(Kitco , Wed. May 3rd, 2023) – JP Morgan Chase bought the beleaguered First Republic Bank over the weekend, making First Republic’s failure the second-largest bank collapse in U.S. history.
According to Andrew Axelrod, global macro and Bitcoin expert, the banking crisis is just getting started. He highlighted that many banks are exposed to commercial real estate, a sector which is expected to collapse due to remote work and companies downsizing their assets.
“With the simple fact that remote work is such a big deal, that means there are a lot of open office spaces,” he told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News. “When it comes time to rolling those mortgages over, they’re not going to do that… Within the banks, their collateral layer is starting to come apart.”
Axelrod’s comments echo those of Tesla CEO Elon Musk and Berkshire Hathaway’s Vice Chairman Charlie Munger, who have both warned of the risk from commercial property loans. Musk, in an April interview with now former Fox News host Tucker Carlson, forecast that commercial property is the “next anvil” to drop in the ongoing banking crisis.
As people withdraw money from banks to place them in T-bills, which carry a higher yield, and as mortgages mature, Axelrod said a “massive problem” could manifest.
Gold Rally
As gold continues to hold above $2k, Axelrod suggested that the rising economic uncertainty could send it to $3k within the next 12 months.
“I don’t think $3k is crazy,” he said.
Axelrod’s prediction comes in the midst of a gold-buying frenzy, which saw 2022 as the best year for central bank gold purchases.
Fed ‘money printing’
As banks fail and the economy slows down, the Federal Reserve will turn on its “money spigots” and use quantitative easing to bail out the economy, said Axelrod.
“We’re already in a perfect storm for the Fed’s balance sheet to keep ballooning,” he claimed. “We’re already seeing it with these bailouts. At some point these toxic assets are going to be absorbed by the Fed… those can be astronomical figures.”
As the Federal Reserve continues to engage in loose monetary policy, Axelrod forecast that 100% inflation is a distinct possibility by 2026. He also pointed to de-dollarization trends within the BRICS (Brazil, Russia, India, China, and South Africa), which would cause these nations to dump the greenback, sending U.S. dollars back home where they would cause prices to rise.
“You have all these nations that want to save in dollar-denominated debt, but if that starts to reduce or go away, then the Fed is going to have to jump in and make up the difference,” said Axelrod.
To find out how Axelrod thinks de-dollarization might play out, watch the video above
Bitcoin
As the U.S. dollar loses its value due to inflation and de-dollarization, Axelrod suggested that Bitcoin is a way to opt-out of the system, claiming that it has “zero counterparty risk.”
“I think Bitcoin is an alternative to the existing system,” he said. “If we do settle on a Bitcoin standard… in the short-term to mid-term, it could be a very good way of acting as a pressure valve to this imploding debt system.”
Posted by:
Jack Dempsey, President
401 Gold Consultants LLC
jdemp2003@gmail.com