Martin Wolf: There Will Be Another “Huge” Financial Crisis

Martin Wolf writing in the Financial Times has warned that there will be another financial crisis given the nature of the modern fractional reserve banking and financial system. Wolf asks whether there will a “another huge financial crisis” and then answers his question by saying that there will be and warns that banks “are designed to fall. So fall they surely will.”

He warns that a system built on making promises it cannot keep is bound to crash, and crash again:

Will there be another huge financial crisis? As Hamlet said of the fall of a sparrow: “If it be now, ’tis not to come. If it be not to come, it will be now. If it be not now, yet it will come – the readiness is all.” So it is with banks. They are designed to fall. So fall they surely will.

A recent book explores not only this reality but also a radical and original solution. What makes attention to this suggestion even more justified is that its author was at the heart of the monetary establishment before and during the crisis. He is Lord Mervyn King, former governor of the Bank of England. His book is called The End of Alchemy.

The title is appropriate: alchemy lies at the heart of the financial system; moreover, banking was, like alchemy, a medieval idea, but one we have not as yet discarded. We must, argues Lord King, now do so.

As Lord King remarks, the alchemy is “the belief that money kept in banks can be taken out whenever depositors ask for it”.

This is a confidence trick in two senses: it works if, and only if, confidence is strong; and it is fraudulent. Financial institutions make promises that, in likely states of the world, they cannot keep. In good times, this is a lucrative business. In bad times, the authorities have to come to the rescue. It is little wonder, then, that financial institutions have become so large and pay so well.

His solution to the dangerous alchemy of the current banking system is to make Central banks pawnbrokers of last resort. This seems somewhat more prudent than the more dangerous deflationary experiment of bail-ins and confiscating deposits, both individuals and families life savings and indeed SME and corporate deposits above a certain level, in order to bail out failing banks.

Wolf joins a long list of investment and finance experts and even the Prime Minister of Japan who are warning that another global financial crisis is coming. The question is not if, but when.

Read full FT article via Irish Times here

Recent Market Updates
– Silver Price To Surge 800% on Global Industrial and Technological Demand
– BREXIT Gold Diversification As Vote Fuels Market Uncertainty
– Gold Forecasts Revised Higher – Citi Says “Buy the Dip”
– Gold Should Rise Above $1,900/oz -“Get In Now!”
– World’s Largest Asset Manager Suggests “Perfect Time” For Gold
– Gold As “Extremely Low-Risk Asset” – Rogoff Advises Creditor Nations
– Silver – “Best Precious Metals Trade”

Must Read Bail-In Guide Here

Breaking News and Commentary
Stocks, sterling roiled as ‘Brexit’ poll unnerves (CNBC)
Gold Sees Short-Covering, Bargain-Hunting Bounce (Bloomberg)
Gold steady after overnight losses; Fed in focus (Reuters)
Gold Traders Pay Most in Years to Keep Big Bullish Bets Alive (Bloomberg)

Global commodity assets rise to $220 billion in Aprill – PMs 50% of AUM (Reuters)
Gold and Silver Worst Performing Assets In May (Zero Hedge)
Disappearing Money and Opportunistic Candidates (Huffington Post)
Gold Isn’t A Hedge Against Monetary Disorder, It’s “An Investment In It” (Zero Hedge)
Read More Here

 

Gold Prices (LBMA AM)
02 June: USD 1,215.50, EUR 1,085.32 and GBP 842.10 per ounce
01 June: USD 1,216.25, EUR 1,090.00 and GBP 841.77 per ounce
31 May: USD 1,210.50, EUR 1,087.39 and GBP 829.07 per ounce
30 May: No Fix as Spring Holiday in UK
27 May: USD 1,221.25, EUR 1,092.16 and GBP 833.50 per ounce

Silver Prices (LBMA)
02 June: USD 15.98, EUR 14.27 and GBP 11.07 per ounce
01 June: USD 15.95, EUR 14.30 and GBP 11.04 per ounce
31 May: USD 16.06, EUR 14.40 and GBP 10.99 per ounce
30 May: No Fix as Spring Holiday in UK
27 May: USD 16.30, EUR 14.58 and GBP 11.12 per ounce

The post Martin Wolf: There Will Be Another “Huge” Financial Crisis appeared first on GoldCore Gold Bullion Dealer.