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The failures of FTX and one of the 20 largest banks in the U.S., Silicon Valley Bank (SVB), have sent shockwaves through the global financial system. The effects of these events are likely to last for years as investors and regulators try to figure out how much damage was done and prevent similar things from happening again.
But many would argue that it’s much worse than just two seemingly unrelated events. Given how unstable politics and the economy have been in just the last five years, it seems more like a theft, the last attempt to drain what’s left from a broken financial and monetary system that the world’s richest people expect to fail soon.
For those of us who have been paying attention since at least the financial crisis of 2008, we know that nothing fundamentally has changed after several decades of quantitative easing and near-zero interest rates. The Federal Reserve and Congress chose to kick the can down the road, and now the can has gotten too big to kick.
- Silicon Valley Bank, the 16th largest bank in the U.S., failed last week due to a bank run, then Signature Bank failed, and now the country’s 14th biggest bank, First Republic, is starting to scare the markets even though it is already receiving a rescue package from the biggest banks on Wall Street
- Critics say the federal government has gone too far with its pledge to bail out SVB and Signature Bank, saying it sets a dangerous precedent for other banks and financial institutions, that it undermines the principles of free market capitalism, and it’s a sign of much uglier things they’re trying desperately to hide or stave off
- Many people are turning to precious metals like silver and gold, while hedging and speculating in one of the only few U.S. Dollar alternatives– BitCoin and Ethereum cryptocurrency, which has risen in value by 30% in just one month
Sadly, the situation has gotten so dire that you can no longer afford to just park your money in the bank and hope for the best, hope the government will do the right or smart thing, and just expect things to be ok or to go back to normal.
This time, there will be no return to normal. If you’re wondering how you can protect your money, your bank account, your retirement, or even your life savings amidst a rising number of bank failures or a financial crash, then you’ll want to read this article.
7 Troubling Signs the Financial System is Breaking Down and How to Protect Yourself
Recent Bank Failures and Bank Runs Leading to Collapse and Insolvency
Banks have been the focus in the news for the last two weeks, starting with Silvergate Bank’s failure.
Early in March 2023, Silvergate Bank failed. According to Silvergate’s report, they gradually invested up to 80% of their deposits in long-term bonds, the vast majority of which, surprisingly, were bonds with a maturity of more than 10 years. The majority of these bonds are US government bonds. Rapid increases in interest rates put pressure on corporate clients, amplifying the need for customer deposits to provide liquidity, and raising the default rate on outstanding loans.
Silvergate had to sell these HTM bonds at market prices due to a series of setbacks, which caused losses to be recognized right away. Thus, it is very likely that the Fed’s interest rate increases, which have been occurring at an unprecedented rate, are what most caused Silvergate and SVB’s bankruptcy crises.
SVB Financial Group, a bank that mostly works with the tech industry, saw its stock price drop a lot because of worries about its ties to the troubled hedge fund Archegos Capital Management. This was the second biggest bank crash in U.S. history. SVB’s data showed that they have sold all the bonds that can be sold, worth US$21 billion, and recognized a loss of US$1.8 billion, most of which are U.S. government bonds.
The failure of Signature Bank was due to its exposure to risky loans and weak underwriting standards. Depositors were concerned about the health of Signature Bank after Silicon Valley Bank failed because of the bank’s high proportion of uninsured deposits, exposure to cryptocurrencies, and other tech-related lending. When it was shut down by authorities, Signature was the third biggest bank failure in American history.
First Republic Bank
Having lost over 90% of its share price since the beginning of the year, First Republic Bank’s financial troubles have been attributed to its exposure to the oil and gas industry, which has been hard hit by the recent drop in oil prices. The bank is currently looking for a buyer or investor to help stabilize its operations, and a recent $30 billion short-term rescue loan hasn’t done much to calm investors. They currently have no long term plan to become profitable again.
Credit Suisse is facing billions of dollars in losses after another hedge fund, named Greensill Capital, filed for bankruptcy. UBS then bought Credit Suisse. The acquisition will create the largest wealth management business in the world, with over $3.2 trillion in assets under management. The deal is expected to result in cost savings of up to $2.5 billion for UBS and Credit Suisse combined.
FTX, the third largest cryptocurrency exchange by volume, collapsed in early November 2022 following a report by CoinDesk highlighting potential leverage and solvency concerns involving FTX-affiliated trading firm Alameda Research. Founder Sam Bankman-Fried, who is waiting to be tried in the U.S., was thought to be involved in insider trading and market manipulation, which led to more scrutiny from regulators and, in the end, led to the collapse of FTX. FTX still has $8 billion in outstanding debt it cannot repay to over one million creditors.
