I saw a fascinating interview with a former Fed economist Chris Whalen who said the Fed's interest rate rises are the prime reason for the collapse of Silicon Valley Bank. Banks across the US bought large quantities of US treasuries and mortgage backed securities back when interest rates were at zero and they received a tiny amount of interest in return from those bonds. Now that the Fed has increased rates to over 4% the value of those bonds has gone down significantly. So many banks are sitting on large unrealized losses from the bonds they bought back when rates/yields were low.
Whalen emphasized that the Fed needs to cut rates next week to prevent a contagion spreading throughput the US banking system. The Fed faces a real dilemma: keep increasing rates to 'fight inflation' and face the prospect of more bank collapses or cut rates in a high inflation environment to save the banks.
Either way, keeping all of your money in the bank is fraught with dangers.
Your article says nothing about gold and silver as safe havens in this situation. More and more central banks are buying gold with Russia moving in the direction of a gold backed currency for trade settlements. What is your view of gold and silver in this situation?
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