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The Last Days of Fiat
Interest Rates, Stock Markets and Bank Stocks, Bank “Bail In”, US and Global Debt and the Great Transfer of Wealth when Gold replaces Fiat currencies.
First off, welcome to all the new subscribers and new clients to your first newsletter/blog from us at Preservation Capital. I have been writing financial newsletters since 1995 and I have seen much change in the industry. When I first started as financial advisor things were a lot less complicated than they are today and giving sound, solutions-based advice based on knowledge of the financial cycles and fundamental data such as inflation and earnings was easier than in today’s world with all the uncertainty.
Interest Rates
Speaking of uncertainty, the talk of the town in the world of finance has been all about interest rates for about a year now when rates started going up from historic lows of 0.25%. Never in all my 42 years in finance (I was a banker from 1980-1995) have we witnessed the stock market hang on every word and react so quickly to “what The Fed is going to do and what they say.” I guess when you raise rates 500% in less than 12 months there is rational reasoning as the cost of servicing debt for homeowners along with inflation has become quite onerous and are at dangerous levels.
But what is even more concerning is the cost of servicing the debts of the nations of the world, particularly the United States where their insatiable appetite to just continuously print money will be their demise. The USA and mighty US Dollar and its stock market, along with their sidekicks in Europe, Japan, England, Canada, Australia, and New Zealand have created a storm that they can’t turn around. As one analyst put it, at some point you have the pay the bar tab or toss the dude out. The fallout will be unlike anything we have ever witnessed, and we all best be prepared.
I will leave you with this, the yield curve has been inverted for months and continues to be so. Anytime you have an inverted yield curve you get a recession. But hey, it’s different this time. Hmmm, where have I heard that before? Inverted Yield Curve: Definition, What It Can Tell Investors, and Examples (investopedia.com)
USA and Global Debt
The worldwide Global Debt is well over $300 Trillion and the Debt in the USA is $31 Trillion. These numbers continue to grow and the interest payable on them grows as well. Even if the geniuses that created this mess came up with a magical way to stop the debt from growing, at today’s interest rates the amount payable per year is $150 billion at 5%. This will not end well. The only way to solve it is to start over and that means going back to a global currency that has been around for 6,000 years and that is gold. It has happened many times in history when the fiat (paper money) collapses. I urge you to watch Hidden Secrets of Money by Mike Maloney, we are in episode 9, or the last days. Fall Of Empires: Rome vs USA (Hidden Secrets Of Money Ep 9) - YouTube
Mike Maloney's Hidden Secrets of Money
Stock Markets and the Bank Stocks
Stock markets are acting like everything is fixed. Like I have said many times, I’ve seen this movie before, and it doesn’t end well. In 2000 and again in 2007 the markets made a huge push that had everyone believing that the worst is over, and that we were for many more years of double-digit returns. It’s like a light bulb that is brightest right before it burns out.
In both previous market crashes, we had very highprice to earning ratios and this time is no exception trading at close to 19x earnings, almost double what they should be at considering 10 to 12 times earnings are regarded as normal. In 2000 and 2007 we were told it is different this time and we are hearing that song again today. Insert an eye rolling emoji, don’t let them fool you.
Below is an interesting chart. It is the index of the 24 largest banks in the United States. Take note of the red dotted line at the 115 level where it crept over for a while as if it “was different this time” but is now back under and stuck.
Now look to your left and see where it hit that level last time. That is correct, early 2007 which was right before a massive crash.
But in 2007 the US was only, (lol “only”) $9 Trillion in debt. Today it is over three times that amount. Is it going to be different this time? Different yes, it is going to be worse, much worse!
Will the banks fail? Well, I don’t know but there is a good chance some or many will, especially given the seriousness of the position we are in these days. So, I encourage this video as must watch as well. Central Banks Warn of Forced Selling - Bing video
Bank “Bail In” Program
Will Canadian banks go broke and how are you protected beyond the $100,000 under CDIC? Protecting your deposits - cdic.ca What about Credit Unions, they say you have unlimited coverage with them? Do they really have that much in reserves?
I have no idea if banks will go broke or if Credit Unions have enough reserves to cover everyone’s deposits if their loans and mortgages start to default. I suppose one could write the executives of these institutions and ask for the financial data. You can and maybe should ask your local banker for their financial data and see what you learn.
