I recently got an email from a concerned reader:
“I have followed your podcast and articles for a while and enjoy your content. I’m wondering if you’ve watched The Great Taking documentary or read the book?
This is so important with regard to ETFs and stocks etc. Could you do some research and find out about the legal situation in Australia? This is scary stuff and not a conspiracy theory. I hope we have better protection but I’m not so sure.”
The Great Taking ey? Never heard of it. Sounds interesting.
So I ended up watching the documentary. And since I watched it, I may as well share my thoughts on it. Especially since this reader may not be the only one worried about ‘The Great Taking’.
So what’s it about?
Here’s the one sentence summary…
“David Webb exposes the system Central Bankers have in place to take everything from everyone.”
I know what you’re thinking… stick with me.
I don’t do well with outlandish claims. But since I basically never entertain videos like this, I thought why not? It’s here if you wanna watch it.
The guy started speaking and he seemed quite humble, simply telling his personal story. I detected no signs of hysteria, so I decided to listen on.
He also wasn’t selling anything – the book is available as a free PDF – and doesn’t promote gold, crypto, or anything else (he also says he’s not short the market).
Webb seemed like a genuinely concerned ex-hedge fund guy turned private citizen, trying to point out potential problems in the system.
Anyway, I ended up watching the whole thing. Some of it was pretty interesting and he raised some good points. But I didn’t come to the same conclusion he did.
Let’s run through some of the claims The Great Taking makes, and my thoughts on them. Plus, I’ll share what was missing and my overall views on the financial system, future collapses, vested interests, and more.
Please remember, I’m a casual observer like you are. Not someone who has intimate knowledge of the intricacies of the financial system. So I’m not pretending to have all the answers, nor am I necessarily trying to ‘debunk’ the points raised.
Here’s the first thing I agree with: our financial ‘system’ is insanely complex.
So complex in fact, that most of the people running it probably don’t understand the entirety of how it all works.
I’m reminded of a witty Charlie Munger quote, which I’m probably butchering. During an interview in the decade of zero interest rates, very low inflation and ‘quantitative easing’, when asked for his thoughts on the situation he said, “If you think you understand what’s going on, you’re an idiot.”
Anyway, Webb goes to great details pointing out the major ‘hidden’ risks in the financial system and the problems that have developed over time.
One by one, he notes each additional layer of regulation and rule changes (many of which aren’t well known), and how it has undermined the control and clear ownership of the individual.
There’s far too many things to cover here (and it’s fairly boring to be honest), but let’s explore the main themes of The Great Taking.
The ownership structure of assets like shares and funds is less clear than it used to be.
Webb points out that brokers tend to be the legal owners of the stocks that you’ve bought. Instead of direct ownership, you have a ‘beneficial interest’. Basically, assets are held on your behalf.
He claims that if a broker goes bust in the US, they’re legally allowed to use your securities to cover their losses. As I understand, most US brokers are insured up to a certain amount (which he didn’t mention), but this is simply the tradeoff with ‘custodian’ brokers. It’s partly how they’re able to offer ‘free’ brokerage.
We’ve had a few cases of brokers in the past going bust here in Australia. Nowadays, people mostly use ‘CHESS sponsored’ brokers, where the broker does NOT own the shares on your behalf, unlike in the US.
For the ones that do, the broker usually has a third-party financial institution ‘holding’ the shares in trust on your behalf (such as JP Morgan or another behemoth) to protect against conflict of interest shenanigans.
Index funds work a bit like this too, by the way. They’re trusts, which we have a beneficial interest in. Basically, if a broker (or index fund manager) goes under, our funds are still in trust with an external party. Sure, it could be a pain to transfer to a new broker/fund manager, but we still have legal claim on that pool of money according to the ‘units’ we own.
Now, I’ve not personally read anywhere that there’s a guarantee of no losses in such an event. In theory, everything is perfectly safe and held ‘in trust’ with multiple layers of protection. But in practice, we can’t say with absolute certainty what could unfold in a future financial crisis. In short, there are unknown unknowns.
