Fed Lending And Gold

How To Turn Bank Bailouts Into Your Benefit

The banking crisis of March 2023 could have sparked a major unravelling across the country and the world. 

Three of the 30 largest U.S. banks functionally went under. 

Credit Suisse (CS), with $1.1 trillion in assets, crashed and burned.

The cascade of crises was halted early though. 

The U.S. Treasury and the Federal Reserve came into “rescue” these institutions before it all completely collapsed though. 

What did they do?

They took so many actions to “save” these otherwise worthless entities. 

It was a total package.

There were deposit guarantees to keep customers from pulling even more money out.

There were purchases of assets at well above market rates to inject cash into these banks. 

There was coordinating deposits from even larger banks to replace the customer deposits that were withdrawn. 

And, if history is our guide, in a few years we’ll see even more was done in secret.

They “rescued” the system by completely papering over it.

But it will not come without a cost though. 

It’s a cost that isn’t directly visible to most people though. 

But investors like you reading this now know there’s massive cost unseen costs with these bailouts. 

The most direct costs will be continued malinvestment from poor lending practices and further mismanagement of banks and financial institutions.

But another cost will be higher inflation and further dollar devaluation.

And that means gold may be setting up for a nice run in months ahead and possibly longer.

Take a look at this chart below from Silver Santa (view the original post here). 

It correlates bailouts – via loans from the Federal Reserve – with gold prices. 




Although we’re hesitant to publish too much information too often from gold bug types of investors (it's often far more compelling than profitable), there’s a clear pattern here. 

The $2 trillion Fed injection in 2008 led to a major run in gold. 

The $700 billion Fed injection in 2020 led to a solid run in gold. 

Now we’re near $2 trillion again and gold has already started marching higher.

The latest round of bailouts will have all sorts of consequences. 

It’s inevitable.

But nimble investors turn others’ consequences into their own gains when they see the opportunity coming. 

Right now gold could be coming in a big way.