Latest / Financial Survival Network / Economic indicators & Secret Bank Bailouts - Robert Kientz #5872

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Economic indicators & Secret Bank Bailouts - Robert Kientz #5872 · Financial Survival Network

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Two things are causing people to pull money out of large commercial banks. So
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the banking problems you had earlier in the year, I think may have scared
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people a little bit as to the solvency of the banking system. But I
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think this deposit gap is forcing people to pull their cash and liquid deposits out
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of commercial banking system seeking higher interest rates elsewhere. And also a third reason,
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the general economy is a little bit tougher on the lower middle classes so
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that they have less correstionairy and capital Sam maybe point Cerre and paus out.
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more than ever, And welcome. You are listening to watching the Financial survive
1:00
Will Network. I'm your host, Carry Lutts and what is going on in
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the world. A good friend, Rock Kins is with us and now,
1:07
and of course you find him at Gold Silver Pros dot com. Rock It's
1:14
always great to have you on the show. So we're talking pre cool banking
1:19
crisis. What is going on in the banks, How serious do you think
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it is? And is it time to really start hoarding bitcoin and precious metals.
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Well, always a pleasure to be on your show. Carry you do
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such great content, and appreciate that very much. I know, being a
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content credit, it takes such tremendous amount of work, So I definitely appreciate
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everything that you guys do over there. Yeah, the banking crisis, you
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know, I was looking post the problems we had in the spraying. I've
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been doing some investigations in the banking and just looking at the health of it,
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and you know, the liquidity ratios are being stressed, meaning the amount
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of free capital the banks have in order to stay liquid during times of distresses
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going down. A lot of what's happening is this what would call the deposit
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gap. So if you think about interest rates for a moment, we all
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know that the Federal Reserve has been raising interest rates here for quite a while
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and it's causing you know, it's caused a little bit of financing troubles and
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the counting people of paying higher interest rates for real estate and things like that.
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And as those interest rates rise, products that consumers may buy, like
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automobiles or homes or things like that, come with higher interest rates. Naturally
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they filter through the system when it starts at the FED. The problem is
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the banking system is not providing their depositors. The commercial banking is not providing
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their depositors with similar increases. So you have this deposit gap. And I
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believe two reasons. Two things are causing people to pull money out of large
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commercial banks. So the banking problems had earlier in the year, I think
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may have scared people a little bit as to the solvency of the banking system.
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But I think this deposit gap is forcing people to pull their cash and
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liquid deposits out of the commercial banking system, seeking higher interest rates elsewhere.
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And also a third reason, the general economies a little bit tougher on the
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lower middle classes so that they have less correctionairy and capital sand maybe points or
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posit out for that reason. But in any case, what this led to
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since April of last year, a little over a year now, we've had
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an outflow of almost a tree in dollars from the large commercial banks. An
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additional you know, several hundred bigion from the small commercial banks. So we're
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sending it about a treeon or so dollars being pulled out of the commercial banking
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sector in terms of customer deposits, and so now the banks don't have those
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customer deposits. Well, what a banks use customer deposits for. They take
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the money in and then they refinance or relend it out for higher rate investments
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that are often longer term. So you know a lot of people talk about
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this. You have the promise to pay on customer deposits is a shorter term,
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but when you lend money out as a thank you have a longer term
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commitment to get that you get that money back. And so you have this
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deposit gap between the interest rates of what the banks are taking in and giving
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out. And people are noticing it and say, hey, wait a minute,
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if you're not going to give us a higher interest rate of my money,
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I'm going to go put it over here. And that's reducing equity ratios
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at the banks. And when you look at you know, loan to value
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ratios. You look at silver Gate Bank and SVB, they were in the
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ninety percent. Well, there are a couple other banks in that range.
