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[Music] 223 trillion. That's how much risk is hiding right now in US banks that we know of. According to new data, US banks are sitting on roughly a quarter of a quadrillion dollar worth of derivative exposure. Derivatives being the financial weapons of mass destruction that almost brought down the entire global economy in 2008.
But if you thought that following the great financial crisis, these derivatives were under control or gone, think again. They didn't disappear. They evolved to a pile that is bigger, more complex, and buried under layers of financialization designed to hide their true risk. We're talking hundreds of trillions, if not a quadrillion plus, in interconnected bets that are built on top of debt, speculation, and extreme leverage.
But the trigger, it could be anything, but it might already be unfolding. See, in the last month, we have seen three subprime auto lenders collapse the same kind of credit cracks we saw before the last crisis. But this could be the early warning, a quiet indication of something much bigger. A collapse of the system that will impact not only these institutions, but your deposits, your savings, your retirement, even life as we know it.
In case you missed it this week, another subprime auto lender, Prima Lend, has gone under following the recent collapse of Triricolor and First Brands Auto Parts. But this isn't just about a few subprime lenders. It's about the entire structure of our financial system. Let me explain.
Now, it's no secret that the American people are struggling financing everything from groceries to basic necessities on credit. But as prices have risen across the economy, one item in particular, the car, has been hit especially hard. 77% of Americans rely on car transportation to get to work, making it an essential item for many. And yet, car payments have risen to an average of $750 a month. With over a 100 million Americans having a car payment every month, the third largest credit area behind mortgages and student loans, this is becoming increasingly unattainable and difficult to keep up with for many.
But guess what? Auto lenders continued to give loans to anyone and everyone, even people who clearly cannot afford to make these payments. No surprise there. But they did not stop there. No, they took it a step further. They took all of these subprime loans, loans that they knew were risky, and they bundled them all together, slice and dice them, and made them appear like they were safer on paper. US banks, shadow lenders, and private equity would come in and scoop up these packages, slice and dice them again, repackage them as something else, and suddenly you have layers and layers and layers of risk, all disguised as stability. Meaning that all of these were stamped with a AAA rating. the highest level you can get, making everything look very safe. All the while being filled with subprime borrowers who are defaulting at the fastest pace on record since 2009.
Meaning that the risk is never about just the one loan or a collection of loans that are being defaulted on. It's not even about the company that's issuing these loans. It's about the layers and layers and layers of financialization and betting that's been built on top of one subprime asset. We are talking an exponential amount of risk held by US banks.
But if any of this is sounding even a little bit familiar, it should because this is exactly how 2008 started. Risky loans bundled up and packaged as something different, pawned off as a safe asset until eventually it's unrecognizable. And at that point, no one even knows what's inside of it. But they don't care if it's rated AAA and they're making a profit. What do they care what's really in it? If it's subprime or not until the borrowers that the assets value is derived from derivatives value is derived from all those layers down below when they start to default on those loans that is the chain reaction that is set off when we talk about derivatives being as Warren Buffett calls them financial weapons of mass destruction that is what he's referring to. You have a couple of loans go bust and it's not just the loans, it's not just the company, it's all of the financialization that has been built on top. That's when everything comes crashing down.
But just like every crisis, by the time it happens and the public realizes what's going on, it will be too late. Now, the warning signs are everywhere. It's not a matter of if this is happening, it's when. But the more important question to be asking is what happens next.
Most people when they think of 2008 think about taxpayer money being used to fund Wall Street, too big to fail, bank bailouts. But this time around, a quiet foundation has been laid for a much different outcome. It's called a bank bailin, a legal scenario where banks can use your deposits to cover their losses.
During the great financial crisis, there was a public outcry for banking reforms, which is how we got the 2010 DoddFrank Act, which was supposedly designed to make the system safer and to reduce the likelihood of a future bailout. But there were a lot of closed door meetings, a lot of powerful players involved in this, and what we got was nothing like what we were promised. Most regulations at best were ineffective or never enforced or rolled back or watered down. A perfect example of this being now failed Silicon Valley Bank which should have been held to more regulatory oversight and had higher holdings but it was deemed not necessary later on. Another example is of course derivatives themselves which we were told as a public would be stopped right the catalyst for this crisis and what happened there.
