Hypothecation: Hypothecation is the practice where (usually through a letter of hypothecation) a borrower pledges collateral to secure a debt or a borrower, as a condition precedent to a loan, or has a third party (usually an affiliate) pledge collateral for the borrower.
Rehypothecation: Rehypothecation is a professional financial market practice, where counterparty reuses a security pledged as a collateral for its own use.
By now everyone who follows the real news in the financial markets (as opposed to the zombie drool masquerading as news that is regurgitated by CNBC, Bloomberg, CNN and Fox Biz/News) knows that there seems to be a lot copper – “a lot” as in “tens and hundreds of thousands of tons – missing from several Chinese metal warehouses: News Link. If you use google to find news, you’ll see that there’s not one U.S. media outlet (besides Zerohedge) reporting this. Yet, big U.S. banks will turn out to be inextricably involved in this.
What is happening is that elaborate financing schemes were devised in order to create sources of financing. The scheme initially involved the counterparty to the loan (the borrower) issuing a note of security interest against copper collateral sitting in a warehouse in some Chinese port (in this case, copper). This is a collateralized loan if the chain of events stops there. However, the enterprising lender would than take the securitized note and use it as “collateral” – i.e. rehypothecate the note – to borrow funds from another source.
See where this is going? What turns out as a legitimate securitized loan travels through the fraudulent global fractionalized banking system meat grinder and comes out the other end as a giant Ponzi scheme. Now there’s several “legitimate” claims on the same pile of copper. When one party decides to grab the collateral, the scheme collapses.
This is a simplified explanation of what is happening in China but it captures the essence of the situation.
Here’s the problem. This same scheme is being applied to the gold and silver sitting in London LBMA and Comex warehouses AND in big bank custodial gold/silver vaults (read into this: the GLD and SLV vaults/HSBC and JPM).
I can guarantee this is going on with gold and silver. All it will ever take is a legitimate independent audit of all of the custodial vaults mentioned. This is why Putin issued a statement on behalf of both Russia and China expressing concern for the security of each country’s gold: LINK.
Don’t think for a second that Putin and China don’t know what’s going on in London and NYC with gold. And don’t think for any more than a second that the U.S. won’t go to war before the truth is exposed about its missing gold. Ask Ukraine, Libya and Iraq what happens to their gold when the U.S. invades…