Bank Failures in United States, Unrest in US, Depletion of Physical Supply

As rebellion spreads to the United States, financial markets remain volatile. In Europe, the bailouts have, yet again, begun, as the French/Belgian banking giant Dexia has “failed.” Both governments have pledged to take part in the rescue plan, which will entail printing of Euros, and perhaps even US monies dedicated to the cause of European stability. Dexia is the first public victim of the new European credit crunch, and there are sure to be more such banks, all across Europe.

The French government has pledged to lend Dexia “as much as it needs.” Predictably, the philosophy of “too big to fail” is alive-and-well in Europe, as Dexia was bailed out once before in 2008. Earlier this year, European regulators deemed Dexia healthy during a bank “stress test.” So, it is safe to assume—from here on out—that whenever a bank is determined “healthy” by regulators, that this is likely not true. The truth is that many of the largest banks in the world have bad debts on their books. As Michael Hudson reminds folks over and over: those debts that cannot be repaid, will not be repaid.

The IMF, which has taken an increasingly strong tone on Europe, will probably eventually step-in, and lend Europe capital. Much of it will probably stem from the Federal Reserve System in the United States, just as US taxpayer money has already gone to Europe. This took place during the 2008 banking crisis, as many European banks, such as Deutsche Bank, received US taxpayer money.

In the US, young people are taking to the streets to protest corporate policy, which is sure to put stress on the financial system. Should this movement continue to grow, international investors will lose confidence in the US Dollar as a safehaven. This movement could accelerate interest in silver, leading more young people to the metal as a store of value, i.e. a savings account, thus representing more long-term upward pressure for the metal. Instead of the famous bull on Wall Street being touched for good luck, it is now being guarded by NYPD. Interesting to note, JP Morgan—target of the “buy silver crash JP Morgan” campaign, and infamous silver manipulators—made, at the onset of the demonstrations, a donation of more than 4 million dollars to the NYPD foundation.

Expect that, as social dislocation becomes more intense, markets will become more violent. Large swings will transpire, and we will see more of what happened in the late summer, as the market had huge down days, followed by rather stable days.

That the precious metals markets having huge up days followed by huge down days could mean great buying opportunities, does not necessarily mean waiting for the perfect dip is the best choice of action. These physical markets are controlled by paper-bugs, who put trillions of fiat into play in order to oppress true price discovery. JP Morgan, for example, owns 78% of the silver derivatives. HSBC owns 20%. That means there is a paper-silver duopoly. This renders the $ price of the metals somewhat random, and does not actually represent the true value of the physical metals. There are only about 1 billion ounces of investment grade silver above ground—that is around six ounces of silver per individual on the planet! Actually getting physical “investment grade” silver (99.9% fine and above) should be considered when buying gold and silver, not simply timing the dip.

The economic policies being espoused by our leaders have no realistic foundation. That a nation can cut deficits and promote growth is “a very hopeful way of looking at the world, but unfortunately, it’s not based on anything ever seen in economic history,” says economic forecaster Peter Berezin, managing editor of the Bank Credit Analyst, in the Montreal Gazette article titled “Austerity obsession kneecaps Europe.”

Irregardless, the Bank of England has launched a new quantitative easing program, pumping 75 billion pounds of new money into the economy, claiming that “the worst financial crisis in modern history demanded it.”

Sir Mervyn King has warned against the obvious, arguing this program could force more inflation and promotes no confidence among savers. Regardless, King said he would not
push Britain into a recession” for the mere sake of helping savers. This is sure to send gold well over the 1,000 pound psychological price point.