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But if you look at the overall large commercial banking sector, we're at seventy
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eight point eight percent as of like a month ago. It's probably close about
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eighty percent, and that's kind of a danger zone. At this point,
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the large commercial banks are sort of in a little bit of distress. And
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the second point that I'd like to make is that the amount of uninsured deposits,
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either those above two or fifty thousand or those that may not qualify for
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like FDIC insurance, has gone up and it's slightly over fifty percent. So
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there are two problems if you're a depositor in a bank. One, you're
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not getting the interest rate to the risk of the bank operations is going up,
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and three, having issues with your deposit may not be ensured. And
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what this has caused the commercial banks to do is go out to the wholesale
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funding market and increase their wholesale funding. Well, so they can get cash
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to fund operations through wholesale funding, but there's often an interest rate attached to
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that, so now they have another liability which they couldn't pay for in the
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first place. You know, that's why they had to go get wholesale funding,
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so it leads to this banking spiral, and I suspect that that's going
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to come to fruition sooner rather later. And I don't know whether we're going
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to have wholesale defaults in the banking system, but it sure looks like the
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banking sector is not super healthy, and actually it's probably a little bit less
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healthy even than it was in the spring when we had all of those bank
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failures. First Republic, so we get SVP and I think also credit suites
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across the pond had some issues. So the US banking system is in a
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bit of trouble and be interesting to see if policymakers formally recognize that and maybe
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is there anything that they can do to help shore up help the banks shore
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up the balance sheets a little bit more. Well, I think that last
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to take under the Bank of California showed that they've gotten their act together,
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And basically what it tells me is that all all deposits are implicitly guaranteed by
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the US government and that they're not going to make the same mistake that they
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made with SVB, where you know, like every banking crisis, the initial
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responses, we're not going to bail out the banks. You know, we're
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not going to do it. We're not going to do it. And then
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they see a loss of confidence and then they said, well, of course
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we're going to bail out the depositors, and that's where we wind up.
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But they have to learn the lessons from the last failure. You know,
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they had to bailed out to bear Stearns and Lehman. We wouldn't even be
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talking about what happened last time. But the fact that they didn't and they
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shut them down, they drew that line in the sand, really led to
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a massive loss of confidence in the system. And the rest is history.
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So they never learned this because look, you've got fractional reserve banking and you've
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got banks of borrowing short and lending long. It's what they always do,
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and they always get banged up when rates reverse, when the yield curve reverses.
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And this time is no different than the other, except that I think
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the government put on faster. Maybe there are bailouts. Let me ask get
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your opinion. Do you think there's bailouts taking place behind the scenes. We
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don't even know about. We know that the special discount window, emergency funding
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has been lending at record levels. Well there, Yeah, it's funny when
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you get into high finance, so the banking system it gets super complicated.
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Like I know that the FED had increased the amount of high quality liquid assets
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that they were putting into, like the repo market, which is a way
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for people to borrow, you know, intra day to fund operations. But
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you can only do so you know so much of that. And I do
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think that the signal from the FDIC and the FED for the banking failures in
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the spring was that they did want to back depositors, but the investors,
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the bondholders and the shareholders got kind of got the shaft, to be honest
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with you, so that's the way they did it. They said, well,
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we got to pick or poison here, And I do believe what you
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said. They're going to try to back depositors. The problem with like the
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FDIC, they only carry about one percent coverage when you compare it to all
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the deposits in their commercial banks, So they can't bail out one hundred percent
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even if they wanted to, unless the FED steps in and just either prints
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money or does you know something else or I suspect what will happen is we
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have more bank failures, you're going to have the big guys probably come in,
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like the JP Morgan's and those guys probably offer, you know, much
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like they did during the lema An issue, to take over some of those
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those distress assets. The question is how contagious is this and where the policymaking
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tools be strong enough? And honestly, I don't know. I have some
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concerns about that. How much you know, if it turns into a contagion,
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I think the stresses could be pretty strong and the policymakers could be put
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in a really difficult position, you know, telling the public what they're able
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to do and what they're not. Hopefully this doesn't lead to downward spiral,
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you know, and that's enough to help consumer confidence. But honestly, I
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don't know the answer to that question. So getting back, you know,
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this is a tale of two cities here our economy the low tax states.
