The Great Taking
Book & Documentary by David Rogers Webb,
former Hedge Fund Manger and Investment Banker,
age 63 (born 1960)
List of revisions
Revised on Feb. 1, 2024 (and labeled with "Update (Feb. 1, 2024)"
Revised on Feb. 2, 2024 (and labeled with "Update (Feb. 2, 2024)"
Revised on Feb. 11, 2024 (and labeled with "Update (Feb. 11, 2024)"
Revised on Feb. 13, 2024 (and labeled with "Update (Feb. 13, 2024)" -- I proofread the whole article
Revised on Feb. 22, 2024 (and labeled with "Update (Feb. 22, 2024)"
Revised on June 7, 2024 (and labelled with "Update (June 7, 2024)"
Revised on June 19, 2024 (and labelled with "Update (June 19, 2024)"
Minor revisions on June 24, 2024 (and labelled with "June 24, 2024")
Minor revisions on Sept. 22, 2024 (and labelled with "Sept. 22, 2024")
Interesting Questions
Have you ever thought about the following questions:
- Why is global debt-to-GDP so high?
- Why does it keep rising?
- How come no one in leadership positions seems to express concern publicly?
Or the following:
- Is the 40-year downtrend in interest rates (with the US long Treasury yield bottoming at less than 0.5% in 2020) likely to be followed by an extended uptrend?
- Is U.S. national debt (now at $33.9 trillion and growing; see usdebtclock) an issue?
- What does the financial End Game of all this debt look like?
(My answers appear at the end.)
The Great Taking may be applied to answer these questions and more. It suggests a plausible answer to how high debt levels and unsustainable debts can be resolved. It predicts a world of hyperdeflationary collapse as opposed to the more obvious forecast for hyperinflationary collapse.
Primary Sources
However, if you just wanted to access the book or documentary or other primary sources, here are the links:
If you wanted to spend time on just one single item, I would recommend reading the Open Letter to Legislature. It's the last bullet point above.
If you had one hour to spare, I would recommend watching the Documentary. It's the 2nd bullet point from the top.
(end of update)
Update (June 19, 2024)
If you wish to forward a shrink-wrapped package to a friend, please visit this blog post.
Update (Feb. 11, 2024)
Update (June 7, 2024)
Synopsis
Let's begin.
My goal here is to motivate the reader to explore Webb's work. You can think of this article as an overview. What I've written below is my summary of the documentary.
The subject matter is property rights.
On an abstract level, the work explores the disconnect between real-world wealth and paper-based wealth. The difference is that the latter requires no energy input and is fictitious to a great extent. However, the feature common to both is power.
On a practical level, the work explains that the legal ownership of financial securities has been replaced with their beneficial ownership and given the name of "security entitlement". This is a mater of law and pertains to property rights. It went into effect in 1994 in the U.S.; source.
The process started more than 50 years ago (1970) in the U.S., was foisted onto Europe, and now spans a good portion of the world. (Based on Wikipedia here, here, and here, I'm guessing that excluded countries are comprised of New Zealand, Iceland, UAE, Nepal, Philippines, Myanmar, Vietnam, Cambodia.) When and why does ownership matter?
Ownership matters in the case of insolvency, i.e. when the brokerage firm where you happen to hold your assets (or financial securities) goes bankrupt. Here's what it means. Because the law states that you're not the legal owner of your assets but just their beneficial owner, the secured creditor of that brokerage is entitled to claim your assets in the event of that entity's bankruptcy (but only if such secured creditor also has control of those assets). I repeat, this happens by law and doesn't require judicial review. More on this in my actual Twitter thread. The relevant section of the law is Subsections (b) and (c) of Section 511 of Article 8 of the UCC (Uniform Commercial Code).
Update (Feb. 1, 2024). A legally more precise restatement of the previous paragraph: Ownership matters in the event of bankruptcy of the brokerage firm or any intermediary in the chain of intermediaries starting with the brokerage going all the way up to the securities' ultimate legal owner.
In the event of bankruptcy of any one of these intermediaries, a secured creditor has precedence over you by law and without requiring judicial review. Your financial securities are serving as collateral.