Banks can technically close off access to our cash if they deem it a risk to their financial stability. They could do this through ‘technical’ issues, refusal of physical cash withdrawals, or closing off access to redraw accounts (which happened during covid with at least one lender).
I’m probably sounding a little tin-foil-hatty at the moment, but these things are simply true. OK, so what could trigger The Great Taking? Where we magically lose all our money.
We’ll get to that in a minute. But here’s why Webb thinks bad things are coming.
In the late 2000s, a web of complex derivatives – leveraged bets on low quality mortgages – triggered huge bank losses and the credit crunch of the GFC.
The Great Taking suggests the same murky pool of contracts and derivatives has gotten much bigger since then.
Webb suggests that additional powers granted to financial institutions over the last 50 years, have incrementally undermined control for individuals. He says that financial institutions are now legally allowed to use our securities, cash, bonds, and whatever else they ‘hold’ for us to cover their losses.
How? Because technically, legal ownership is now theirs in many cases. Here’s where it goes off track for me though…
He alludes to an upper echelon of mysterious figures who are pulling the strings and this is all a deliberate plan to confiscate the wealth of the masses in the next big collapse. The documentary shows images of Rothschilds and old barons like Rockefeller, but he never actually mentions names who these instigators are.
Apparently it’s not just the masses being targeted, but also the wealthy and the elites. “They’re saving the rich for dessert” was one of the lines from memory. And while that’s a gripping claim, it makes absolutely no sense for countless reasons, which I’ll get to soon.
In practice, Webb thinks during the next crash, due to complicated ownership structures, banks and institutions will be allowed to take people’s securities and cash to cover against derivative losses and other obligations. It’ll supposedly be done in the name of protecting the financial system.
Because the contagion and exposure to derivatives and losses will be so vast and widespread, creditors will also be allowed to take over the assets of pension funds, institutions, and even accounts of sophisticated investors.
The first half of the documentary was about sharing facts on how complex the system has become and the dilution of ‘direct’ ownership. But the second half is… well… basically the end of the world.
Webb thinks rising interest rates have started to cause it now, with certain pressures building inside a few banks.
He claims that as lower interest rates drove asset prices up, high rates will drive them down. He uses some frankly horrible math to try and explain this.
Rates fell from 5% to 1%, and boosted values of bonds, stocks, and real estate. So rates going from 1% to 5% will collapse asset values in reverse.
He suggests 80% falls based on those simple interest rate numbers. Webb even goes so far as to suggest index funds will be worth 10% of what they were at the peak.
Look, I don’t know what the next crash looks like. But this thesis isn’t even close to adding up. Valuations of assets did not increase 5x due to interest rates, so the ‘reversing’ of this makes zero sense.
We know that to be true, because valuations have been largely underpinned by earnings. For example, the stock market did not go from being priced at 15x earnings to 75x earnings. And real estate didn’t go from transacting at 5% yields to 1% yields.
Then look at the current situation. We had a few wobbles as rates began to rise off the floor. But stocks and real estate markets have, for the most part, handled it relatively well. In fact, local and US stock markets have been rising, and so are home prices and rents in most cities.
So the whole ‘rising rates will crash the economy/markets/etc’ idea is looking like an awfully bad call (made by MANY pundits and financial news outlets to be fair).
One thing that bothers some people about the financial system is that money is literally made out of thin air by banks and central banks.
Now, banks do have restrictions on how much they’re allowed to lend against their capital. But when your home loan is approved, banks are literally just creating digital entries on a screen. The bank only has a fraction of that money in cash.
Central banks, like the RBA, can also do the same thing. Obviously we could give everyone unlimited money but that creates inflation and deflates the actual value of that money, so people aren’t actually wealthier.
Webb points out how we’ve moved away from physical share certificates and title deeds as proof of ownership. This is an interesting point. The phasing out of paperwork means we can often have trouble ‘proving’ we own things.
He says this makes it easier to ‘steal’ our assets. Not sure I buy that. Remember, these things are literally just pieces of paper. You need a legal system to enforce ownership.
