by Egon Von Greyerz, Gold Switzerland:
The financial system is terminally broken, toast, kaput!
Anyone who doesn’t see what it happening will soon lose a major part of their assets either through bank failure, currency debasement or the collapse of all bubble assets like stocks, property and bonds by 75-100%. Many bonds will become worthless.
Wealth preservation in physical gold is now absolutely critical. Obviously it must be stored outside a broken financial system. More later in this article.
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The solidity of the banking system is based on confidence. With the fractal banking system, highly leveraged banks only have a fraction of the money available if all depositors ask for their money back. So when confidence evaporates, so do the balance sheets of the banks and depositors realise that the whole system is just a black hole.
And this is exactly what is about to happen.
For anyone who believes that this is just a problem with a few smaller US banks and one big one (Credit Suisse), they must think again.
RE CREDIT SUISSE SEE ‘STOP PRESS’ AT THE END OF THE ARTICLE.
THE BANKS ARE FALLING LIKE DOMINOS, INCLUDING CREDIT SUISSE TONIGHT
Yes, Silicon Valley Bank (16th biggest US bank) is gone after an idiotic and irresponsible policy to invest short term customer deposits in long term US Treasuries at the bottom of the interest rate cycle. Even worse, they then valued the bonds at maturity rather than market, to avoid taking a loss. Clearly a management that didn’t have a clue about risk. SVB’s demise is the second biggest failure of a US bank.
Yes, Signature Bank (29th biggest) is gone due to a run on deposits.
And yes, First Republic Bank had to be supported by US lenders and the Fed by a $30 billion loan due to a run on deposits. But this won’t stop the rot as depositors attack the next bank and the next one and the next one……….
And yes, the Swiss second largest bank Credit Suisse (CS) is terminally ill after a number of poor investments over the years combined with poor management that has come and gone virtually every year.. I wrote an important article about the coming demise of CS 2 years ago here: “ARCHEGOS & CREDIT SUISSE – TIP OF THE ICEBERG.”
The situation at CS is so dire that a solution needs to be found before Monday’s (March 20) opening. The bank cannot survive in its present form. A failure for Credit Suisse would not just rock the Swiss financial system but have severe global repercussions. A merger with UBS is one solution. But UBS had to be bailed out in 2008 and doesn’t want to be weakened again by Credit Suisse without state guarantees and support from the Swiss National Bank (SNB). The SNB injected CHF50 billion into CS last week but the share price still went to a new low.
No one should believe that a state subsidised takeover of Credit Suisse by UBS will solve the problem. No, it will just be rearranging the deck chairs on the titanic and making the problem bigger rather than smaller. So rather than a lifebuoy, UBS will have a massive lead weight to carry which will guarantee its demise as the banking system collapses. And the Swiss government will take on assets which will be unrealisable.
Still, it is likely that by the end of the present weekend a deal will be announced with UBS being offered a deal they can’t refuse by taking over the good assets and the SNB/Government nurturing the bad assets of Credit Suisse in a rescue vehicle.
The SNB is of course in a mess itself, having lost $143 billion in 2022. The SNB balance sheet is bigger than Swiss GDP and consists of currency speculation and US tech stocks. This central bank is the world’s biggest hedge fund and the least successful.
Just to put a balanced view on Switzerland. It has the best political system in the world with direct democracy. It also has low Federal debt and normally no budget deficits. It is also the safest country in the world.
SWISS BANKING SYSTEM TOO BIG TO SAVE
But the Swiss banking system is very unsound, just like the rest of the world’s. A central bank which is bigger than the country’s GDP is extremely unsound. And a banking system which is 5x Swiss GDP makes it too big to save.
Although the Fed and ECB are much smaller in relation to their countries’ GDP than the SNB, these two central banks will soon discover that their assets of around $8 trillion each are grossly overvalued.
With a global banking system on the verge of a systemic failure, Central Bankers and bankers have been working around the clock this weekend to temporarily avoid the inevitable collapse of the bankrupt financial system.
BIGGEST MONEY PRINTING IN HISTORY COMING
As I pointed out above, the main Central Banks would also be bankrupt if they valued their assets honestly. But they have a wonderful source of money that they will tap to save the system.
Yes, I am of course talking about money printing.
We will in coming months and years see the most massive avalanche of money printing that has ever hit the world.
For anyone who believes that we are just seeing another bank run that will quickly evaporate, they will need to take a shower in ice cold Alpine water.
What we are witnessing is not just a temporary drama that will be sorted out by “the all powerful and resourceful” central banks.
THE DEATH OF MONEY
No, instead what we are seeing is the end phase of this financial era which started with the formation of the Fed in 1913 and in the next few years, or much sooner, will end with the death of money.
But the Death of Money doesn’t just mean that the dollar (and most currencies) will make their final move to ZERO, having already declined 98% since 1971.
Currency debasement is not the cause but the effect of the banking Cabal taking control of the money for their own benefit. As Mayer Amschel Rothschild said in the late 1700s: “Let me issue and control a nation’s money and I care not who makes the laws”.
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