Beware of the Twin Crashes!

10 May

Beware of the Twin Crashes!

Beware of the Twin Crashes: Commercial Real Estate and Bonds!

“The twin crashes in US commercial real estate and the US bond market have collided with $9 trillion uninsured deposits in the American banking system. Such deposits can vanish in an afternoon in the cyber age.”

So writes veteran British journalist Ambrose Evan-Pritchard in The Telegraph’s Economic Intelligence newsletter.

We keep reading that the failures of First Republic, Silicon Valley, and Signature banks were “idiosyncratic.”  That means that the failure was not systemic to the banking system but was limited to just those banks.

Of course, if the failure of those leading banks is a sign of things to come, then you would rush right out and buy gold and silver.  

Evans-Pritchard is not having any of that “idiosyncratic” nonsense.  It is a “dangerous evasion” he says:

Almost half of America’s 4,800 banks are already burning through their capital buffers. They may not have to mark all losses to market under US accounting rules but that does not make them solvent. Somebody will take those losses.

He cites Amit Seru, a professor at Stanford’s Graduate School of Business, who also says, “Let’s not pretend that this is just about Silicon Valley Bank and First Republic. A lot of the US banking system is potentially insolvent.”


Prof Seru and a group of banking experts calculates that more than 2,315 US banks are currently sitting on assets worth less than their liabilities. The market value of their loan portfolios is $2 trillion lower than the stated book value.

These lenders include big beasts. One of the 10 most vulnerable banks is a globally systemic entity with assets of over $1 trillion. Three others are large banks. “It is not just a problem for banks under $250bn that didn’t have to pass stress tests,” he said.

Already US bank closings have produced losses of about $550 billion.  As the problems cascade through the banking industry, the FDIC will find itself inadequate to the last of providing the kind of liquidity necessary to stave off a collapse.  It is more than the Federal Reserve can handle without massive money printing.

Evans-Pritchard concludes, “The horrible truth is that the world’s superpower central bank has made such a mess of affairs that it has to pick between two poisons: either it capitulates on inflation, or it lets a banking crisis reach systemic proportions. It has chosen a banking crisis.”

You don’t have to be personally victimized by either crisis.  Insulate yourself by owning gold and silver during the difficult times coming our way.  Speak with a Republic Monetary Exchange specialist today.