The Basel III reform measures will impact US markets in a number of ways.
What are the core implications of Basel III for US investors, and how should you interpret current inflationary fears and the strong interest in gold?
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Here are the important takeaways for investors, and a bird’s-eye view of the near future.
The dollar has been less than stellar in moments lately, and that alone has markets skittish.
Add to that the QE and other general leniencies on formerly inaccessible practices by the Fed, and you have a current flutter against the background noise of rolling presses.
To date, the Fed’s approach has been sufficient to keep the doomsayers at bay, but a core group among respected economists and others do keep pointing out that the chickens will one day come home to roost.
No matter the artistry of the Fed, no one gets a free lunch, so the Fed pumping trillions in liquidity into the markets can’t be sustainable in perpetuity, at least not according to any accepted economic model that enjoys broad consensus.
QE is accepted by those models, with the huge caveat of caution, something the Fed seems to consider sin at times.
Add to that the central banks’ desire to “upgrade” from messy fiat and render our money electronically as CBDCs, and an even more distant yet also more ominous bell tolls for fiat far away, and perhaps not too far if the banks have their way.
Something is glowing in the dark
Any one of these considerations would be just that-a mere consideration-but taken together, they form a picture.
More importantly, they form sentiment, and while it’s not the mainstream sentiment, it’s always only a matter of time before bad news becomes everyone’s news.
The markets might bounce back, economies might miraculously emerge from lockdown stronger than ever, but that’s not what the smart money is saying.
Pop in the very convenient and timely arrival of the Basel III regulatory framework that essentially makes gold a global currency, and investors’ interest in gold becomes clear.
Gold has reentered the financial system, and a few facts and figures will clarify just why it’s important to be buying some gold right now.
One of the key aspects of Basel III is something called the Net Stable Funding Ratio.
The new requirements around NSFR compel banks to finance longer-term assets with equally longer term money to prevent a failure of liquidity, and the ensuing nightmare we now all know ensues.
Basel III has essentially mandated a gold standard
NSFR requirements for precious metals stipulate a Required Stable Funding (RSF) of 85 percent held against the clearing and financing of precious metal transactions by the banks.
When you consider that the previously mandated percentage was 0 percent, what do you think the implications for gold are?
Gold will now be part and parcel of bank business, and on that basis alone, its price will be driven as high as possible and maintained there.
Banks are fond of prime assets, and if they have to have gold in their lives, they’ll want it to be more precious than ever.
Especially with a highly speculative asset like gold, which has no underlying earnings to support faith in its value, things can always go either way.
There’s no guarantee that gold will make ridiculous money, but it’s pretty sure that it will make more money than you have right now.
It’s a solid investment, and a moment’s thought can illustrate why.
If you applied all of the positives gold is currently enjoying to literally any other asset, brokers would be wrestling one another to be first in line to buy some, that’s a given.
Getting some gold is easier than you might think, especially when you go to those who are specifically geared for the high growth potential of gold and crypto.
Get something shiny in your portfolio-don’t miss getting in early on gold.
Further Reading: Gold is Compelling (and That’s Only Going To Grow)