Robert Kiyosaki, a financial educator and author of Rich Dad Poor Dad, warned that a third U.S. bank will crash soon after SVB and Silvergate Bank collapsed within 48 hours.
He also advised people to buy gold, silver and bitcoin as a hedge against inflation and currency devaluation.
Robert Kiyosaki, known for his ability to predict the economic crisis, simplify complex concepts, and present those in an exciting manner for readers on all levels to understand, couldn’t stay aside when it comes to recent activities in the US banking sector around the collapse of Silicon Valley Bank (SVB) and Silvergate Bank.
He has been actively propagating against the US government in particular Federal Reserve which kept printing money in order to support the economy and avoid the economic crisis in the short term.
Furthermore, Kiyosaki has warned in his appearances several times that the value of the US dollar has diminished in recent years. He has also highlighted that he is no longer a believer in the robustness of the US economy, and that is why he was actively supporting assets like commodities, in particular Gold and Silver which are known as safe havens for investors in the midst of a financial downturn.
Apart from the traditional safe havens, Kiyosaki is also a big supporter of Bitcoin which he believes is the challenger and will replace the fiat money in the future.
What did really happen with the SVB and Silvergate Bank?
To give some background, one of the main reasons for the collapse of the SVB and the overall turmoil in the banking sector is due to the fact that Fed keeps raising interest rates aggressively to fight inflation. This in turn causes US treasury bond portfolios held by the banks to deteriorate in value. On top of that borrowing costs increase for companies and individuals hence they have to get back their deposits to support business operations or cover personal costs.
One of the triggers for the SVB default was the announcement by the bank that it sold a significant part of its bond portfolio with a loss to cover the financial needs of the bank which led to further panic among customers who rushed to withdraw their remaining deposits from the bank.
This process is called “run on the bank” when many depositors try to withdraw their money at the same time. However, the bank is not expecting such activity and lacks sufficient cash on hand to cover the customer needs hence leading SVB to default on its obligations.
In the case of Silvergate Bank, which was mostly cooperating with new crypto companies, due to a lack of sufficient cash the bank decided to wind down its operations and liquidate the bank afterward.
Why is this a big issue?
Since the financial system is interconnected and banks are actively making transactions amongst each other in the interbank market, the collapse of one bank may cause a domino effect and cause a failure of several other banks, which was the case in the 2008 crisis. This means that all the banks and the financial sector overall will feel the impact of the default of one member.
Kiyosaki knows this very well and that is one of the reasons why he believes that the fall of two banks – SVB and Silvergate Bank, is not the end of the story and that we should expect more tumbles in the near future.
Moreover, as this default chain continues Kiyopsaki expects that markets will behave as usual which is selling the risky assets and moving the money towards safe havens such as Gold and Silver, as well as Bitcoin since people will lose their faith in the traditional financial system and try to get back into the crypto gold.
What are government agencies doing?
After this event one of the largest credit rating agencies – Moody’s, reduced its outlook on the US banking sector from “stable” to “negative” with the comment that this change better reflects the deteriorating operating environment of US banks.
Although regulators including US FED, US SEC, and other government agencies are actively working to investigate and minimize the impact of the collapse on the overall economy, the timing of the expected support from the government is already delayed because consumers have already lost their confidence in the overall US banking sector.
This may lead to a massive run on the banks causing active withdrawals of deposits further increasing the magnitude of the banking crisis.
Major investors and financial gurus expect the US banking sector and overall economy to continue its downturn in the near future. They expect that the safe heaven assets will benefit from this emerging crisis and that investors should look at transitioning their investments into Gold, Silver, and Bitcoin.
While at the same time, US regulators and government authorities try to assure the public that the US banking sector is still robust and they will do anything to save the trust in the US economy.
In the end, the damage has already been made and it is just a matter of time and action from regulators and the market overall to decide the severity of the impact.
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