murphy metal monday

“The subprime situation is isolated and will not spread.” – Ben Bernanke in 2007

“There will not be another financial crisis in my lifetime.” – Janet Yellen in 2017

“Current inflation is transitory.” – Jerome Powell in 2021

“The US banking system is sound and resilient.” – Janet Yellen in 2023

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“The US banking system is sound and resilient.” – Jerome Powell in 2023

It’s no wonder the public doesn’t trust the people in charge. At the same time, Yellen and Powell are spouting off about our rock-solid banking system[1], unprecedented emergency meetings, and drastic rescue programs are being implemented. Just look at the Fed’s recent balance sheet in which five months of Quantitative Tightening has been undone in just two weeks. The Fed has taken massive losses onto its balance sheet. Bank shares are plummeting. Any analysts worth their salt are predicting more bank failures in the coming weeks.

But the greatest contagion and inflation concerns are directed at Europe and Japan, where the prominent Deutsche Bank this weekend is the latest financial institution hanging by a thread. As per London economist and banker Alasdair Macleod,

“All the big global systemically important banks in the eurozone, and there are 7 or 8 of them, have their share prices falling very heavily. So there is a vote, if you like, internationally amongst depositors to basically get out of the eurozone banks. And I think they are going into physical gold and silver. The Germans in particular understand that the way to protect yourself from a failing fiat currency or a failing fiat system is you put your money into gold. You get rid of the credit stuff, get rid of the deposits and all the rest of it and just go and buy gold. And that’s what’s happening.”

Macleod goes on to say in his interview with King World News that the banking crisis is only in its early stages[2]. As interest rates remain high, banks reel from locking in securities at much lower interest rates. Because the banks are underwater, they are withdrawing credit (reducing lending) when borrowing demand is increasing, which is not good for the economy or stock market. In addition, I just learned that regional banks finance 70% of all commercial real estate. Like Deutsche Bank, the commercial real estate sector is on the verge of imploding, thanks to COVID and more people working at home. If/when this sector fails, the regional banks will likely get slaughtered.

Along the same line of thinking, Mike Savage of Raymond James Financial had the following to say,

“It appears to me that the Fed is playing a game where they are pretending to try and reduce inflation by killing the economy with rate hikes. The reason I say they are pretending to care about inflation is that on the other hand they are creating MASSIVE inflation by conjuring up cash out of nowhere. $2.3 TRILLION for the banks announced last week and this week UNLIMITED LIQUIDITY for the banks. Who owns the Fed? The BANKS!”

Thanks to the banking crisis, physical gold and silver are rising in price, as are the premiums. And this trend will continue as the crisis unfolds. In addition, as prices rise, so will demand. Because physical inventories are already low (thanks to the Central Banks buying all gold in sight), a real danger exists in which physical supply will just run out.

Also, adding to the urgency of owning physical gold and silver, the Open Interest (O.I.) on gold remains relatively low. For silver, the number is 118,000 contracts, well below the twenty-year range of 135,000 – 240,000 contracts. For those unfamiliar, the Open Interest is reported by the Commodity Exchange and reflects an interest in the paper contracts on COMEX. A low number means the public is looking the other way, and like clockwork, it is very bullish for the price. A case in point was silver in 2010 when the O.I. was 135,000, and the price of silver rallied from $20 an ounce to $50 an ounce in just eight months. This time around, the silver price increase should be MUCH more dramatic.

So, there it is. Before 2020, our massive trade deficit was already choking the economy. Then came the ravages of COVID, followed by sanctions on Russia, higher interest rates and inflation, and the banking crisis… Which all means trillions of more dollars to be printed… This means the dollar is headed south, as is your standard of living. How could there possibly be a better time to own physical gold and silver?