In fact, derivatives continue to be on the rise. Q4 of last year to Q1 of this year, US bank exposure to derivatives jumped 7%. Q1 to Q2 of this year, another 6.2%. And these aren't small numbers. We're talking 15 trillion, 13 trillion being added. For reference, our entire United States GDP isn't even that much combined. Just two quarters of growth of US derivatives. The entire output of goods and services of this country compared to the derivative exposure of our US banks in just two quarters. That's the kind of scope and scale we're talking about here. And again, this doesn't even take into consideration all of the shadow banking or hedge funds, money market funds, private equity, all of these entities that operate outside of transparency and regulation that are adding to this exposure in amounts that again we can only guess at. Meaning the risk today, the risk to you and I and everyone else is far greater than it was in 2007.
But it doesn't stop there. No, the DoddFrank Act gave us one other little gift. Under this act, it changed the rules of what happens when banks inevitably fail. Under these new rules, the FDIC, the Federal Deposit Insurance Corporation, that gold sticker on your bank that's supposed to make sure that your deposits are safe. That entity, well, they are allowed to step in in the case of a bank failure. And as a friendly reminder for anyone out there who's saying, "Yeah, wait, wait a second. If something goes wrong, doesn't the FDI ensure my deposits? Aren't I safe?" Well, in case you didn't know, they actually only have 1.3% of all total insured deposits in their insurance deposit fund. And I get it. That's how insurance works. But at the end of the day, to have about a penny for every dollar that's insured, well, we're talking one too big to fail. That's how they got their name. Or a couple of midsize banks and that deposit insurance fund is completely wiped out. Good luck getting your funds back.
But not only that, let's say that the bank stays in business. You can still see your deposits, your savings, your checking, your retirement, everything on your screen, right? The numbers are still there. The bank is still operating, but they are at risk of going under. Well, the FDIC can step in and say, "Okay, you know what we're going to do? We're going to opt for a bank bailin." Unlike a bail out where it's taxpayer funds or not even that, just the government coming in and writing a check. Well, guess what? They're going to use your funds. That's right. Your cash, your savings, your deposits. They're going to turn that into equity and use it to make the bank whole to save the system.
We have seen how this plays out time and time again in other countries. Recently, in 2020, in Lebanon, they were suffering from sky high inflation. And as the government continued to print, they realized that their entire banking system was at risk of going under. So what did they do? They immediately overnight froze every single person's account. Didn't matter how much you had, what bank it was. No ATM access, no withdrawals, shuttered the doors. Maybe the amount was still there on the screen, but you had no way to use it. Your debit card didn't work, your credit card didn't work, and again, good luck getting any cash. So anything that you had in the bank was no longer yours to access. This went on not for two days, not for two weeks, not even for two months, but for two years. During these two years, those in power decided not to prosecute those who were the counterfeits, the government, right? The over printers. They didn't prosecute those who had made risky, poor decisions from the bank or had spent all their money on bets. No, instead they went after the depositors, taking half. They seized half of all deposits to cover the hole to make sure that the system stayed intact.
The same thing happened in Cypress in 2013. Two of Cypress's major banks went under. Likely Bank and the Bank of Cypress. In Likely Bank, everything was seized and used. Nothing was left behind. And the Bank of Cypress, anyone with over $100,000 in their bank account, they took half. They took half. Imagine if tomorrow morning you woke up and you had half of your deposits, half of your savings, half of your retirement wiped out. Would you be able to survive? As with all bailins, the responsible parties, the savers get punished while those in positions of power, those who are doing the counterfeiting, those who are taking the risky bets, they are the ones who come out the other side unscathed.