This has led to an increase in interest rates and a decrease in consumer spending, both of which have had a negative impact on the economy. The highly regarded Manheim Used Vehicle Value Index shows that used car prices increased 3.7% in February compared to January of this year, which was also higher than the previous month. This index tracks wholesale used-car prices at dealer auctions. Since a 4.4% increase in February 2009, according to Manheim, the increase of 3.7% in February was the highest monthly increase ever.
The Banks Have Become Too Big to Fail, the Bankers– Too Many to Jail
The Silicon Valley and Signature Bank depositors with balances above the $250,000 FDIC insured maximum were saved by the Biden administration; otherwise, their accounts would have been frozen and eventually subject to a 15% bail-in. And now, any bank that needs to borrow money from the Federal Reserve can do so using the full face value of its Treasury bonds rather than the market value of those bonds if it is under financial pressure to pay depositor obligations (crushed by Fed rate hikes necessitated by high inflation).
To put it another way, the government continues to socialize private risk onto average taxpayers, which encourages them to take more risky decisions. The Treasury Dept. and Federal Reserve are making big moves, making big statements, and consolidating the entire banking system that much further, which is a threat to the price discovery and feedback mechanisms of a free market.
And if you’ve been paying attention, it seems to be a perpetual consolidation of real economic and banking power into the hands of the fewer while the middle class disappears.
How to Convert Your Cash Into Hard Assets Now to Protect Yourself From Bank Runs, Financial Crashes, and Economic Instability
Anyone knows what it looks like when someone attempts to fix a complex machine with duct tape, and that’s definitely what it’s looking like these days, when you consider the global political instability and priorities of monolithic governments like the U.S. and EU in Ukraine, sending over $100 billion in U.S. taxpayer money to a foreign country for military equipment and training.
History has shown us what happens to empires when they become stretched too thin. That’s why now really is the last reasonable opportunity for people to prepare. With a new crisis every week, you really have no better motivation or indicator of things to come.
Buying and Investing in Gold and Silver
Hard assets you can buy during times of financial crisis and currency instability include gold, silver, real estate, and commodities like oil and agricultural products. These assets have historically proven to hold their value or appreciate during times of economic uncertainty.
In times of a currency crisis or severe systemic banking crisis, people often transfer some of their wealth into hard assets like gold and silver. This is because hard assets tend to hold their value better than paper currency during times of economic uncertainty. Additionally, gold and silver have historically been viewed as a safe haven for investors during times of crisis.
Buying an ounce of gold is an easy and lightweight way to store wealth away in $2,000 increments. Now imagine a savings account that couldn’t lose value due to inflation that weighed a pound and secured $32,000 of your money. Think you couldn’t hide a gold brick on your property somewhere? I bet you could.
What Silver You Should Buy When Starting Out
Silver’s the cheapest precious metal you can purchase but its value it intertwined with gold. Being able to buy a little bit of silver here or there still puts the purchasing power of your years of work and savings into a safehaven, while having various denominations of silver coin will help you for actual barter and exchange someday, should the need arise.
Silver and gold that you physically hold will protect you ’til you’re old and the government gets bold. Printing the most U.S. Dollars and inflating the currency supply the most in world history is sure to have consequences! I wouldn’t want to be unprepared.
Whatever you do, don’t let anyone tell you that buying GLD or SLV, or the paper shares that represent gold and silver on the stock exchange, is the same thing as buying tangible, hard gold and silver.
Money Metals Exchange Gives Customers the Most Competitive Spreads and Low Ask/Bid Prices for Bullion, Bars, and Coins
While the powers that be have still found a way to artificially suppress the price of real metals, valued in U.S. dollars, if and when the U.S. dollar loses its role as the world’s reserve currency, a serious revaluation is likely to take place. This is another reason why world governments have made a serious effort to prepare Central Bank Digital Currencies (CBDC) to transition from a bankrupt fiat monetary system to a digital ledger that they still control and manage.
