Financial crisis

Beyond Deutsche Bank, we must understand that the large banks of the world are holding inordinate amounts of derivatives, beside which their own funds are ridiculously low. And this constitutes an endemic risk that is largely underestimated by the shareholders, as well as the depositors.

There are many events to be analysed for these last few weeks. As happens every year, this time of year is, once again, quite fertile. These events, whether geopolitical, economic, financial or historical, all exert influence, more or less on the long term, on the precious metals markets.

With virtually empty gold vaults, the central banks and bullion banks are now becoming desperate.

The American bank Citigroup has just been condemned by the Department of Justice to pay a fine of $7billion for its role in the subprime crisis.

Banks have not really taken preventive measures against sudden changes in their environment, and that their gross underestimation of risk puts them in a fragile position, should anything unexpected happen

In January of 2014, economists were predicting a 2.6% growth, and we get a result of -2.9%. This catastrophic number has been totally ignored by the markets and talked down by the Fed, of course, but this will make the return to reality that much more painful.

Currency In Circulation vs Gold & Total Credit Market Debt vs Gold. Charts by Nick Laird.

We often talk in these pages about the difficult situation facing Europe’s southern countries, but the financial crisis is also affecting countries that are considered sound and that have a good reputation. This is the case with Austria, facing difficulties with its banking sector.

The Bank for International Settlements (BIS) just published a statistical study on the amount of derivatives worldwide at the end of 2013, and they reach the astronomical amount of $710 Trillions ($710,000,000,000,000).

There always is this media noise, constantly repeating itself, about optimistic growth predictions, but only real results should count, and they are not good at all.