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We don't even need to get into politics. All we have to do is
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just look at the economic markers indicators issues right places like Florida, Texas,
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low regulation, business friendly climate, developer friendly climate, and low taxes,
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no state income tax, personal minimal business income taxes, you know, they're
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and the real estate in these markets is booming, and you could make an
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argument that the freedom index is certainly higher in these states as well. And
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there's a number of states. There's Tennessee, there's a lot of states that
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are thriving right now. And then you've got the other mush high tax states
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with very misguided policies, you know, benefits going out to the wazoo.
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All of that. It amazes me because the first thing that you look at
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when they raise rates is real estate prices go down almost invariably, and we've
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had a rapid increase in rates from three percent are less mortgages to seven and
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yet people pursuing lower taxes. So maybe you're going to pay ten thousand dollars
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more per year in higher interest rates, But on the other hand, that's
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going to be deductible for the most part, and you're going to be giving
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up the virtues of paying a state income tax to places like California and New
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York. So you still come out ahead on the deal, Rob Right,
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Yeah, I you know, I think you do. And there's been this
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massive migration over those types of states. Of course, I live in one
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that's generally considered business friendly, lower tax in the state of Texas. I
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live in the North Texas area Dallas for earth, which is the fastest growing
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metropolitan area in the United States, and I can tell you that there there
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are positive signs of growth, also stressful signs, but positive around construction,
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build of highways. Real estate is booming. I used to be a real
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estate investor from twenty two eighteen here in North Texas, and I could buy
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a three two single family home, moderate quality built seventies eighties, you know,
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pretty typical for this area for anywhere from ninety two hundred and fifty thousand,
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depending upon certain local factors. Now that real estate goes from three fifty
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to five hundred, and we're talking modests that we're not talking new build,
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we're not talking natash Mahal And for Texas, that's a lot. It may
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not seem like a lot of some of losing in New York of California,
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but you know when when real estate triples in the matter of five to six
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years, the average home, how did these these young kids get into the
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starting home. They can't afford it because now those homes are as expensive as
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their parents. What their parents bought their luxury houses at and so it's without
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the wages going up correspondingly, and wage rates haven't risen quite as much.
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So we're still in a better position made those other states. But it does,
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you know, provide some stress. The good news is, if you're
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doing real estate, you're doing very well. I almost wish I hadn't sold
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the last of my property in twenty teens, just held them for a couple
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more years. I you know, maybe I could have retired just off that
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alone. The boom has been unimaginable. But the flip side that token has
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rents have also risen, so for those that lower incomes, it's a little
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bit more stressful. So it depends upon what part of income struta you're at.
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It could be a positive or a negative. But in general, these
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stakes are doing much better. There are more tax receipts. There's the school
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systems are flush with money. The average teacher here in North Texas now is
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making you know, sixty five to seventy thousand dollars, and those salaries have
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risen. So there are benefits to that, I mean there are. It
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does. It has definitely helped, but you know, we're also talking about
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social services. I'm going through a permitting process right now for a project,
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and you know, it's taking a very long time because there's so much growth
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in so much demand. So I think there are positive negatives to it.
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But yes, we definitely see those populations moving to those areas, and it's
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been generally pretty positive for people there, and I don't think that's going to
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stop. I suspect if Dallas Were Worth continues to grow like it is,
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you're going to see almost one long continuous city from the border of Texas,
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Oklahoma down to Central Texas here within the next fifteen to twenty years. I
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mean that entire north central Texas area is becoming a single giant metropolitan area.
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Honestly. Yeah. Yeah, Well, I've been to yours fair Estate many
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a time and had family in Dallas. You know, they call it the
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Metroplex. You know, you go, you go to downtown Miami here up.
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I mean, it looks like Beijing with all the well what Beijing looked
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like ten years ago. Now all the cranes are falling down in Beijing.