What I do know is that in 2016, Canada, along with many other countries changed the rules on who is responsible for a bank that goes insolvent. Previously the banks were bailed out. Remember 2008 when the banks were “too big to fail” and received billions in bail outs from the governments (tax-payer) as a reward for their financial incompetency while Joe and Martha Public lost their homes and life savings.
But alas, the taxpayer is no longer on the hook as the developed world has gone to making the depositors of a failed bank responsible for “bailing them out.” It is called the “Bail In” program where anything you have over $100,000 in a bank becomes property of the bank if they fail, and they give you equity in their bankrupt business in exchange. Wouldn’t that be nice to own a penny stock while they gobble up your GICs. Trudeau's Bail-In Now Law to Allow Banks to Confiscate Your Deposits | Canada Free Press
Bottom line, you need to own tangible assets and keep your cash deposits under $100,000. Everyone needs to own Gold and/or Silver.
Gold and Silver
Gold touched all time highs over the past few weeks but has since backed off. Silver has been lagging and cannot break through the spot price (price in the ground) of US$26.00.
In the short term the price will likely continue to fluctuate based on the price of the USDollar vs other major currencies, namely the Euro, Yen and British Pound. Why this is, is because the US Dollar is still considered the safest place to be in times of trouble, even more so than Gold.
In the medium to long term, Gold and Silver are set up for a breakout. Some say the breakout will be modest, maybe 30% to 100%. Others say it will be massive. I agree with both. I comically say that as I see both sides of the argument, yet I tend to be more optimistic than some of the more moderate crowd and I do firmly believe that anyone that holds gold/silver after the crash will be among the wealthiest. And at the very least they will have real assets if/when the currencies fail.
Here is why everyone should own gold/silver
· From 1929 to 1934, the Great Depression, the stock market dropped 89% and Gold went up 70%. Thus, it provides diversification away from paper assets that are at all-time highs.
Physical Gold and Silver, not the paper kind, are a store of value.
Physical Gold and Silver were the first money 6,000 years ago.
Fiat currencies (paper money backed by nothing) throughout history have all failed.
Their replacement? Gold and Silver, every time! Go to the six minute mark of this video if you don’t believe me. Money vs Currency - Hidden Secrets Of Money Episode 1 - Mike Maloney - YouTube
· The US currency is the world’s reserve currency and due to the US debt, it is on its last legs, and since 1971, it is backed by nothing but goodwill.
· In 1944 it became the world’s reserve currency, but it was backed by Gold. In those days, if the USA wanted to print more money, they needed to buy more gold as reserves.
· In 1971, the US removed Gold as it’s backing for its dollar so they could print more currency, creating massive inflation of 16% and interest rates of 20%. It was the beginning of the end of the USDollars life expectancy.
· In 2008 they had $1 Trillion in currency.
· In 2009 they printed another $3 Trillion to “Bail out the Banks.”
· In 2020 during the Covid Crash they printed an inexplicable $17 Trillion more. That is obscene and set the stage for a quicker demise.
In 2021, the International Bank of Settlements (IBS), the “Head office” Bank of Central Banks of the world, located in Basel, Switzerland did something that was never announced to the media. They secretly promoted Gold to a tier 1 asset class. The only other tier 1 asset since the formation of the IBS has been the USDollar.
Now the world had two “riskless assets, the USD and Gold.
Did they do that knowing that the USD is no longer riskless and that it’s best before date is creeping up?
Not surprisingly in 2022, the Central Banks of the world bought a record amount of Gold and they continue to accumulate it.
The BRICS nations (Brazil, Russia, India, China, South Africa, and recently Saudi Arabia) have announced that they will be introducing a new world currency backed by Gold.
The BRICS have 24 other nations applying to be part of their trade group and are already dealing in their own currencies and not trading in USDollars as they have for decades.
The BRICS nations make up 75% of the world’s population and 45% of the world’s GDP. They have influence and their currency will influence the price of gold and silver.
And there is more, but it is enough ammunition to own the physical bullion as the currencies are at risk.
If you know of anyone that could benefit from this information, please pass it on to them. Our mission statement is to educate hundreds if not thousands of families for the financial devastation that wiped out the middle class in 1929.
If you want to learn more, please contact us ay 306-343-7800 or email to daryl@preservation-capital.com
You can learn more about me at www.preservation-capital.com or one of our social media or blog sites.
blog page www.darylcooper.ca
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Yours in Faith, Family and Finance,
Daryl Cooper