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In this era of massive bank failures, gold and silver offer the best consumer protection and hedge against misuse of client funds.

March 14, 2012 – In this era of massive bank failures, gold and silver offer the best consumer protection and hedge against misuse of client funds. Banking stocks are at an eight-month high today after only four out of nineteen banks failed Federal stress tests. Even markets in Asia are celebrating, but it seriously begs the question what other industry would be celebrating a 25 percent failure rate?

And why would you entrust your money to an industry with a 25 percent failure rate in a test to show it possessed capital to cover its losses? Unfortunately for the American worker, saver, and investor, banks have not been responsible for their client’s money for some time now. Certainly the bailout programs and too big to fail motif have not encouraged large lending institutions and holders of private savings to be careful with their customer money.

This is the “moral hazard” that we heard so much about a few years ago. If you cover bank’s losses, what is going to stop them from making riskier bets? We should have all paid a bit more attention to that concern then, because it turns out banks cannot be trusted to observe the sanctity of their customer’s money or to restrain themselves from making ever-riskier bets with that money.

The epic failure of MF Global should be a warning to us all. The multi-century old investment bank, which was headed by a former governor, went bankrupt on October 31, 2011 after a huge bad bet on European sovereign debt. The bank, per a ruling by the Commodities Futures Trading Commission, was allowed to use customer funds in this bet and $1.2 billion worth of customer money has been missing ever since. Yesterday, the New York Times reported that MF Global customers are “said” to have been made an offer for their lost money.

Gold and silver have a clear place in this economy. When you can long trust major banks to hold enough capital to cover their own losses you know that it’s time to move your money into a safer place. Increasingly, banks must make riskier bets in order to procure the same return on investments. This means the risky investments cannot stop in anything but bankruptcy.

Gold and silver are the historical stores of money for the generations. Since ancient Rome, they have been used to store wealth, transfer wealth, and to safeguard wealth. The use of silver coins goes back even further. In this era of epic bank failures, the best solution for those who want to hold onto their wealth is a time-tested one. Gold and silver have been working well for humanity for millennia and never stopped.

Shannon King

Senior Staff Writer – GoldSilver.org

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