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But you know it's how you know, high rise is going up left and
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right. I mean, they're to the point now where the land has become
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scarce, so they're like ripping stuff down and on occasion you have a high
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rise will fall down on its own and then that gets recycled too, So
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yeah, that happens. And office space in dallas Worth has been absolutely you
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know, exploding everywhere I look, especially you know, Amazon and House a
15:00
big distribution center here, probably about three or four miles from where I live.
15:03
And the amount of warehouse because I live near DFWA Airport and the amount
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of just warehousing space has exploded around there. If you're if you're building warehouse
15:13
space and North Texas, you're going to do very, very well because a
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lot of companies are using daals Forth as a distribution point. Of course,
15:18
the airport is connected to you know, you've got direct flights to most places
15:22
in the world from DFW, So it's a great spot, you know,
15:26
if you're a business owner or if you want jobs in and around that industry,
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it's a great place to be honestly right now, you know it's amazing
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is the growth of Florida has actually led to a resurgence of passenger rail because
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we have, just like you do, horrid traffic and now they've built this
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thing called the Bright Line, a quote unquote public private partnership. But they've
15:52
they've put a new rail and it's going to go all the way from Miami
15:56
to Orlando to the airport there and get you there within a couple of hours.
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And yet pretty pretty amazing. What's what's taking place because the traffic gets
16:11
so bad that passenger rail expensive passenger rail. It's gorgeous. I mean,
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it's clean. You can eat off the floors of the trains and the stations.
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Robert, It's it's amazing that we could actually do it. It's not
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particularly safe because it's traveling on on on cargo rail tracks and we have hundreds
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and hundreds of grade crossings with gates, and you know, people get killed.
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But uh, you know people get killed on the highway all day long
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too, in Florida and in Texas. So it's interesting that this growth can
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actually lead back to the past. Kind of the glory days of rail travel
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are coming back again. Yeah, and the same things happened in North Texas.
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We have a very rapid trains that believes the overall organization, and they've
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connected the airport the two downtowns for Worth in Dallas, and a lot of
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the mid cities together and where I used to live a little bit different part
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of the metroplex. There are passenger trains that come by almost one hundred a
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day now it's like four or five an hour just zooming by. And they're
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using you know, the commercial rail system to do that. And these are
17:23
modern, beautiful passenger rail systems. And the challenge with North Texas is so
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sprawling, it's harder to run buses in that type, but with rail you
17:34
can tend to move a lot of people. There's also one other thing called
17:37
the Trinity Railway Express Trinity as a Trinity River here in North Texas that connects
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Dallas and Fort Worth on a double decker a passenger train that looks like a
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freight train. I mean it's huge, and the amount of people that they're
17:49
able to move as quite substantial. So we have seen that as well increased
17:55
rail. And I will say this in North Texas, the traffic has gotten
17:59
very heavy so much. You know, like now six thirty five, which
18:03
is a main artery connecting North Dallas, it's basically like a loop as now
18:10
double decker much like you used to see in La for example. So all
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of our highway systems now, you know, are being upgraded as well.
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So a tremendous amount of infrastructure development here in North Texas. Yeah, same
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here. You know, highways in Florida are constantly being widened under construction.
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It's it's really amazing. I've never seen anything like it, and I've been
18:33
coming to Florida my entire adult life, so you know, it's it's really
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kind of amazing to see. All right, So where do you put your
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money? How do you how do you defend yourself against what's happening now?
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Well, I think with high inflation, it's brought people into looking at quote
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unquote alternative investments, and I'll define as anything other than your typical stock bond,
19:00
you know, sixty forty type of portfolio. Of course, bitcoin did
19:04
very well, it's at sixty thousand, I guess before you know, crypto
19:07
winner. It hasn't quite recovered, but there is more support into the crypto
19:11
space. Gold silver, of course, you know, the one thing I
19:15
kind of called that's my niche or my specialty is gold and silver. I
19:18
did. I did used to have other financial licenses, but I left that
19:22
behind many many years ago. Good move. But the gold silver marks.