- 1 Oz Gold American Eagle Coins
- Price: $1462.40
- 1 Oz Gold Bar
- Price: $1460.40
- 1/10 Oz American Gold Eagle Coins
- Price: $159.10
- 100 Oz Silver Bars
- Price: $1695.00
- Gold Bracelet - Wearable Bullion, 1 Troy Oz .9999
- Price: $1555.21
- 1 Oz American Platinum Eagle Coins
- Price: $938.75
- 1/10 Oz Platinum Bars
- Price: $84.98
I personally enjoy keeping American Silver Eagles as backup hard currency. They also make for great gifts or tokens of appreciation. I've probably given away more than I've kept. The smile and surprise that light up in people's eyes when you give them a high-quality .999 pure silver coin that's also worth around $25 is always fun to see. It's also a great opportunity to explain the built-in failings of the monetary and fractional reserve banking system.
In other words, it's what we're all dealing with now!
Money Metals Exchange, one of the top rated online sellers of gold and silver, is ranked A+ with the BBB and also accepts BTC and crypto as payment, in addition to credit/debt card, ACX, wire, PayPal, and check.
Why I Also Own Bitcoin and Ethereum Cryptocurrency
People are starting to consider buying Bitcoin who never have before to protect themselves from the current economic and banking instability. Bitcoin is seen as a decentralized currency that can be used as a hedge against inflation and economic uncertainty. Bitcoin's growing popularity has also been helped by the fact that more and more big companies and investors are using it.
Coinbase will give you $10 in free bitcoin for signing up and trading your first $100. This year my long-term bitcoin trade went positive. Using structured buying has taken most of the emotion out of it, which has enabled me to see shorter-term trends for increasing your bitcoin while the monthly market sloshes around.
I've found in the last year or so that a generally good strategy is to simply buy a small amount every time the price of BTC or ETH drops 5 - 7%.
Markets Insider says we're currently in bitcoin's "watershed moment," considering the failure of the financial system overall.
Storable Foods and Other Useful Supplies to Have on Hand
Food is necessary and its price has gone to the moon with inflation from the Federal government's decision to shut down businesses and print stimulus checks. If you consider that the prices of food are not going down all that much, then buying cheaper food that lasts you longer which stores easily is another way to save hundreds of dollars a month while developing a long-term food plan emergencies or disruptions in the normal supply chain or public safety.
You can buy freeze-dried and dehydrated foods like the ones typically sold at sports and outdoors stores for hiking and camping that last for several years. Mountain House is one such brand I've really enjoyed throughout the years.
Additionally, you can start buying more canned goods since many are usable for up to three years. You can cycle the occasional canned good into one of your meals as you get closer to their expiration date, then replenish. This way, you always have food on hand that doesn’t go bad and isn’t as unappetizing as dehydrated or freeze-dried foods.
The importance of food supplies doesn’t just stop at ready-made meals. Having seeds for planting a sustainable garden, fishing equipment, and a rifle or shotgun for hunting and plenty of ammunition also provide additional means to combat food insecurity into the future.
And if you have land, it takes less than a few hundred dollars to get some chickens laying you eggs. In the event of any food emergency, protein will be at a premium, as we've already seen from inflation. Now imagine a major scarcity or societal upheaval. Growing your own food is a great way to become more self-reliant and less dependent upon today's system where the U.S. consumer loses a daily battle against odds stacked egregiously against them.
Conclusion: No Chance of Wheelbarrow Hyperinflation if There’s No Cash and No Wheelbarrows
With supply chain issues still unresolved and the desired rollout of a new digital currency, which was brought to us by the same amazing people who brought us the banker bailouts of 2008, and now suffocating interest rates driving more Americans out of the dream of home ownership, it may be difficult to notice how bad inflation is getting, since people can’t make big purchases.
Whereas, back in the day, the signature sight of horrible economic times and currency crises showed the common person pushing a wheelbarrow filled with paper money just to be able to buy a loaf of bread from the store, the money creators (out of thin air, in their own words) will be able to conceal the weaknesses in the money supply by getting rid of cash completely.
And with supply chain disruptions taking their toll, there won’t be any wheelbarrows available to cart the cash down to the store for basic essentials.
They really have thought of everything.
Frequently Asked Questions - Starting a Photography Business
In 2023, several banks have failed and many more hang in the balance. So far, Silvergate, SVB, Signature Bank, and Credit Suisse have bit the dust and either been rescued or closed by government intervention, or bought up by competitors. Bank runs have left depositors and creditors very concerned that the problems are indicative of a much weaker global banking crisis brewing.
You'll never get the opportunity to travel back in time to buy gold and silver, especially after your currency has entered hyperinflation. No one has ever regretted buying gold or silver. The main challenge with gold and silver is storage, convenience, convertibility for convenience purposes, and theft. However, having none of your wealth in hard assets like precious metals is a sign that you're not managing your funds to protect against all forms of risk.
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