Thoughts On Currency Markets

Thoughts on Currency Markets

The summer season is often associated with warm weather and barbecues, but this year it brings with it a different kind of heat - the heat of the currency markets. SVB Bank has taken a tumble, inflation is cooling but still on the rise, and bank runs are looking increasingly likely.

The Central Bank has announced the creation of the Bank Term Funding Program, a one-year loan program providing banks, credit unions and other financial institutions with access to liquidity. These loans will be secured by US Treasuries, agency debt and mortgage-backed securities. This program is designed to provide financial institutions with the resources needed to support the economy and help ensure that lending continues to flow to households and businesses. This program is an important step in ensuring stability in the financial systemic the short term....But what happens after one year?

And furthermore, what happens if bank runs take off? For those who don't know the significance -- historically, as we have seen in every major financial crisis, if large investors (or even enough small ones) see their holdings shrinking in an unstable market, they'll pull their money from the banks. This almost instantly flushes massive drops in the financial market and is the known trigger for full on collapse.

As these economic woes continue to rock currency markets, many investors are turning to gold, silver and other precious metals as a means of correcting their portfolios and protecting their wealth. With history repeating itself, it appears that these assets may become even more valuable as the summer continues.

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