Categories: Base Metals / Energy / General Market Commentary / Precious Metals
Topics: General Base Metals / General Energy / General Market Commentary / General Precious Metals

THE WAR ON CASH AND THEN ON GOLD...

THE WAR ON CASH AND THEN ON GOLD...

The global financial system continues to groan under the strain of the accumulated weight of trillions of dollars worth of debt and derivatives, which have built up to even more fantastic levels than those that precipitated the near collapse in 2008, thanks to the policy of solving liquidity problems near-term by creating even more debt and derivatives, Quantitative Easing being the most obvious example. However, while the majority consider the situation to be hopeless, there is actually “light at the end of the tunnel”.

If only a way could be found to freely tap the funds of savers at will, by imposing duties or taxes on bank accounts, with the additional option to appropriate savers’ funds on occasion as required, then the systemic liquidity problems will be solved. Banks need never fear solvency problems again and they can simply fall back on the account holder’s funds to meet any obligations. There are in fact already names for these restorative operations, they are called “bails-ins” and NIRP (Negative Interest Rate Policy).

Unfortunately, any immediate attempt to implement bail-ins and NIRP on a large scale will backfire because, faced with being charged significant sums for the privilege of keeping their money in the bank, savers will simply withdraw their funds and keep them as cash at home, or maybe even invest in Precious Metals. It is therefore imperative that these escape routes are blocked off.

We have already seen an interesting “trial balloon” in recent years with respect to bails-ins. This was the celebrated Cyprus bail-in. When Cyprus banks were about to go belly up a couple of years ago, they saved themselves by raiding customers’ accounts, which is more palatably described as a bail-in. The reaction of global savers to this action by the Cyprus banks was one of horror and revulsion and they made it plain that they weren’t going to stand idly by and watch banks plunder their funds – they would withdraw them as cash if any such threat should appear over the horizon. 

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