If the “powers above” were really going to take your money, do you not think they’d also just stop people making claims of ownership in court? Meaning the paperwork would be meaningless anyway in such a scenario.
“Damn, we can’t get Joe Bloggs money, that crafty bastard has a piece of paper. Guess we’ll just everyone else’s then.” Come on, that’s a poorly thought out argument. After all, you’d think these all powerful people would have the judicial system under control too.
I think Webb understands the increasing complexity of the financial system and decided there must be something sinister going on. But it’s worth remembering this quote: “Never attribute to malice that which is adequately explained by stupidity.”
If you think the people running the world are highly competent supreme beings, you’re probably not paying attention. It seems far more likely that the financial system has been one band-aid after another, sloppily attempting to fix one issue and inadvertently creating two more.
Compound that over 200 years and you’ve got a Frankenstein system which nobody really understands, is too confusing to untangle, but works most of the time. And since we’ve mostly gotten wealthier as a society, nobody has the time/courage/energy to ‘fix’ it (whatever that would mean).
Here’s a few other notes taken while watching the doco…
— We’re supposed to believe that a tyrannical few have allowed vast amounts of the world to become wealthy and develop great standards of living… only to then take it away again later. Again, come on. Then what?
— In any case, mass poverty doesn’t actually help these mysterious elites. Are we not more useful as slaves who have some money to spend and will happily work for a few carrots?
— If everything is taken from the masses, will we not just stop participating? Of course we would. There’d be widespread violence and it would essentially be the end of society as we know it. The Great Taking is too all-encompassing for it to not lead to this.
— The productive system makes the richest much richer for as long as everyone else participates. If we stopped playing the game, productivity, profits and asset growth would die, hurting those who own everything (apparently the end goal of The Great Taking). Circular logic fail.
— The perfect chance for The Great Taking was the GFC, the biggest and worst crisis since the Great Depression. Nobody had a clue what was going on and there were barely any protections in place. But governments papered over that as best they could with spending, and effectively covered bank losses while handing out money to the public (using borrowed/public money of course). Emergency central bank policies like suppressing bond yields and zero interest rates fed into higher house and stock prices (making most people wealthier while causing very little inflation during the 2010s).
— The central bank in Australia (RBA) is not ‘privately owned’ like is suggested central banks are. The RBA is owned by the Commonwealth Government and surplus profits are paid back to the government as dividends. So while there are vested interests everywhere you look in finance, the situation isn’t the same everywhere.
— In Australia, most share brokerage firms are ‘CHESS Sponsored’ not custodial like in the US. Meaning you are the legal owner of those shares, not the brokerage company. If the brokerage firm goes under, your shares can not be taken (unless there’s some loophole that has never been enacted which nobody knows about).
— In Australia, most banks are guaranteed by the government. So the idea that they’ll take your money to cover losses is stupid. Especially since after the previous major catastrophe the government stepped in to ‘guarantee’ systemically important institutions and backstop any major bank failures. This includes any deposits held at the bank up to $250,000. So that doesn’t add up.
— Our superannuation system, housing market, equity market, and banking system, are all interdependent and rely on one another. Everyone is tied to this system for our way of life. All the politicians wealth and “higher ups” are invested in the same things that we are, even more so.
The documentary is amazingly heavy on problems and light on solutions (as are most doomsday predictions).
While it has some valid points of concern – complexity, institutional powers, etc – the conclusion and takeaways are farfetched and unhelpful.
It’s very defeatist in its assessment of the world. A mindset that seems to be increasingly embraced, along with its cousin entitlement, both of which turn my stomach.
And while this type of negativity is persuasive (even appealing) to our survival-focused minds, I strongly believe anything this defeatist in its outlook is ultimately destructive for the average person.
It simultaneously leads to the toxic combination of zero action (because what’s the point?), and maximum stress (because everything’s fucked!).
Webb offers no real actions of solutions to the supposed Great Taking. Everything will be taken: equities, bonds, cash, gold. The government can usually take crypto too, and have done so in many cases, so that’s hardly a foolproof solution.
