Your Money and the Banking System

Your Money and the Banking System

Jim Clark

7/12/2015

Your Money and the Banking System
Draconian measures intended to save Greek banks and the Euro monetary system have been imposed on the people of Greece. Greeks are no longer allowed to transfer money to accounts outside of Greece. In addition to limiting cash withdrawals to $65 a day, Deputy Finance Minister Nadia Valavani announced last week that Greek citizens will no longer be allowed access to their safe deposit boxes and that any cash held in those boxes will be taken and credited to the owner’s checking account.

The Greek government is now confiscating cash from its people. The cash will then be dispensed from ATMs in an attempt to postpone the day of reckoning for Greek banks when the banks are depleted of cash.

Does this sound familiar? No? Well it should.  At minimum, because of the interdependence of the national economies of China, the Eurozone and the US, we Americans are facing the same severe restrictions on taking possession of money that belongs to us.

Here are some key points we must consider:

  • Here in the US, last year, JP Morgan Chase and other major US banks restricted international cash transfers from the US.
  • JP Morgan Chase has prohibited holding cash and bullion (and bullion coins) in safe deposit boxes.
  • China has outlawed “major shareholders” from selling stocks and suspended short selling in a failed attempt to stop the freefall of Chinese stocks, which are down over 30% in the last three weeks.
  • France has outlawed cash transactions in excess of €1,000
  • On Wendesday , the NYSE was shut down for several hours after falling over 200 points, all outstanding orders were cancelled and investors could not exit any positions nor access any cash.

Capital Controls in the USA
Most of us feel that another financial crisis is on the horizon for the US. When this crisis unfolds, it will be increasingly difficult to access your cash

Another example of these creeping restrictions on your ability to access your money- The SEC, last year added a regulation allowing the restriction of withdrawals from money market funds. The regulation is called Rules to Provide Structural and Operational Reform to Address Run Risks in Money. Market Funds. 

Under this regulation- “Redemption Gates – Under the rules, if a money market fund’s level of weekly liquid assets falls below 30 percent, a money market fund’s board could in its discretion temporarily suspend redemptions…” Money market funds may lock in your capital at their discretion.

If you think that your money market funds are the same as cash, think again. Your money is a data entry on someone else’s computer. During the financial crisis of 2008, in the span of four weeks, Americans withdrew some $500 billion from money market funds. This represents nearly 24% of the cash in the entire system and revealed to our central bankers the instability of their “house of cards”.

The questions we need to ask ourselves are,

“Have the issues which led to the collapse of the US financial system in 2008 been fixed?”

“Has adding $10 Trillion in national debt through the QE program stabilized the system (or has it made us more like Greece)?”

“If our financial system were healthy, would regulators be imposing these kinds of restrictions on capital access?”

As we have said before on these pages, if issuing debt ie. printing money worked to stimulate the economy, Zimbabwe would be the most prosperous nation on Earth.


 

Spotlight On Physical Demand
The US Mint has run out of 2015 Silver Eagles and projects no new shipments until mid August. “The significant increase in demand for American Eagle Silver Bullion Coins depleted our current inventories,” the mint said. Demand for Silver Eagles has caused an increase in primary dealer premiums for the Silver Eagle by an average of $1.00. This is the second time in nine months that the US Mint has run out of Silver Eagles. As metals prices decline in the paper markets, smart buyers are taking physical supply off of the market at record rates, ahead of future demand.

The pressure on paper precious metals prices comes from two sources: The expectation of The Fed raising interest rates and the strength of the Dollar. The crisis in the Euro has caused safe haven buying of the USD. This is at best a temporary measure for when the market absorbs any Fed rate increase and the European Monetary Union and Greece resolve the bankruptcy of the Greek financial system, we are left with an inflated dollar bubble, a declining US economy and a massive US debt near $19 Trillion or 108% of US GDP. Let’s look at who is taking advantage of low metals prices.

If gold and silver are “barbarous relics why are central banks hoarding gold at a rate seen only twice in 50 years.

The reality is that the flight to quality and safe haven buying is happening in the physical metals market.

 

What can you do to safeguard your assets and ensure your future buying power? Contact one of our precious metals experts today for an answer.

 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign