The ongoing banking crisis is showing signs of accelerating, with the contraction of credit leading to rising interest rates and bank failures. With the FED having little control over the situation, big banks like JP Morgan are likely to come out on top, while small banks have been destroyed by regulation. The FDIC is also protecting all depositors instead of just those with accounts under the cap, and calling for a higher insurance limit, a sign of confusion from the regulators. The authorities need to ensure no bank fails, which will lead to a greater quantity of currency in circulation. Gold may be impacted by this crisis, with the potential for bullion banks to fail and authorities attempting to control the price of gold.
The speaker discusses the confusion among regulators in the US regarding the FDIC press release calling for a higher insurance limit on deposits for business transaction accounts, and how this could lead to the entire commercial banking system being underwritten by the Fed and Treasury. The situation in the UK banking system is also discussed, with the exception of HSBC and Standard Chartered, which earn most of their earnings in the Far East. The speaker suggests looking into miners and inflation-linked government bonds as potential investments but emphasizes the importance of getting out of credit and investing in real money such as gold and silver. The potential collapse of bullion banks is also discussed, with unclear implications for the precious metal market. The potential actions of Russia and China to protect themselves from a collapse of the dollar are also mentioned, including the reintroduction of gold standards in their own currencies.
In a discussion about the state of the global financial system, a financial analyst highlighted that traders who grew up in the London bullion market may not understand the current market environment. They may not recognize that gold is a more stable asset than the dollar-backed cash they are used to. The analyst also predicted that Russia and China may reintroduce a gold standard to protect their currencies as the dollar collapses. The collapse of all fiat currencies has not happened before, but hyperinflations have occurred in the past. The analyst proposed that rather than facing inflation, currencies face a falling purchasing power of credit. While a collapse could happen quickly, the ease of moving electronic money may slow it.