the risk of losing your wealth if all the fiscal mismanagement that central banks induce backfires, if Evergrande defaults spill over, and if the banks find themselves unable to return depositor money. Therefore, in order for individuals to continue transacting, living, and curbing the power of institutions like the WEF, the Bank of International Settlements, and other similar organisations, it is vital to have a limited amount of cash in the banks and most wealth outside of these institutions.


One sure way to keep your wealth safe outside of the banking system is gold. Gold has always been valued and people have acquired it for a myriad of reasons: to keep it, to hide it, to transport it to another nation, to pass it on as an inheritance, and so on. Gold is a safe haven for savings when all other forms of currency, physical or virtual, end up failing. It serves as protection against the risk of going bankrupt when the financial system collapses.

Gold has maintained its value for millennia unlike other assets, including paper money. It is used by people to amass and protect wealth. Since it is
non-corrosive, melts quickly, and shines more brilliantly than other precious metals, gold is a wonderful choice to serve as a token of one's belongings. Additionally, as gold also becomes more costly when life gets more expensive, it is a good method to hedge against inflation. There are two causes for this. First: the price of gold in any given currency increases as that currency's buying power declines. Second: when individuals see that their nation's currency is losing value, they sell it and switch to other trustworthy assets or immediately buy gold to save their investments.

In times of unpredictability and volatility, gold retains value. A bank may not return a deposit. Money from a brokerage account might be stolen by a broker. But you do not face a counter-party risk if you purchase gold bullion. In other words, you cannot lose money because someone filed for bankruptcy and failed to repay you, as may happen with any other asset when the pending global financial collapse aims to strip people of all their wealth.   EG