Gold & Silver Forum - What's Your Cash Position? (PERCENTAGE)

A Few More Notes

My C-level friends offers more guidance:

"The $1000 limit applies only to online purchases. Banks and other vendors are not restricted in the amount they may sell face-to-face."

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Re: "I know where its going (liquidity crisis) and agree with you. A week ago I had to wait an hour to get a certified cashiers check cashed at my bank It was only for $8k and I was depositing over $2k and they still wouldn�t do it without Calling the other bank. Poor folks are gonna take it in the shorts soon, probably."

In recent years, there has been a plague of bogus Cashier�s checks (see listing on bankersonline.com ). The scammers picked these because Reg CC (Expedited Funds Availability Act) requires next-day credit for these items once they are accepted for deposit.

If someone comes in with a non-local Cashier�s check, wants to cash it, and doesn�t normally have enough funds in their account to cover it if it comes back counterfeit, I dig up contact info on the issuing bank and try to verify that they did, in fact, issue the check. Otherwise, we take the loss if the item comes back counterfeit and the customer can�t cover it.

A Cashier�s check is drawn on the bank that issued it. Your writer�s bank is under no obligation to cash it, or even accept it for deposit. Normally, banks will do this as a convenience/courtesy for customers. Only the bank that issued it is obligated to redeem it. So, the key is to make sure that the bank named on the front of the item really did issue the check.

Again, I don�t disagree that bank liquidity is a concern, especially with the big ones. Where I diverge from your interpretation is the motivation for some of these actions at the small bank level.

More food for thought...

Trouble Indicator? Limits on Savings Bond Purchases

Continuing yesterday's report, where I suggested that the Fed is getting ready for some serious financial problems, another example of how the 'wagons are being circled' has come up. This was in an email from a "C-level" (ceo, coo, cfo etc) type of a national bank which shall remain unnamed:

"I wasn�t sure where people were getting info about bank restrictions. Then today I got notice that, starting 1/08, savings bonds purchases will be limited to $5000/yr per SSN.

We haven�t heard anything about restrictions on wires.

While I don�t disagree with your conclusion about where these things are headed, I gotta tell you that the initiative for monitoring and restrictions is coming from government, not the banks. Believe me, I wouldn�t be doing half the things I have to if it weren�t for regulatory mandate."

Not to take this fellows word for it without checking, I clicked over to the TreasuryDirect web site and sure enough:

Annual Purchase Limit For Savings Bonds Set at $5,000
FOR IMMEDIATE RELEASE
December 3, 2007
The annual limitation on purchases of United States Savings Bonds will be set at $5,000 per Social Security Number, effective January 1, 2008. The limit applies separately to Series EE and Series I savings bonds, and separately to bonds issued in paper or electronic form. Under the new rules, an individual can buy a maximum of $5,000 worth of electronic and paper bonds of each series in a single calendar year, or a total of $20,000, in single ownership form. If paper bonds are issued in co-ownership form, the limit applies to the first-named co-owner. All limits are based on the issue price of the securities.

The reduction from the $30,000 annual limit in effect for both series since 2003 was made to refocus the savings bond program on its original purpose of making these non-marketable Treasury securities available to individuals with relatively small sums to invest. Approximately 98 percent of all annual purchases of savings bonds by individuals are for $5,000 or less. The minimum purchase price for Series EE bonds is $25, whether purchased electronically or in paper form; the I bond minimum purchase is $25 for bonds issued in electronic form and $50 for those in paper form.

Savings bond purchases have been subject to an annual limit since Series E Bonds were first issued in 1941. Over the years, limits have been adjusted by the Treasury Department several times and have ranged from a low of $3,750 (at issue price) for Series E bonds from 1941 through 1947 to the $30,000 (issue price) limit that most recently applied to both Series EE and Series I bonds. The limit was last set at $5,000 (issue price) in 1973.

For more information about the change in the purchase limit for savings bonds, visit our frequently asked questions page.

Are you keeping track of the developments? Let me lay them out for you and suggest where we are headed. First, consider the changes in banking restrictions that have been coming to light lately:

Citibank and other money center banks have imposed limits on customers abilities to use free IIS (inter-institutional) wire transfers of more than $2,500 per month for overnight wires, and no more than $10,000 per month for 3-day wires.

Then Saturday I reported that American Express has an "Order limit: There is a maximum order size of $1000.00 that can be purchased within a 14-day period. " Heck, that wouldn't get me through three days in Europe...

