Bank Collapses and Precious Metals Redux
Author: Patrick Blair
Silicon Valley Bank and Signature Bank recently collapsed because their depositors pulled out their money forcing these banks to liquidate their underwater investments. Behind Washington Mutual in 2008, these were the biggest bank failures in U.S. History. The Federal Reserve’s policy of raising short-term interest rates to attempt to fight inflation has exposed the systemic weakness of the banking system. For good measure, Credit Suisse was recently taken over by UBS for similar reasons.
The Federal debt is now approaching $32 Trillion. Unfunded liabilities are approaching $185 Trillion. Inflation is persistent. The economy is slowing, and job losses are ratcheting up. Fear is starting to take over. People are now more concerned about preserving wealth than growing it. They want to put it somewhere they perceive as safe. This is why bank collapses will likely continue.
It is best to not let emotions like acute fear drive your financial decisions (or any decisions). On the other hand, isn’t it better to be safe than sorry? What is the downside to pulling your money out of a small bank? Nothing or very little. This is why smaller banks are doomed to fail in this current environment.
Diversify, Diversify, Diversify
I don’t give financial advice and everyone is free to do what they want. However, I will keep pounding the table on this general Biblical principle: diversification (Ecclesiastes 11:1-4). It won’t make you rich, but it can keep you from becoming poor.
Diversification is not a 60/40 portfolio. It is not just having stocks allocated into different sectors. It involves owning real money: physical precious metals. It involves having money and wealth in more than one place. It also involves investing in skills, education, health, and other intangibles.
Very few people in the U.S. own precious metals and for good reason. Even though it was used as currency for thousands of years, it isn’t any more and has been hated upon by the mainstream investment community. So many people just have all their money in one place, whether it be a pension, a 401k, an IRA, or a bank, which can be very risky.
Here are some quotes in articles where I have written about this in the past:
Most people don’t consider investing in precious metals, because they don’t understand them. Is Cash Trash? (June 9, 2020)
I remember the old days when people thought we might someday pay off the U.S. national debt. Now, no one even entertains that possibility. The National Debt – What Does It Mean? (July 22, 2020)
As Christians, should we roll over and be victims to inflation? Should we leave our money in places that get decimated by inflation? Is it our role in this world to be passive sheep? The Spiritual Angle on Inflation (November 6, 2021)
… Most major financial institutions nearly collapsed in 2008. So, no bank, exchange, brokerage, insurance company, or financial institution is completely safe. Catastrophic Loss and the FTX Fraud (December 30, 2022)
I’ll leave you with the famous graphic of Exeter’s Pyramid. What do you think will be left if the structure collapses?
