Discover the truth behind shadow banking and the unregulated lending sector threatening global financial stability. Learn how shadow banks, which operate outside traditional regulations, pose a significant risk to your savings and financial security. Find out why financial experts are warning of a potential crisis and what you can do to protect yourself.

CHAPTERS:

00:00 Introduction to Shadow Banking

00:35 The Growing Threat of Shadow Banks

01:09 The Size and Scope of Shadow Lending

02:22 Lack of Regulation and FDIC Limitations

03:37 IMF Warnings on Shadow Banking Risks

04:12 Traditional Banks’ Risk from Shadow Banking

05:24 Increased Volatility as the New Norm

06:33 Potential Economic Fallout and Hyperinflation

08:12 Protecting Wealth Outside the System

08:50 How to Take Action for Financial Security

09:52 Conclusion

TRANSCRIPTION:

00:00

Lurking just outside of your regulated banks is a network of alternative sources of lending that are threatening the entire global banking sector’s stability. Known as shadow banks, these private sector credit lenders have integrated with the banking giants, riddling an already overextended system with more risk that’s not trackable or regulated—threatening your deposits.

There’s a lot of financial transactions happening outside the banks. This shadow banking system is absolutely an issue, and it seems they’ve already started a downward spiral. Their shadow banking system is in trouble.

00:35

These shadow lenders are the same institutions that created massive amounts of easy money lending that almost brought down the entire system in 2008. You’d think these lenders would have been stopped, but it might shock you to learn that the opposite has happened. Not only have they continued to operate, but they’ve actually grown. Shadow banks now account for 15% of all assets, and shadow lending in general accounts for $218 trillion worth of financial assets worldwide, representing the savings of billions of individuals and businesses.

01:09

And while these numbers are concerning, they’re likely conservative, given that about half of all shadow lending is not reportable because they don’t adhere to the same regulations. Should these lenders fail, the impact on the average depositor would be tremendous, given how integrated shadow banking is into the broader financial system. This is because broker lenders, private equity, and hedge funds don’t have to take and hold any deposits while carrying much higher risk. If these were to fail, imagine a 2008 but worse—tighter credit conditions, the economy coming to a standstill, businesses having liquidity issues forcing closures, inflation, and banking collapses.

02:22

All of this is only exacerbated by the fact that these shadow banks don’t have access to the same types of emergency funding that traditional banks do. In fact, this concern has caused the Federal Reserve to finally call for regulation for these non-bank entities after the FDIC was backed into a corner this year following the bankruptcy of fintech Synapse, which failed to properly monitor and secure funds for its client banks. Because Synapse wasn’t regulated, the FDIC was unable to insure its customers, who now, five months later, are just starting to get access to some of their funds—totaling up to $85 million.

03:01

But the FDIC can’t be expected to step in and cover all of these non-regulated banking entities. In fact, as it stands today, the Federal Deposit Insurance Corporation—the FDIC, the people responsible for making sure that your deposits are safe and protected—they only keep less than 2% of all total insured deposits in their Deposit Insurance Fund. So, all it would take is one “too big to fail,” one large bank or a couple of mid-size banks to fail, and suddenly there aren’t enough funds to cover those who were assured they were insured—let alone the risk that’s coming from this non-insured sector.

03:37

In fact, this sector has grown so out of control that even the highest levels of regulation are looking at this and ringing the alarm bells. The International Monetary Fund, or the IMF, has said that this growing shadow lending sector poses the biggest threat to the financial system as a whole, citing leverage, collateral risk, and high counterparty risk. More specifically, these lenders have high leverage and low liquidity. We know that traditional banks are already overleveraged, meaning they owe more than they have. But with these shadow banks, there is no limit to how much leverage they can have, meaning they can borrow large sums against relatively small capital.

04:12

But shadow banks don’t act alone. In fact, traditional banks are just as at risk from shadow lending operations because they often lend to and from them. We saw how this played out with Lehman Brothers and Bear Stearns in 2008 when these non-traditional banking operations were at the center of the financial meltdown. And just two years ago, the same thing happened with the collapse of US fund Archegos Capital, which left behind $10 billion worth of losses across the banking sector, about half of which were sustained by Credit Suisse, who subsequently collapsed and was taken over by UBS.

04:49

This is a pattern we continue to see. You can’t keep playing “kick the can down the road,” always hoping that another bank will come in and take on the toxic assets without it affecting them down the line. Eventually, there’s nowhere left to go. And what’s so concerning about today, the reason people at the highest levels are calling this an emergency, is that there’s a higher risk of failure due to increased volatility. More and more experts are saying that we should expect volatility to be the new norm.

05:24

We just saw what happened with the Japanese yen carry trades, and although it was short-lived, it was a stark reminder of what can happen at any time without notice. We continue to live in a world where geopolitical uncertainty and political unrest are the new norm. Should market conditions sour or this volatility continue, which many again are saying it will, this could have a disastrous effect.

05:58

There are many out there who believe that the stock market, as it is today, is overvalued. And while we might not have the same mortgage crisis we had in 2008, if you have a bubble that’s ready to burst, the potential fallout will be disastrous—not just for the individual investor, but again for all of these shadow lenders and other operations that are so integrated into our financial system and carry so much risk.

06:33

I continue to try to spread awareness about this, but I don’t know what it’s going to take for people to realize that we’re living in unprecedented times. What’s happening right now is not normal. The next time there’s a 2008, there won’t be a next time. There isn’t enough paper to paper over the system like they did before without completely devaluing the currency. We’ve seen what happens when this type of crash occurs in other countries in a hyperinflationary situation. Your wealth is taken from you because the dollar just won’t have any purchasing power left.

07:06

Or in a situation where banks are collapsing, we could see bail-ins, where banks legally seize your deposits and use your funds—your hard-earned savings—to make themselves whole again. The reason there’s so much exposure and risk isn’t because they care about you; it’s because they care about maximizing profits. They don’t care if they’re jeopardizing your savings or your deposits. There aren’t enough funds in the Deposit Insurance Fund to insure all the deposits that are at risk—not even close.

07:38

And on top of that, we have this entire huge sector that’s not regulated, with no transparency. We don’t even know how bad it is. All it takes is a little market volatility, and poof—well, nothing we can do about it. Nothing you can do about it. And that is why the only way you can protect yourself is by making sure that you are protected outside of the system. Because everything that’s inside the system is in their control, and ultimately, if they control it, they own it. All you have is the illusion of ownership. Until you control your wealth, you don’t own it.

08:12

This is why I believe in physical gold and silver. If you hold it, you own it. And wealth is power. Because if you’re able to protect your wealth through what’s coming, not only are you able to sustain your standard of living, but you can set yourself up for opportunities on the other side and build generational wealth. That’s what I want for everyone watching—to make sure you’re protected against what’s coming next. Because once all of this starts—overnight, you wake up, and something has happened in the market, something that ignites a chain reaction—at that point, it’s too late.

08:50

As soon as your dollar is worth less, as soon as they bail in your deposits, you’re not going to be able to take your funds and make sure they’re in something tangible, something that is a safe store of value, like physical silver and gold. If this sounds like something you’re concerned about, that you want to protect yourself from, if you want to make sure you have a strategy in place, talk to a member of our team. We have expert analysts. You can set up a free appointment with someone by clicking the link below or call us at the number on your screen and talk to a member of our team today.

09:52

My name is Taylor, with ITM Trading, your trusted source for all things gold, silver, and lifelong wealth protection. Until next time.