Also, in the event of bankruptcy of the brokerage itself, the additional requirement is that the secured creditor have control of your financial securities. If the secured creditor has control of your financial securities, then it will have a higher claim to these securities than their beneficial owner which is you. An example was Lehman's bankruptcy (2008). JPMorgan was the secured creditor of Lehman and also custodian for Lehman client assets. JPMorgan was allowed to keep those assets, as of a 2012 court ruling.
A creditor is someone who has lent money. A secured creditor is someone who has lent money against collateral.
The ultimate legal owner of American stocks and corporate bonds is a company by the name of Cede & Co. The ultimate legal owner of U.S. government bonds is the Federal Reserve (source: ChatGPT query dated Sept. 22, 2024).
(end of update)
Update (Feb. 11, 2024) According to Ch. 7 of the Great Taking, the legal entity sitting at the very top of the ownership hierarchy is DTCC (Deposit Trust & Clearing Corporation). The DTC (Depository Trust Company) is its subsidiary. Cede & Co is owned by "certain employees" of DTC, according to Cede & Co's Wikipedia page.
Update (Sept. 22, 2024) In Europe, the entities similar to Cede & Co are the following:
- Euroclear. Based in Belgium. It's a major depository for a wide range of financial instruments, including corporate bonds, government bonds, and equities. Its jurisdiction is primarily western Europe and global markets.
- Clearstream. Based in Luxembourg and Germany. Securities covered are corporate bonds, government bonds, equities, and more. Its jurisdiction is primarily Germany, Luxembourg, and international markets.
- Target2-Securities. Securities covered are corporate bonds, government bonds, and other securities traded within the Eurozone.
In Japan, the entities similar to Cede & Co are the following:
- Japan Securities Depository Center, Inc. (JASDEC). Securities covered are corporate bonds, equities, ETFs, mutual funds, and more.
- Bank of Japan. Securities covered are Japanese government bonds and other public debt instruments.
(end of update)
Financial institutions today have been set up in such a way that magnifies systemic risk. For example, when two parties open a derivative position (e.g. option or futures contract) and each one takes one side of the trade, the party that bears the ultimate risk is neither of them but the central clearing house (also known as Central Clearing Counterparty or CCP). The system has been designed to shift risk from individual parties to the collective. If you think you have hedged your position by having bought insurance (e.g. long puts against a stock market crash), think again because your counterparty is none other than the CCP. The CCP has a very limited amount of funds (a few billion dollars), especially given that it's the sole entity bearing risk for the entire financial system. No extent of governmental insurance protection would be sufficient to bail it out in the extreme case. (This is explained in this ZeroHedge article which is part of my Twitter thread.)
Update (Feb. 1, 2024). The concept of CCP corresponds to a system that's designed to have a single point of failure. This is a no-no in good, fault-tolerant engineering design.
The Great Depression provides a precedent for how things could unfold. In 1933, FDR declared a “Bank Holiday.” By executive order, banks were closed. Later, only those approved by the Fed were allowed to reopen. (Source: same ZeroHedge article as in previous paragraph). If this were to happen again, it means that secured creditors of those financial institutions that remain closed or their intermediaries will have a legal right to client assets held at those institutions (and sometimes depending on whether they have control of those assets)!
The work is called The Great Taking because it refers to the confiscation of private wealth by secured creditors because they have a claim on collateral. The collateral in question is private wealth held in the form of beneficial ownership (as opposed to outright legal ownership). These secured creditors are typically financial intermediaries.
The author believes that the real culprits are the central banks of the world. He says that whenever any national bank has tried to grow roots in some country, central banks of other countries have forced it to shut down. (Note: I haven't verified this independently, but it's worth checking out.) He says that contrary to public opinion, central banks are not owned by their governments, but by entities whose identities are secret. (We can surmise that they're comprised of the largest banks. This is true at least in the U.S. I won't name any names, except for JPMorgan and Blackrock, as they are probably the two financial firms most prominently featured in the media.) The issue is the central banks' secrecy of ownership, rendering them unaccountable to any authority.
