Fwd: The Brexit, Banks, and Gold

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From: Outsider Club <ww-eletter@angelnexus.com>
Date: Fri, Apr 22, 2016 at 8:05 PM
Subject: The Brexit, Banks, and Gold
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The Brexit, Banks, and Gold

By Jason Simpkins | Friday, April 22, 2016

On Wednesday, every former treasury secretary since 1995, plus representatives from the Nixon and Carter administrations, signed off on a letter imploring Great Britain to stay in the EU. The group included Larry Summers, Robert Rubin, Henry Paulson, and Timothy Geithner, among others. The letter was published just as President Obama arrived in the UK, where he too argued against a Brexit. So why all the fuss? What are they all so worried about? Banks. "For many financial institutions, London has served as the financial springboard into Europe," the letter read. "EU membership allows banks based in London to sell their services across Europe without needing multiple regulatory approvals in each country. While Britain will remain an attractive center for finance even if Britain exits, it should not take for granted its global primacy when it is no longer the gateway to Europe." See, on the surface, leaving the EU doesn't seem like the worst idea in the world. The European Union hasn't looked particularly stable of late. The financial crises in Greece and Cyprus almost disintegrated the Eurozone, and greater EU altogether. Several other countries — notably Portugal, Ireland, and Italy — nearly faltered as well. There's something to be said for getting distance from these issues — even if it does mean some short-term financial pain. Indeed, the two European states with the highest standard of living are Norway and Switzerland. Neither of them is in the EU. Advertisement Apple Panics Could this technology really kill the iPhone? Of course, that doesn't concern U.S., or even European, policymakers. They're worried about the banking industry. As the letter suggested, U.S. and European banks benefit from "passporting" regulations that let them run trading operations in London. But we're talking about more than trading here. If England leaves the EU, certain markets could implode entirely, as British banks — and U.S. banks via British banks — would no longer be able to handle certain European securities. That could trigger yet another full-blown financial crisis. No one is talking about it, but it's true. In fact, the Federal Reserve, FDIC, and the Office of the Comptroller of the Currency (OCC), have all told U.S. banks to present specific plans for their businesses in the event of a Brexit. These are the same regulators that just days ago said five banks — Bank of America, JP Morgan, Wells Fargo, Bank of New York Mellon, and State Street — were totally unprepared for another financial shock. To use the Fed's terms, their plans were "not credible." So, what we're learning and re-learning as we approach Britain's June 23 referendum is that banks are not any safer than they were in 2007. And that's why gold has done so well lately — especially in Europe where the pound sterling and euro are facing serious pressure. Everywhere you look, people are buying more gold. But the UK is far ahead of the pack. As a result gold priced in British pounds sterling has already surged 20% this year, reaching the fastest start to the year since the peak of the financial crisis in 2011. Obviously, gold is up in U.S. dollar terms, as well. Advertisement Homeless man turns $500 into $978,750 in just five weeks Jake Studebaker had lost his house... and was living on the streets of Los Angeles. Things were looking pretty grim for Jake, until one day he was notified that his grandfather left him a $500 inheritance. You won't believe what he did with it... Jake went into a local brokerage office and turned that $500 into $978,570 — in just five weeks of trading — all thanks to a simple secret he discovered. The brokers were absolutely stunned. But here's the thing: you can do this, too. Click here to learn more. And it's going to climb even higher as we get into the summer, and higher still if Great Britain follows through on its threat to leave the EU. The simple reality of the matter is that no one is prepared for that to happen — not policymakers, not banks, and not investors. Heck, even if Britain stays in the EU, gold will still go higher, since global growth has stalled and central banks are in a tailspin. Six of the world's central banks, including the ECB, have taken interest rates negative. They range from -0.05% in Hungary to -1.25% basis points in Sweden Just last month, the ECB slashed its interest rates to record lows. It also ramped up its quantitative easing program to 80 billion euros ($91 billion) per month from 20 billion euros, and announced that it would also start purchasing corporate bonds. Even the Federal Reserve is backing off rate hikes — not necessarily because the U.S. economy can't handle it, but because the rest of the world is headed in the opposite direction. No doubt gold has taken its lumps over the past few years, but people are starting to remember why it's so precious. Interest rates around the world have gone negative. The stock market is running on fumes. And Great Britain is threatening to leave the EU. Take the hint. Get paid, Jason Simpkins @OCSimpkins on Twitter Jason Simpkins is a seven-year veteran of the financial publishing industry, where he's served as a reporter, analyst, investment strategist and prognosticator. He's written more than 1,000 articles pertaining to personal finance and macroeconomics. Simpkins also served as the chief investment analyst for a trading service that focused exclusively on high-flying energy stocks. For more on Jason, check out his editor's page.  *Follow Outsider Club on Facebook and Twitter.

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