He says to pay off any debts you have, and to do things that make you happy. But then also claims that even debt-free real estate isn’t safe from being taken. So… yeah.
If one is truly worried about something like this – what then? Well, the best solution I can think of is to:
Become as wealthy as possible, and have as many different forms of wealth and income streams as you possibly can… including physical cash, private businesses, as well as skills and relationships you can utilise in a worst case scenario.
Land and weapons you can defend it with probably won’t go astray either. But that’s going next level with it!
There’s a fine line here between diversifying yourself, and living in a fear-based reality. You can NEVER remove uncertainty, so the further you go down this road, the more peace of mind will prove elusive.
Look, I’ll be honest. As a finance nerd, I found some of The Great Taking interesting. But I also feel dumber for spending my time on it and walking through these arguments😅
The world is a complex and messy place. The financial world – with all its rules, regulations, interests, and interdependent and overlapping layers of securities, instruments and assets – is even messier!
Webb suggests one thing we could do is unwind the complexities in the system. Yeah, good luck with that.
Look, there’s obviously a risk of huge financial catastrophes in the future, where everyone loses a lot of money. That’s the reality of markets. There’ll never be zero risk, just like walking down the street or driving to work.
But the idea of massive and deliberate confiscation of wealth by mysterious world-controlling figures who’ve concocted a plan over 50 years to rob us of all our resources so they can finally own EVERYTHING …. just ain’t stacking up.
In all seriousness, I think these fears are farfetched and wildly unrealistic. Like most conspiracy ideas, they start off with a kernel of truth and end up at Armageddon.
In any case, if he’s right, you’ll have bigger problems to focus on, like food and self-defense, so maybe focus on that instead 😁
But that’s just me. Maybe I’m a blind optimist. Let me know what you think in the comments.
My thoughts on a behavioural trap I see in the FI community, how to recognise it and how to fix it. Far more common than you might think, and it can prevent you from enjoying the wonderful wealth you’re building.
Lizzie changed her career, moved location, sold her home and switched investment strategy. Now she’s looking to semi-retire in her 30s.
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Nice Dave. Keep us the great work. Your posts are always appreciated, entertaining and insightful, or, perhaps in this case, ‘inciteful’ 😉
Haha thanks mate!
Your reviews are always a breath of fresh air. Love your optimism, never change. I agree with you, the defeatist and entitled attitudes are becoming more and more prevalent which is worrying. We need more people like you to keep us on the right track! 🙂
https://youtu.be/Ved2e2IP3LA?si=9iEYto1YfBCtQLLw You might like the first minute of this clip by Yuval Noah Harari on debunking conspiracy theories
Haha he nailed it. These stories give us certainty in an uncertain world and shift blame/control to an external party, giving us a green light that our circumstances are never our fault. Most people find that mentally delicious.
I suggest Harrari is NOT a person to be listening to about this subject…
Thanks, and glad it resonated!
I assume buying through Vanguard’s platform means the shares are held in a trust, as I recall not reading anything regarding CHESS.
Correct, Vanguard personal investor accounts are not CHESS sponsored, so there is an additional third party layer in between you and the ‘units’.
This is why I pulled all my shares out of Superhero and went with Pearler instead. Not a conspiracy theorist but I feel better knowing I own my shares 😂
Yeah that’s totally understandable, it just removes another layer of potential complication. I prefer that option too.
Love your work Dave.
Nice review and analysis… For sure we are in a system that no one fully understands. While all the interesting points raised might be true, I do agree that it’s very unlikely this is the result of some grand scheme, and likely just papering over past mistakes with temporary solutions that will bite harder later (kicking the can down the road).
I’m not a Bitcoin evangelical by any means, but I would urge you to look at how feasibly challenging it really is for self custody Bitcoin (not other crypto) to be confiscated by governments when you say “ The government can usually take crypto too, and have done so in many cases, so that’s hardly a foolproof solution”. Not a foolproof solution, but probably the hardest asset to confiscate asset of them all.
Thanks for the comment Sam.
Are you referring to ‘cold storage’ bitcoin or just the fact that it’s harder to track down the wallet/address (or however it’s referred to) for an individual?