The problem with modern central banking is that central banks can create money out of thin air. Money is power. In the traditional sense, power is acquired by expending energy (as in deploying human labor, capital, and fuel). In the central banking sense, power is acquired by printing money which doesn't cost anything or require real effort, which can then be used to influence everything spanning people, public media, politicians, governments, and corporations. The author believes that the plan for The Great Taking was an intelligent plan and wasn't stupid. It was designed by people who are long gone.
The first phase of the plan was over-financialization and asset inflation. This is mostly behind us and we are probably in its last stages. The second phase which is yet to happen involves systemic financial collapse where financial institutions except for members of the "protected class" (this term was used in Lehman's bankruptcy proceedings) will fail or be shut down by mandate (in the same vein as Silicon Valley Bank and First Republic Bank last March and May, 2023). Secured creditors of the closed financial institutions or their intermediaries will have a legal right to client assets held at those financial institutions (and sometimes depending on whether they have control of those assets).
Because people will suffer a drop in wealth, the general price level will fall for years, claims the author. This will make it more difficult for debt holders (e.g. mortgage holders, corporate debt issuers, etc.) to service their debt, which will in turn lead to more asset confiscations by creditors. And that's where the author ends his story. Or not.
The author's goal in having created this work is to spread the word about this nefarious plan. He doesn't believe that the plan is coincidental, but intentional. It has been methodically carried out and expanded decade after decade for over 50 years, he says.
The author believes that the plan can be hindered and ultimately averted. If not, the consequences are likely to be deprivation on an international scale.
The Great Taking describes an international plan for the legal confiscation of most if not all private wealth, especially wealth that has been unknowingly pledged as collateral.
Postscript Thoughts
p.s. I haven't read Webb's book yet (as of Dec. 19, 2023). So the above summary may be lacking in that sense. For example, Webb also discusses
declining velocity of money as being insightful, something on which I've remained silent because I don't fully understand it at this time ....
Update (Feb. 1, 2024; Feb. 11, 2024): I have now read the book. It doesn't delve into velocity of money to any great extent, but does mention it as a concerning symptom of the current state of things. See chart below. Velocity has been declining since mid-1990s and in 2020 (Covid pandemic) was as low as in 1946, the lowest level on record. See FRED for more recent readings of velocity based on M1 & M2.
From the Quantity Theory of Money, we have MV = PQ, were M = money supply, V = velocity of money, P = price level, Q = quantity of output, and PQ = nominal GDP. So, by rearranging, we have V = PQ / M. A decline in V means that M is increasing faster than PQ, or that money supply is increasing faster than nominal GDP. Update (Feb. 2, 2024): I think what Webb is really pointing out is the declining "marginal revenue product of debt" (MRPD). MRPD refers to the marginal increase in nominal GDP for a marginal increase in debt, a topic about which I had Tweeted in the past. Declining MRPD suggests that there will come a point when MRPD would hit zero. That's the point were no additional increase in debt causes any increase in GDP. That may be a turning point in Fed policy. That may be the point when the powers-that-be will trigger a financial crisis to enable The Great Taking.
p.s.2. Within my Twitter thread, I provide
recommendations for what people can do to protect their wealth. However, this shouldn't be misconstrued as investment advice. Please do your own research or seek professional advice.
Update (Feb. 1, 2024): The author's own solution to the problem is somewhat idealistic and has 3 parts: (1) have Congress strengthen ownership rights to financial securities, for example by striking out Subsections (b) and (c) of Section 8-511 of Article 8, (2) convert the Federal Reserve into a public utility, and (3) stop physical warfare. Source: author's interview with Daniela Cambone, linked at the top.
p.s.3. It is clear why Wall St would have an incentive to suppress the price of gold or bash Bitcoin. Update (Feb. 1, 2024): The author implies that these are perceived as threats because they represent alternative systems of money. In 1933, when gold was outlawed and confiscated, the Fed didn't use it as a means of injecting badly needed liquidity into the system. Hence, the author hypothesizes that the real motive for gold confiscation was to prevent an alternative system of money from taking shape. Update (Feb. 13, 2024): Today, gold and Bitcoin would be likely candidates for an alternative system of money.
p.s.4. My answers to the questions at the top. Note that these are all speculation backed by reasoning.
- Why is global debt-to-GDP so high? It's part of phase 1 of the plan. Webb would say that it's by design.
