All Paper Currencies Die In An Inflationary Mess. Historical fact, based on all the paper currencies since the first one in China in about 1300 AD. The average life of a paper currency is about 50 years. Our current currencies started 52 years ago, in 1971, when the last link to gold was cut.
Yellen today said uninsured money is only safe if you put it in banks she deems important, or in banks that have enough political muscle to influence her.
This is a Gangster State — where cash above the $250K limit is only protected if it’s in the Dear Leader’s preferred banks. …
Oh — and if you think you don’t have to worry about the $250,000 limit because you personally don’t have that much money in your account, let me introduce you to millions of small businesses whose payroll accounts pay tens of millions of Americans
The implicit guarantee of full insurance is for all deposits in all US banks — or do they play political favorites now? Would you leave your money in a small bank in a red state, just to find out and have something to whinge about afterwards? Exactly — the small banks will now die.
Economists are now estimating that 186 banks may be prone to the same risks as Silicon Valley Bank, per WSJ.
This number is likely even higher as the pressures that regional banks are facing are ramping up.
The government has put itself in a spot where they must backstop all banks for now.
What they did for SVB must be done for everyone until panic subsides.
Costly is an understatement.
The FDIC, the US Governments bank insurance body, obviously has nowhere near enough money to cover all those banks. It’s several orders of magnitude short.
Now that small banks are fully insured, they might as well gamble — just like the big boys, only not so much regulatory oversight! If they lose, the Feds bail them out. If they win, they keep it.
In the 1970s, US inflation came in three waves.
In 2020, covid sit-down money finally kicked off inflation — wave 1. Rising interest rates in 2022/23 curbed money growth (it’s now slightly negative), and inflation is falling again.
But inflationary expectations had been lit as the populace realizes that there is suddenly 40% more money around, so costs are going up — permanently. Now, in mid 2023, the central banks are going to ease off and lower interest rates to avoid recession and more bank failures. Inflation won’t quite go away, but with lower interest rates again it will rekindle in 2024 or maybe 2025 — wave 2.
Raising interest rates might be over for now, but it will be back soon. In the 1970s, it required 20% official interest rates to cure the 15% inflation of the third wave.
Btw, the price of gold rose US$60 per ounce yesterday. Here is what gold did in the 1970s:
PS. I’m biased. I own and edit GoldNerds, which compares all the gold companies on the ASX.