Hi Dave, I’m referring to any type of self-custody where you would be holding the ‘keys’, and that would usually be cold storage. Self-custody is NOT having your Bitcoin on an exchange, with a bank or any other ‘trusted’ party, or anyone else having access to the ‘keys’. While I’m not advocating investment in Bitcoin here, it is worth highlighting that it is one of the most secure protocols for protecting value, and has no ongoing costs. I guess you just have to be able to stomach the volatility.
Keep up the good work
Understood. Honestly if one has a large amount of wealth, I can see the utility in having a backup pot of ‘money’ like that if it helps them sleep at night (or they feel at risk of government confiscation).
Dave I think you found a nice series of posts to start – reviewing finance conspiracy docos on YouTube about the next impending financial crash. There’s plenty of content out there and your breakdown and methodical critical thinking is spot on.
I’d definitely love to see more of these posts as it saves us the loss of IQ watching them!
Well done.
Eman
Cheers mate.
I don’t think I have the patience for a ‘series’. And they’re all basically the same anyway lol. I’ll keep it in mind though!
It might save you the loss of IQ, but you’re happy to throw me under the bus? 😁
After watching the documentary, I read your comments to see if our thoughts aligned. However, I believe your analysis was overly generous.
The film focused on an active fund manager who claimed to have accurately predicted major financial crises, such as the 87 Crash and the Subprime Mortgage crisis. He worked tirelessly and was met with skepticism, leading to believe a conspiracy theory. This had a profound effect on him, causing him to conduct extensive research to support his beliefs. However, his findings were not subject to peer review before being presented in the documentary.
It is absurd to think that if this individual had truly possessed such knowledge, he would not have set up his own fund to capitalize on it. The use of emotive language and background music in the film is a major red flag, as it detracts from the credibility of the content.
I know someone who is a die-hard supporter of cryptocurrency, and he would have been enthralled by this documentary. At times, it felt like he was the one speaking. He holds the belief that crypto is the only safe investment, as he views the government as being corrupt.
While David Webb, the fund manager featured in the film, does not claim to invest in cryptocurrency, his documentary could easily be used as a tool by unscrupulous individuals to promote unregulated assets. I would not be surprised if a headline emerged about a pensioner losing their savings to a scam after being influenced by this film. Thank you for shedding light on this individual and warning others about his dangerous views.
Thanks for your thoughts and sharing additional colour which I didn’t highlight in the article (mostly to save space).
Well I do try to be generous for the sake of fully taking arguments at face value so they can be fairly critiqued.
If I was just watching it by myself, I wouldn’t give it much credibility at all. Who am I kidding, I’d probably just never watch it given the claims involved haha.
I agree with you – the doco can be used to paint compelling pictures and people will use it to promote all sorts of stuff and likely mislead unsuspecting people. In that sense, it’s sad. But it’s tricky, because those types of people are naturally going to cling to stuff like this, and if it wasn’t this doco, it’ll easily be something else suggested on YouTube or charlatan in the media.
Great read.
I am hearing a lot of talk nowadays about Blaxkrock and Vangard owning and controlling everything.
Haha yeah that’s a great one.
People don’t realise it’s simply normal investors and retirement funds who are the ones behind BlackRock + Vanguard’s assets. It just gets pointed out they’re in the top 5 shareholder lists of all shares, because obviously they operate index funds on behalf of everyone which invests in all those shares.
Not to mention Vanguard is owned by its own index fund investors (in the US) and shares of Blackrock can be invested in by anyone given it’s public company (and therefore Blackrock is also inside index funds that we all own too).
But it’s a popular narrative among the conspiratorial folks. The grain of truth is that Blackrock and Vanguard have the voting rights on our behalf, so they can influence company policies in ways which we may not approve of individually.
Re: defeatism “A mindset that seems to be increasingly embraced, along with its cousin entitlement, both of which turn my stomach”
Bang on, Brilliant 🙂
Haha 🙂
Another way I’ve seen this phrased is: “Kids these days want in their spring what every generation before them could only accumulate by their autumn”. Something like that. Like they’re reading a novel and couldn’t be farked reading all 648 pages so they skip straight to the spoiler at the end so they can say they’ve read it.
