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