We are contemplating a new policy here at Miles Franklin.  Should we PAY YOU for buying gold and silver from us?  No firm decision has been made at this time, but hey, if it’s good enough for Draghi and the EU banks, maybe they’re onto something big over there.  We will explore all options.

Holter will write about this in depth today but in my simple “fireside chat” style, it all comes down to this.  Japan has suffered through 25 years of deflation and the Western world does not want to fall into the same trap.  The EU has to find a way to force their citizens to spend their money, not to save it.  In their remarkable wisdom, the EU officials decided the simplest way to accomplish this is to ask depositors to PAY THE BANKS for the privilege of taking their money.  I know that sounds crazy, but it’s happened before.  It’s what the Swiss banks did in the late 1970s in order to slow down the massive inflows of money from inflation-ravaged countries in Europe and America.  No, negative interest rate policy is not new.

Saving used to be the prudent thing to do.  Now, savers are forced into “investing” (speculating their retirement dollars) in stocks or real estate instead of parking their money safely in an institution that will pay them a fair rate of interest for their deposits.  The Fed and the EU are not friends of the common man.

Maybe more people will now decide to buy gold or silver.  It’s an easy call.  Precious metals are cheap and savers have to go somewhere with their bank deposits.  Only a FOOL would keep money on deposit with a bank and pay for the privilege.

Some of you may be asking, “Isn’t it bad for banks to lose deposits when they use those deposits to leverage up to 10 to 1 in a fractional reserve banking system to expand their loan base?”

The banks have alternatives.  They can go to other sources for their capital.  Due to the massive amounts of money created by the central banks, there are large pools of it available at very favorable interest rates to the banks.  All that money created by the Fed and other central banks is still out there, in abundance, and at very low interest rates (supply/demand).  The banks still have to meet minimum capital requirement, around 15%, or else they will have to call in some loans.

This is so crazy that it suggests the key players are scared to death and know not what else to do.  Letting the bankers get control of money, credit and interest rates has created problems so big and complex that even they don’t have a clue how to set things straight.  This will be a bad time for older folks on fixed income and a great time for those of us with a hefty gold and silver portfolio.