Banks

The trillions of U.S. dollars created out of thin air in 2020, as well as the trillions which preceded this printing-frenzy between 2009-2014 (QE1-QE4), have dire consequences on the purchasing power of America’s once sacred but now totally inflated, and hence debased, currency.

China has given domestic and international banks permission to import large amounts of gold into the country.

Derivatives can only be netted down on the basis that counterparties pay up. But in a real systemic crisis, counterparties will disappear and gross exposure will remain gross.

Banks, and hence banking risk, come in a wide variety of flavors, largely because bank mismanagement and short-sighted absurdity comes with equal frequency. As such, a fuller discussion on banking risk would necessitate hundreds of pages and hundreds of examples.

Warren Buffett called derivatives financial weapons of mass destruction and he is absolutely right. Greedy bankers have now built derivatives to a self-destructive nuclear weapon. Archegos shows the world that an unknown smaller hedge fund can get credit lines of $30 billion or more that quickly leads to contagion and uncontrollable losses.

Despite all the reasons discussed in preceding reports (i.e., money supply, commodity super cycles, deficit spending, and governmental credit guarantees to commercial banks) as to what we see as the current as well as future inevitability of rising inflation, there are many credible individuals, including those who strongly favor gold, who see a very different horizon.

Getting out of stocks and holding physical gold will not only be a seminal decision but it will also heed 2,500 years of wisdom that Confucius taught.

Gold is a wise investment in an increasingly broken, desperate and hence repressive environment. But how one purchases, owns and secures it is a critical matter. Individuals going forward will have more freedoms than regulated institutions to hold portions of their wealth outside of such openly and increasingly centralized financial systems.

Egon von Greyerz and Matthew Piepenburg look bluntly at the increasingly incontrovertible direction of rising inflation in concert with relatively lower yields, paving the way for longer term scenarios in which inflation rates outpace nominal yields—the ideal setting for precious metal strength.

I often hear complaints that gold is a useless investment since it doesn’t go up fast enough. Bitcoin and Tesla are much more exciting so why should an investor hold gold – an incredibly dull investment for the majority of people. If I tell investors that it is absolutely critical to hold gold for wealth preservation purposes as the world financial system is the biggest bubble in history, most would ignore or ridicule me. And if I tell them that the dollar and most currencies are down 97-99% since 1971 against gold and down 85% since 2000, they would yawn. They are only interested in their nominal stock market gains not understanding that they have gained nothing in real terms.