19:26
I kind of called it at the beginning of the summer. I wrote an
19:30
article for jam Bowen, which I do regular content there, and I said,
19:33
I don't think this summer we're going to get the usual fade and gold
19:36
and silver prices we typically do. Of course in the summertime, it's kind
19:40
of the mantra of selling main go away until school starts again late August is
19:45
September. People tend to go to the beaches or vacation and be a little
19:48
bit more conservative for their investments and part money certain places. So a lot
19:52
of the financial markets are not quite as frothy unless there's something big going on
19:56
the economy, and typically gold and silver of fade a little bit, and
19:59
we have not had that fate of anything. Gold and silver have held serve
20:02
over the week is, you know, traditionally the weakest part of the year.
20:04
And not only that, we've seen a massive silver specifically, you've seen
20:07
a massive amount of silver come out of the UK market, the industrial side,
20:12
and it appears a lot of that's made its way to the to the
20:15
US. So there's a lot of pool in the US now on the precious
20:18
medals. Not only the paper derivative complex, which is what determined spot pricing,
20:23
but also the physical metals themselves, and so there has been a little
20:26
bit of a resurgence and precious metals investment here in the US. And so
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I think specifically the younger generations. There was an article on y'all who finance?
20:33
It came out put out by State Street, and there was a study
20:38
done by SPDR that does GLDNSLV, which are gold and silver ETF investments and
20:44
a lot of other ETFs, and they did a survey of their users and
20:47
millennials are putting more money into gold and silver than my generation Gen X or
20:51
the boomers. They're now a seventeen percent of allocation of their money is going
20:55
into like GLD or SLV. And you know people are when I say that,
21:00
they're like, don't they invest in bitcoint stuff? Yes, they are,
21:03
but because a crypto winner, I think some of that money went back
21:06
to gold. So that's a reversal, you know, from the last financial
21:08
crisis to about the pandemic. I would say the younger generations who are more
21:15
into bitcoin, and I'm investment clubs and they always talked about bitcoin. They
21:18
also talked about digital investments, even stuff like you know, Wall Street bets
21:22
and those types of things. But now that generation starting to move over to
21:26
gold, and that's a very positive sign that they're looking at some of those
21:29
more traditional term of investments that you know, the older generations are more comfortable
21:33
with, although more in a paper format. I think, what's going to
21:36
happen when we get to the next recession. Finally, because this is what
21:38
happened in my generation during two thousand and eight, we went from buying things
21:41
like GLD and SLV to buying physical gold and silver. And I think what's
21:45
going to happen to millennials during the next recession. They're going to trade out
21:48
some of their paper gold and silver investments and go buy the physical if the
21:52
pattern holds, and I think that that's coming. So I think from the
21:55
physical side of the gold and silver market, they're about to get a lot
21:57
of support from these younger generations saying we're looking at the banking system, we're
22:02
looking at inflation, we're looking at job availability, and you know, we
22:06
want to do something to protector, you know, our long term financial futures.
22:10
All right, I think that kind of sums it up. Everything old
22:15
is eventually new again. You know, the younger generations always rediscover what the
22:21
older generations new and often forgot or neglected. I think we're going to see
22:26
that here. Hey, Rob, tell us the best place to find you
22:30
and best way to connect with you on the web. Yeah, easiest place
22:33
just go to gold Silver Pros dot com. We're a social media business,
22:36
so that's a landing spot for all our social media and find us on YouTube,
22:37
Twitter, read it and other places like that. But if you just
22:41
go to our website goalsverpros dot com, it's an easy way to reach us.
22:45
Excellent. The link is in the show notes this interview on Financial Survival
22:49
Network dot com. While you're there, please sign up for your free newsletter
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and of course send me an email. Got a question for Rob or myself,
22:59
We'll get an answer. K l at kryltz dot com. Rob always
23:03
a pleasure, Thanks for stopping by. Thank you, Carry appreciate it very
23:06
much. Thanks for listening to carry Lets's Financial Survival Network, your solution to
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today's trying times. For the latest, go to Financial Survival Network dot com.
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