But if you think, oh, this will only happen somewhere else. It can't happen here in the US. Think again. Not only is it law under the DoddFrank Act, but it also is something that the FDI themselves, the very people who are supposed to be making sure that our deposits are protected and safe, right, that are supposed to inspire confidence in our banking system, those at the FDI who are in charge have sat around and laughed at the American people for not understanding what a bailout is and for having trust and faith in the banking system itself. I mean, it's a little bit conflicted, right? I mean, it's important that people understand they can be bailed in, but you don't want a huge run on the institution, but they I mean, they're going to be >> people need to know, but I don't think you have much hope of reaching a public that doesn't have a professional need to know. >> I completely agree with that. I almost think you'd scare the public if you put this out. Like, why are they telling me this? Should I be concerned about my bank? Like my insurance company doesn't tell me what they're doing with my assets if they just assume they're going to pay my claim, right? It's it's I think you've got to think of the unintended consequences of taking a public that has more full faith and confidence in the banking system than maybe people in this room do.
As risk continues to mount from these derivatives and the underlying assets. As more defaults continue to rise, as the American people continue to get crushed under the weight of our debt and the devaluation of our dollar, this is very much a possibility. You are at risk for footing the bill of these banks and our government's poor decisions. And I don't know about you, but to be honest, this whole thing really makes me mad because it is completely unfair. And while I personally don't have an answer for how we can stop this from happening, I do know that the first thing we can do is continue to educate people because not enough people are aware that this is even something that can happen. So if this video was helpful for you or you have someone in your life who would benefit from learning this, please please share this video because there is strength in numbers.
One positive thing I will say is that I do believe a bailin typically from what we've seen in other countries goes hand in hand with hyperinflation. Now that's not positive. Of course hyperinflation is terrible when prices are rapidly rising. We're talking doubling overnight. But right now there is still time to get out and protect your wealth before we enter that next phase. Right? We know inflation is only going to continue to escalate as the government continues to devalue our currency which will lead us into hyperinflation. But right now there is this unique moment in time where you still can protect your wealth outside of the dollar and outside of the system. And while that might look different for everyone, for me personally, it is with physical gold and silver, the real deal. I am talking again about tangible gold and silver. Not something that is a digit on a screen. Not something that again they can freeze or seize overnight without my control before I can get to it. That's the thing. A lot of people out there I think there's this false sense of security that you'll be able to tell. You'll know when things are going south. You can get to it. This is your insurance policy against that. Okay? Because maybe you can, but history shows us most people don't. Right? By the time you realize what's going on, it's reached that crisis point. And let me promise you something else, too. Those in power, those who are running these institutions, they're going to know before you. And guess what? They're going to be fast. And when they shut off access again, you're going to make sure that you're going to want to have this because if you have gold, you will not only survive, but you will thrive through this reset that's coming. This is your insurance policy. If you don't already have physical gold and silver, if you're not waking up to everything that's going on, now is the time to do it. It's not too late, but I would highly, highly encourage that you get your physical gold and silver.
Now, here at ITM Trading, we are a full service physical gold and silver dealer. That is what we specialize in. And specifically, we help people with education and understanding and building a strategy for what is coming next. Because there's a lot of different reasons that people buy gold and silver, but when we're talking about physical, you want to make sure you have a plan in place that makes sense for you. So, if you have any questions or you want to get more gold and silver, you want to create that strategy or you've been thinking about it for a while, now is the time. Call us at the number below or click the link in the description. There's a calendarly link or you can scan the QR code and set up a time that works best for you that way to talk to one of our expert analysts. They are the best. They will help answer any questions you have. And if you want to learn more about gold and silver and how it has functioned throughout history, specifically during currency life cycles, during these resets, the one that we're living through right now, we have a free built to endure report. It is awesome. It has a hundred years of history in it, as well as multiple examples of how physical gold has performed during these resets. You can download that using a link below or also scan the QR code. It's the first link on there. Either way, thank you so much for being here. I know that was a lot, but I appreciate you being here with me. As always, I'm Taylor Kenny with ITM Trading, your trusted source for everything gold, silver, and lifelong wealth protection. Until next time. [Music]