How Bad is the Banking Crisis?

31 Mar

How Bad is the Banking Crisis?

If only there were a dependable form of money!

We have taken the title for this commentary from a March 20 article published by Market Insider.  

It begins this way:

You know something is wrong when six big central banks from around the world decide to join hands in order to reassure financial markets. That too on a Sunday night….

So, you might be wondering: Just how bad is the banking crisis?

In less than two weeks, three US banks, Silvergate, SVB, and Signature Bank, and a big global lender like Credit Suisse have collapsed, bringing back fears of a full-blown financial crisis.

That sums it up except for pointing out that the Federal Reserve also raised interest rates by another 25 basis points after the crisis hit.

So, the central banks are trying to deal with failing banks and generationally high inflation at the same time.  Dan Denning with Bonner Private Research says that trying to save the banks while also fighting inflation “is like spinning plates on sticks…while jumping up and down on a trampoline…that’s bolted to a roller coaster.”

We are too busy helping our clients acquire physical gold and silver during this crisis to spend a lot of time examining bank balance sheets ourselves.  But thanks to Wall Street on Parade, here is a look at the uninsured deposits of the four Wall Street megabanks:

As of December 31, 2022, Silicon Valley Bank had $175 billion in deposits. On the same date, Signature Bank held $88.6 billion in deposits. Now compare that to the whales on Wall Street: As of December 31, 2022, this is where deposits stood at the four largest banks in the U.S. – all of which also have large risk exposure from their extensive trading operations on Wall Street: 

JPMorgan Chase Bank N.A. held $2.015 trillion in deposits in domestic offices, of which $1.058 trillion were uninsured.

Bank of America held $1.9 trillion in deposits in domestic offices, of which $909.26 billion were uninsured.

Wells Fargo held $1.4 trillion in deposits in domestic offices, of which $721.1 billion were uninsured.

Citibank N.A. (parent, Citigroup) held $777 billion in deposits in domestic offices, of which $598.2 billion was uninsured. But…wait for it…Citibank also held a staggering $622.607 billion in deposits in foreign offices – of which, potentially, nothing was insured according to current law and rulemaking

That would bring total deposits at Citibank in both domestic and foreign offices to $1.4 trillion with potentially only $178.8 billion FDIC insured – or 13 percent. 

There is a lot of exposure there.  Place that against the background of $300 trillion dollars of total global debt, some 3 ½ times total global production.  And then there are derivatives, each one relying on one below it which in turn is relying on the one below it, which in turn relies upon…  All the way down.

Well, you get the picture.

If there were only someplace you could turn, an investment that doesn’t rely on someone else’s promise or performance.  An enduring form of money that isn’t dependent on a counterparty or a criminally corrupt government.  A haven of wealth that has never declared bankruptcy.  One that can’t just be printed digitally or otherwise.  Something that has stood the test of time, not just for a few years, but for thousands of years.  If only… 

If there were, we might name it “Gold.”