Financial crisis

Egon von Greyerz about the coming failure of the gold paper market, the importance of owning physical gold as insurance against a failure of the financial system and to protect against counterparty risk.

We’re here at the heart of the conflict of interests that we have denounced in the past, e.g. the central bank being the banking sector’s regulatory organism : the ECB is judge and party.

Deflation fears persist and, with it, the impact it would have on the gold price. Many observers believe the gold price would go down. Let’s try to clarify things a little.

We’ve already talked about what happened in Cyprus last April : the confiscation of bank accounts over 100,000 euros to shore up local failing banks. We also explained that it was but a rehearsal for future settlement of banking crises : directly looting depositors’ accounts. And, case in point,...

The Volcker Rule, forbidding the largest U.S. banks from trading with their proprietary accounts, has just been approved and will take effect on April 1st, 2014. What impact will it have on the gold and silver markets?

Amidst these geopolitical and monetary secular changes happening, gold will shine again in its historical role of debt extender and stable monetary haven. However this secular monetary crisis unfolds, gold will obviously be priced much higher than today in relation to fiat currencies.

According to the Bank of Italy, of the 255 billion euros borrowed from the ECB through the LTRO, italian banks only reimbursed 15%, or 38 billion euros. So, there still remains 217 billion euros to be paid in 2014... and for Spain, the amounts are just about the same.

Only 40 european banks have disappeared since the 2008 financial crisis, compared to almost 500 in the United States. The governments have decided to keep their banks alive, and this has caused the healing process to slow down.

Andrew Huszar: Confessions of a Quantitative Easer. We went on a bond-buying spree that was supposed to help Main Street. Instead, it was a feast for Wall Street.

Even if its goals are laudable, a tough regulation always generates perverse effects. Such is the case with Basel III, and it’s a shame, because it’s the solidity of our banks that is concerned.