I swear people who grew up on social media have had their minds broken to some degree.
The idea that some invisible elite society will take everything from everyone makes no sense. The whole system runs on debt, you take away everything and there’s no way to keep paying your debts down. Violence as a primary mean of growing wealth is ineffective and not cost effective – once the war is over, the mechanism stops working. Our financial system is complex – yes. There’s an elite group that will take everything from everyone – I doubt that.
Haha agreed 👍
It actually makes a lot of sense because the current system is just about broken so in order to wipe the slate clean and start a new system you need to destroy the current one. Debt is increasing and populations are decreasing so their running out of taxpayers to fund the debt that can never be paid anyway. Yes they can keep printing and raising taxes, but the populous surely will revolt eventually if inflation and cost of living keep getting worse. So what do you do as a friendly, caring government? You offer to ‘wipe the debt’…BUT…in exchange the ‘powers that be’ (whatever you want to call them), will take ownership and control of assets and resources (which is 90% complete anyway as most public assets have been sold). The new system will then be completely digital for a digitally obsessed society and UBI will become a program that you can enter into voluntarily – initially. AI will make most jobs obsolete so most people will have no option. Can you honestly not see where this is heading or am I just a fruitloop, or should I say, the dreaded conspiracy theorist label?
It’s amazing that most people still refuse to believe there is a small percentage of people controlling and engineering society in a way that’s beneficial to them and not the rest lol. You can literally trace these bloodlines and the developments of the current systems throughout history, it’s very easy if you spend the time. Start with the establishment of central bankers in the 1600s.
“Never ascribe to malice/conspiracy, that which can be explained by stupidity/incompetence.” It is far more likely that the Western world will continue down its present path of incompetent governments continue to spend money wastefully and inefficiently, and continuing to raise taxes/charges and/or going deeper into debt and printing more money to fund it all.
So taxes will keep going up and inflation will continue to be a problem. As FIRE people, we just need to account and plan for this. It will get harder though.
What about the WEF’s infamous ‘8 Predictions for 2030’ video.. ‘You Will Own Nothing- And You Will Be Happy’..
I can see that The Great Taking is too big and too threatening for our Strong Money author, who has to resort to a flippant and shallow response.
It’s a shock to have to come to grips with the fact that legal ownership rights which have been our accepted right for literally hundreds of years, have been extinguished.
But a concerted effort over decades, first in the US, and then in the EU and Britain, has reduced absolute ownership of paper “securities” to a new construct called “Beneficial Ownership”. You are now not the legal owner. That privilege has been transferred to an entity above you in the financial system chain which goes all the way up to a central clearing entity called Cede and Co, established and controlled by the Federal Reserve Bank. The FRB is owned by a handful of “too big to fail” Wall St. banks, now given the legally defined status of Protected Class.
You & I would have no clue about this diabolical plan but for the dedicated effort of a very savvy and ethical financial expert, David Rogers Webb.
Do your own due diligence. you will find references to the term “beneficial owner” on Australian
websites. “The Great Taking” hangs over Australian investor’s heads as well, due to our
subservience to Wall St. & the Bank of England.
Ignore Webb’s warning “gift”at your own peril.
very thoughtful analysis! Great job on taking an analytical perspective that is free from bias and fud. I am bookmarking this page!
I agree. A little truth and a lot of paranoid nonsense. It’s a hoax. That became obvious to me when I realized whose AI voice Webb selected to narrate the audio version of the Google book: Orson Wells. How funny is that?
Floating down the river of Denial? How can you dismiss and argue with the facts David points out? He backs up his claims with examples of the exact regulations put in place now that can and will prevent ownership incase of a collapse. He also gives the facts on the facts in history. It’s a question of WHEN not if. On MSM “We can begin with Biden’s first major economic policy initiative. This was the March 2021 American Rescue Plan. Its purpose was to prevent the onset of a full-scale economic collapse on the order of the 1930s Great Depression in the face of the global COVID lockdown. The Biden rescue plan entailed a massive injection of government spending, at $1.9 trillion (or about 9 percent of overall U.S. economic activity, i.e. GDP) at that time.” .