Today, we noticed that restrictions have been slapped on how much you buy per year of US Savings Bonds!

I took these three data points around to various friends to get a sense of what it adds up to. One buddy, a lawyer/CPA/economist suggested that in order not to sound too alarmist that I should dress up his suspicions (and mine) in something 'academic sounding' so I don't come across like a hot head. So, how's this?

"Money center institutions appear to be proactively implementing policy changes to ameliorate rapid public disintermediation in the event of possible endogenous, or exogenous negative confidence enhancing disclosures by reducing the public's access to bearer financial instruments which could exacerbate a short term bank-centered liquidity event until a coordinate federal effort to counteract public activities can be effectively implemented."

Translation: Banks appear to be slamming the exits shut so that in event of a bank run, you won't be able to get your money out faster than the Fed and Treasury can print up a solution.

"If that's their game, then the next thing we will see is restrictions on cashiers checks and any other bearer instruments..." by highly educated source continued..

Then sudden, synchronicity being what it is, right then an email popped into the Inbox (just like Universe was promoting me right along..):

"I know where its going (liquidity crisis) and agree with you. A week ago I had to wait an hour to get a certified cashiers check cashed at my bank It was only for $8k and I was depositing over $2k and they still wouldn�t do it without Calling the other bank. Poor folks are gonna take it in the shorts soon, probably."

Was this a conscious thing, or a fluke? My next call was to the time monks, who are busy preparing the baseline knowledge report for the next predictive linguistics run due out this coming weekend or shortly after. "Yup, that would sure fit as a design pattern. Shut the exits".

Then I called Jas Jain, my deflationist buddy. "George, it could just be they are slamming the door because the government has been too generous with people. Almost no stock you can think of (he actually called stocks 'scams') can come close to how plain savings bonds have performed. If you had bought savings bonds at the time inflation was peaking in the early 1980's you'd have out performed 99% of scams (stocks). I mean, how wouldn't love to have a 14% bond in today's world, not callable and exempt from some taxes?" Good point...

But wait! The "reason" for the change cited in the Treasury press release is a non-reason. Quote: "The reduction from the $30,000 annual limit in effect for both series since 2003 was made to refocus the savings bond program on its original purpose of making these non-marketable Treasury securities available to individuals with relatively small sums to invest."

What kinda halfwit reasoning is that? The old higher limits didn't preclude any of the small folks from participating, so why are the slightly larger folks suddenly a problem? This was starting to stink.

A call back to my C-level source was in order. I came right to the point: "Are the regulators getting ready for bank runs here?"

"I don't know. A lot of what is going on under the guise of BSA and Patriot Act enforcement. You know, there are parts of the Act which require banks to spot 'suspicious' activity. And, from a bank officer's standpoint, the only way I can spot irregularities will be to put a layer of software on top of our existing account software to figure out what "normal" is for everyone, because we can't get 'suspicious' or 'unusual' without first having some baseline 'normal' or 'usual' to compare it to."

Yup, sure enough, the government has been beefing up enforcement of anti-money laundering under the Bank Secrecy Act (BSA) for a long time.

So here's where we sit: I have three competing concepts.

The current "best fit" seems to be the Feds putting restrictions on bearer instruments" in place so that in event of bank runs, you can't just run down to bank XYZ and demand a bunch of savings bonds and get your money out of the system and wait till the crisis blowers over.

The second best fit is that under the guise of 'national security' the bankers are locking people into the financial system, perhaps to prevent the ever-increasing barter/cash under the table kind of business that goes on in America. Put a bit less gently, the Banker's coup has already happened (was 9/11 part?) and we're all under their control. They're out new ruling class.

It's just implementation of more government surveillance of average Americans in an effort to root out "terrorism" although that's pretty far-fetched. The transaction that matters to terrorists will be some obscure wire transfer from the ABC Islands, The Caymans, Channel Islands, Panama, Belize, Turks and Caicos, or Switzerland, to some front company in either a former Russian 'stan' or a ME front company, in return for a WMD. That's the biggest threat, as I see it. This domestic spying looking for a change of a few hundred in someone's cash withdrawal habits is really nonsense when you think about it.

You're welcome to draw your own conclusions - and like I said, there are at least three ways this puzzle could be fitted: Runs, Ruling, or Regulating. Pick one and get back to me. Say, late March?