I know that Jon Corzine doesn't read 321gold. If he did, he wouldn't have missed my warning about the dangers of what is now $708 trillion in derivatives. I called it "The Ticking Time Bomb" when I posted it in May.

Basically, with $708 trillion in derivatives on a $65 trillion world economy, something has to give. There is something like $210 trillion in debt supported by only $150 trillion in assets. A lot of people are broke and don't yet know it.

Jon Corzine knows broke but he doesn't know how he got broke. I do. According to him, "I simply do not know where the money is or why the accounts have not been reconciled to date." After his testimony in Congress concludes in five or ten years, he has a wonderful career ahead of him as a standup comedian.

If you open an account with a commodities broker or even with a stock broker on margin, you sign a document acknowledging the company has the right to use the securities and the cash in your account as collateral against the financing they get from banks to loan to you. In other words, they borrow money from banks at say, 3% to loan to you at say, 6% and pledge your assets against those loans. It's called hypothecation and is perfectly legal.

They can also make investments in their name using your assets. But the investments have to be in something safe, such as Greek government bonds now paying 352%. That's called re-hypothecation and again, you signed a document when you opened your margin account saying they could do that. It's perfectly legal.

Jon Corzine may go to jail for lying to Congress but he isn't going to jail for stealing your money. What he did was legal.

Basically here is all you need to know. If you go down to the bank and steal from them or sign false documents or commit fraud against them, it's illegal and you go to jail. On the other hand, if a bank or brokerage house steals from you or makes up fake documents or commits fraud against you, it's illegal but they don't go to jail and usually get a big severance check.

The beauty of this scam is that as long as it's legal, other brokerage houses and banks will get it and see the very real advantage of speculating with your money where you take all the losses and they take all the gains. It's a wonderful world.

If you have opened a margin account with anyone, don't be real surprised if you go to bed wealthy and wake up poor. If it happened to Gerald Celente, it can happen to you.

###

Bob Moriarty
President: 321gold
Archives

321gold Ltd