What does government spending have to do with it?
I’m just not buying it. Feel free to believe differently and act accordingly.
I understand the points he made, and how the regulations have changed, as I’ve stated in the article. But I’m not buying the idea of mass confiscation of assets, including of the rich, to a handful of unnamed mystery people. I’ve made my arguments against it, if you still believe otherwise, that’s totally fine.
I lean towards your conclusion, DG, mainly for the same reason that a vast, decades-long “conspiracy” of this sort by a secret ruling cabal seems improbable for the reason that no one alive now was involved in setting it into motion, and no one who set it into motion would be around to see it implemented. I just started to read the book and paused after the prologue because of the sensational anecdotes about being met by Important People who might have been sent as a warning to Webb. I worked on Wall Street and, no, 28 y/o investment bank associates do not sign all the papers in any deal, much less the biggest deal in a merchant bank’s history. That, and I have never heard of CDOs being “credit default obligations” (always before there were CDS – credit default swaps – and CDOs were Collateralized Debt Obligations). I am a corporate finance attorney who was worked on Wall Street and in London, so I have some acquaintance with the terminology. Here is the part that Webb has correct, and which may escape non-specialists: formerly in the UCC (Uniform Commercial Code, adopted by each state in the US), a holder of securities had a “beneficial interest,” a centuries old concept in the law of trusts. The UCC and other laws in other jurisdictions basically imputed a trust arrangement between customer and securities broker. The broker held your securities on trust for you, which meant you had a right to them even if the broker went bankrupt because the property was deemed to be yours even though the broker was the legal owner (this is always true with trusts: the trustee is the registered (i.e., “legal”) owner of whatever the real or personal property is, but “as trustee” meaning that the beneficiary of the trust – “beneficial owner” – is the ultimate owner). What has transpired over the years is that the UCC and other laws were amended to now grant instead a “securities entitlement,” whatever that is, instead of beneficial interest! The legal change has converted our beneficial interest (something held on trust for us by the brokerage) into a contractual claim that now just so happens to be subordinate to the claims of the brokerage’s senior creditors! This is what has Webb all excited, and for good reason. I was at a law firm in London involved with MF Global’s insolvency and saw first hand that it is what Webb warns us about. For anyone who wants to verify this, it can almost certainly be found in online searches of the news at the time — customers of MF Global discovered that their property got turned over to MF Global’s creditors. Webb has extrapolated that to what is likely to happen when the Mother of all Bubbles bursts. He has also identified the GSIBs (Global Systemically Important Banks — formerly known as Too Big Too Fail — which also conceals the real issue, being politically connected and favored) as the ultimate winners, which is probably true. They will end up holding nearly everything that was held in customer accounts of all the institutions that go belly-up in a massive meltdown. Seems like a good long position to put on — long GSIB equities. Lastly, though I do not know Oz laws, banks or regulation, it is true in many other Western economies that, in the next meltdown, bank depositors, who are theoretically creditors to the banks, will be “bailed in” and their deposits converted into equity. So I would not rely on “our bank deposits are guaranteed.” I will re-watch the documentary again, but not on 2x speed, which I did last time. I recall he appeared to say that all hard assets could be taken. If a house has not been mortgaged, or there is no loan on a car, then I do not see how this system would result in losing assets that are not collateral or are not in a customer account. However there is plenty to be concerned about, apart from his extreme dystopian scenario. Postscript: Webb did a video interview recently of Edward Griffin, author of “The Creature from Jekyll Island,” so that gave him some street cred. Webb is now involved in getting the UCC restored to its former terminology and in the video interview, says that the US state of South Dakota has a bill pending on the matter.
Dave, David’s comment above is formatted as a huge chunk of text, so maybe you missed it. But he’s a finance attorney who has worked on Wall Street and basically agrees with Webb’s assertion that laws have been put in place to make sure the little guys take it in the shorts next time.
