Many say the definition of insanity is doing the same thing and expecting a different result. Yet this seems to be the standard set of marching orders for the global financial system. Each time there is another failure on the part of one of these mega-finance corporations, we say “Oh it won’t happen again…it was a freak occurrence.” Each time, we’re dead wrong.
Just nine months after the MF Global debacle in which hundreds of millions of dollars in customer deposits simply disappeared, it seems to have happened again. Iowa-based PFGBest announced this morning that more than half of its customers’ funds are, you guessed it, missing. Somehow over $225 million in customer FOREX and commodities investments are simply gone, which came to light after the company’s chairman, Russell R. Wasendorf, was found in his car after an apparent failed suicide attempt.
This was yet another example of a company with a strong track record and solid reputation in the marketplace simply falling apart at the seams with no explanation whatsoever. Did we ever get a clear account of exactly what happened with MF Global? Was the money ever actually found? No. These events make the news, the men behind them apologize profusely to a hostile congressional committee, and then we never hear about it again. It’s the same old story.
We also found out this week that the executives at hallowed mega-bank Barclays have been fixing the LIBOR, which is the interest rate directly responsible for most municipal bond rates. Again there were hearings, the CEO resigned (still taking $4 million in compensation with him) and it will soon be ancient history.
By this point we should be figuring out that not all is as it seems with even the most trusted names in the financial services industry. In today’s world there is so little connection between the people making the decisions about where to place capital and the actual investors whose money is being used that its simply unlikely that this trend will change. A lot of folks who bought “gold” through MF Global and PFGBest must be scratching their heads wondering how it could have been misplaced while the guys storing their metals under the mattresses know exactly where their gold is.
About PFGBest, futures consultant Mark Melin told Reuters that he “always thought they were straight shooters.” These days, it seems like any time we exchange the fruits of our labors for a piece of paper, we’re saying the same thing. We believe the guys issuing the paper are straight shooters because beyond that belief that piece of paper is nothing but wood fibers and ink. The really scary question: Is the all mighty dollar any different?
Mike Getlin is Executive Vice President of Merit Financial, home to America's fastest growing physical gold IRA company. Please send comments or questions to firstname.lastname@example.org