- Why does it keep rising? It's part of phase 1 of the plan. Webb would say that it's by design.
- How come no one in leadership positions seems to express concern publicly? Because they are under direction from their bosses who are behind the central banks and whose identities are kept secret. The method of control is money.
- Is the 40-year downtrend in interest rates (with the US long Treasury yield bottoming at less than 0.5% in 2020) likely to be followed by an extended uptrend? As phase 1 continues, yields would be driven by a combination of Fed policy (expansionary or contractionary) and fiscal deficits. They could very well follow an uptrend. In phase 2 however, deprivation is likely to depress economic growth while a fall in the price level is likely to eliminate inflation. Hence, yields would be extremely low. This would be a welcome blessing for the U.S. Treasury and Congress because they could issue massive amounts of debt at low yields, or refinance high yield debt with low yield debt.
- Is U.S. national debt (now at $33.9 trillion and growing; see usdebtclock) an issue? Probably not. (1) To the extent that U.S. government bonds are transferred to secured creditors in phase 2 and to the extent that such secured creditors are friendly to central banks and one with their governments, these bonds need not be repaid. (2) To the extent that phase 2 is completed with success, most private wealth will have been transferred to secured creditors, so they could decide however they wanted. In other words, a U.S. debt default wouldn't matter.
- What does the financial End Game of all this debt look like? A financial crisis most likely originating in the financial sector, which would lead to insolvency of numerous financial institutions, which would be followed by secured creditors legally confiscating private wealth that's held only beneficially but not legally at those failed financial institutions or at financial intermediaries. For phase 2 of the plan to cause maximum confiscation, all financial institutions except one would have to fail. Expecting massive deflation. Phase 2 would have a second wave which would look like this. Deflation would make it much more difficult for indebted asset holders to service their debts, thereby leading to widespread asset transfers to creditors, which is nothing other than further transfer of private wealth to the surviving financial institutions. The World Economic Forum advertises the future by saying that "you'll own nothing" and makes it lighthearted by saying that "you'll be happy." Update (Feb. 13, 2024) Please see below for a more precise description of the sequence of events triggering The Great Taking.
Update (Feb. 2, 2024) More Q&A.
- What does the timing of The Great Taking look like? (a) Webb thinks that we are very close. He mentions actions and events that indicate that certain operational tasks were completed in 2022 and 2023, which makes the world more prepared for the event of The Great Taking. I'm not qualified to comment on those events. In his interview with Greg Hunter (linked above; please search on interviewer's name), he mentions a no-later-than date of 2030. (b) He also says that we are dealing with a silent, slow ticking bomb; i.e. that there's no hurry for The Great Taking to happen. (c) My own opinion is that it's likely that central bankers will try to keep the current system going for as long as they can. In other words, so long as injecting liquidity and conducting expansionary monetary policy works, they will follow this path as needed to keep the system afloat. However, as pointed out above under p.s. (see declining marginal revenue produce of debt -- MRPD for short), it's likely that the global economy or the U.S. economy will reach a point where MRPD hits zero, meaning that liquidity injections (synonymous with additional debt in this context) become totally and absolutely ineffective. That may be the point when The Great Taking playbook would begin. (d) In the interim, if there is ever the failing of a financial intermediary, The Great Taking can be avoided by simply bailing out that intermediary. The only situation where bailout isn't an option is when the failing is large-scale (i.e. numerous intermediaries failing simultaneously), in which case the timing of The Great Taking would be random even for those in charge. (e) Finally, I should point out that The Great Taking makes the world one of "heads they win, tails they also win" kind of situation for those in charge.
Update (Feb. 13, 2024) More Q&A.
- Why is the size of the global derivatives market an issue? See next bullet point.