Would be interested in your comment.
This entire article is my thoughts on the topic, so I really can’t elaborate further. If that’s what they think, then that’s what they think.
We’ll just have to wait and see how it plays out. I’ve given my thoughts and what I think is the most sensible course of action… yet to hear any viable alternatives from the other side, other than growing your own food (on land that can apparently be confiscated mind you) and becoming more self sufficient.
If we think it’ll end up at this level of extreme, it’s really the end of society and supposedly very little one can do. I remain unconvinced. But everyone can act according to their own view of the situation.
That seems really rational, thanks for the reply.
Having read doom for years, I’ve settled on the “things that are smart anyway, like staying healthy, deploying capital to real things (ie. a new roof), investing in myself (education), and learning some real skills.
In the meantime, I might as well invest these “playbucks” in the smartest way in case I’m wrong.
100% agree mate. It’s not that I don’t think there’s any truth to these things, or that risks aren’t there. It’s that I don’t believe there’s a better alternative than what I’ve outlined.
I was happy to read the last post above mine from David, mentioning the term “Bailed in” thete are not many people that know about this, it has already occurred in Europe and the law was recently adopted in Australia, it is designed to prevent our larger banks from failing at the expense of the depositor. The point that Webb is making is similar systems have been developed in the equity markets where your holdings are in theory nit yours should the custodian become financially stressed. Given that this system is already sanctioned in the banking system, why is it so hard to believe that it has been ushered into other financial systems?
Yes, what Webb states, does seem beyond belief, but none of us have experienced an event like the great depression. And it stands to reason that the world will experience a similar event again. We now have threats that didn’t exist in the past, terrorism and cyber attacks are the main ones. Gold has been confiscated before, and Bitcoin has no chance off avoiding government sanctioned, not by computer control, but simply by jailing tge largest holders. So, no debt and growing your own food was the best solution in the last depression, so I suspect that will be the case again.
How does that line up with the government deposit guarantee for individuals here in Australia?
The GFC was could’ve very well been a Great Depression scenario, and would’ve been the perfect time to take advantage of such a scenario.
So if no debt + growing food is the solution… what about assets? Just own nothing or else it’ll be taken away anyway?
In the US and Europe, bank bail-in legislation was passed AFTER the GFC.
Australia has bank bail-in legislation. The Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 was passed in February 2018, giving the Australian Prudential Regulation Authority (APRA) crisis resolution powers to bail in certain instruments, including hybrid securities. This legislation has been referred to as the “ARPA Bail-in Law” or “Australia’s Bail-in Law”.
Additionally, the search results highlight concerns and debates surrounding the ambiguity of the legislation, with some arguing that it could potentially allow APRA to bail in deposit accounts. A Senate inquiry has been asked to consider tightening up perceived legislative “loopholes” to clarify the situation.
However, APRA and the Treasury have denied any intention to use the legislation to bail in deposit accounts, citing the Financial Claims Scheme (FCS) and the Banking Act as providing protections for depositors.
Since the US has the worst and most thieving politicians in the world, Oz may fare better in the coming crash.
FWIW, ChatGPT says: Yes, Australia has shifted from using the term “beneficial interest” in securities accounts to “securities entitlement.” This change aligns with the broader international framework for securities regulation, particularly the adoption of the Personal Property Securities Act 2009 (Cth), which provides a clearer definition and understanding of rights related to securities held in accounts. This shift helps standardize terminology and enhance the clarity of legal and financial transactions involving securities.
Thanks GPT.
There’s still the govt guarantee on deposits, regardless of whether shareholders are going to cop the brunt of any potential bank collapses. So I don’t see why the bail-in stuff matters all that much. It’s basically just governments saying “we don’t want to rescue these banks next time, they can sort their own shit out, but we’ll still cover depositors cash”
Besides, we never had the same issues here (part luck), and banks seem to be far more risk averse these days rather than reckless with ARPA dictating their risk levels more or less. So that doesn’t really play into these fears at all.