- What is the sequence of events that would trigger The Great Taking? The notional size of the global derivatives market is officially quoted as $715 trillion and unofficially as high as $7,400 trillion, while David Webb estimates it at $2,000 trillion (see my Tweet). This size ought to be compared to the aggregate market cap of all securities in investors' brokerage accounts because this is what's serving as collateral for the derivatives trades. This equates to the aggregate market cap of all public stocks, corporate bonds, and government bonds, which I've estimated at $242 trillion. Estimation: The aggregate market cap of all US public stocks is currently $51 trillion (via Google search); for all global public stocks it's currently $109 trillion (via Google search); for all US public bonds it's currently $51 trillion (via Google search); for all global bonds it's more than $133 trillion (via Google search). So, the ratio of the two sizes is about 8X (= $2,000 / $242) but could be anywhere in the range of 3-30X. The larger the ratio, the greater the risk. Here's the problem. A large move in the value of the underlying (securities) would cause an even larger move in the value of the derivatives. If the move in the value of the derivatives is large enough, there's the risk that one side of a derivatives trade won't be able to meet its obligation, meaning that it would have to declare insolvency unless there's a government bailout. Once insolvency occurs, the responsibility would lie with the CCP (central clearing counterparty) to make the other side of the trade whole. However, as Webb explains in his book, CCPs are poorly capitalized, i.e. to the tune of no more than a few billion dollars. Therefore, the CCP would fail. Once this happens, the other side of the trade has the legal right, without judicial review, to take securities sitting in investors' brokerage accounts. The intuitive issue is the following: After a certain point, the notional size of the derivatives market stops making sense relative to the underlying collateral, which is none other than the aggregate market cap of public stocks and bonds.
Update (June 7, 2024) More Q&A.
- How can "The Great Taking" be prevented? (a) By changing state laws and eliminating Subsections (b) and (c) from Section 511 of Article 8 of the UCC; (b) By reducing the size of the global derivatives market to a level that's commensurate with the size of the underlying assets.
Update (June 19, 2024) More Q&A.
- What can the individual do to protect himself/herself against "The Great Taking"? I participated in a 6-hour webinar hosted by Chris Martenson of Peak Prosperity on June 15, 2024. A wealth manger named Paul Kiker made the following recommendations. (Caveat Emptor: This is NOT investment advice. Please do your own research!)
- Avoid Type II brokerage accounts if possible. Also known as "margin accounts". Stick to Type I or "cash accounts".
- Use money market funds that invest only in Treasury securities.
- Stay under FDIC insurance limits (applies to bank accounts).
- Stay under SIPC insurance limits (applies brokerage accounts).
- For both #3 and #4, take advantage of multiple accounts at multiple institutions and multiple registrations.
- Invest in Treasury securities directly via TreasuryDirect, a division of the U.S. Treasury. Caveat (June 24, 2024): Martin Armstrong is strongly against buying government debt instead of corporate debt. See these Tweets (1, 2).
- Register your securities (applies to stocks only) under your own name via the DRS registration system. Alternatively, have your broker issue physical stock certificates. Update (June 24, 2024): To learn more about the concept of Direct Registration please see here.
- Consider holding physical gold directly. Recommendation was a 10% portfolio weight as a percentage of one's liquid portfolio. The firm Goldcore also presented at the webinar. I myself had known about BullionVault. (Side note: one can ask ChatGPT to compare the two and also to point out the weaknesses of each.) Update (June 24, 2024): Martin Armstrong provides this warning about holding gold at a storage facility. Chris Martenson seems to have said during the aforementioned webinar that Swiss laws required a public referendum before any kind of broad-based gold confiscation ...
- Consider holding foreign currencies.
- Consider holding farm property and foreign bank accounts.
- Consider keeping 3 months of food supplies in your pantry. Learn how to garden. Hold enough cash for 3 months consumption.
"The Great Taking should be deflationary." Meaning: Asset prices should fall.
Other recommendations:
- Avoid a broker that engages in proprietary trading.
- Print out and keep a paper copy your brokerage statements regularly.
- What are common reactions to The Great Taking? According to Paul Kiker (see item immediately above for his link), the first reaction is usually one of apathy. The lure of apathy is that it doesn't require any extra work! The next reaction is one of fear. Fear usually leads to inaction, but once overcome, there can be action. The kind of action depends on the person's beliefs and the choice of action has to be commensurate with the person's beliefs. The following are 3 degrees of beliefs: (1) Hope: "I hope it (The Great Taking) doesn't happen."; (2) May: "I believe it may happen."; (3) Will: "I believe it will happen."
