The term “black swan,” describing an unexpected event, entered the popular lexicon in 2007 with the publication of a book by market trader Nassim Nicholas Taleb. In The Black Swan: The Impact of the Highly Improbable, he writes that until Europeans discovered Australia, it was taken for granted that all swans are white. But the sighting of one black swan was enough to invalidate that belief.
Taleb employed the term for events of low predictability and outsized impact. The COVID pandemic was a black swan event. So were the attacks of 9/11.
So-called black swan events in monetary affairs are pretty good reasons to own gold and silver. But should they really be unexpected?
Should Black Swan Events be Unexpected?
They certainly seem to be unexpected by the authorities, who continually respond to concerns about possible crises with busy assurances that everything is just fine. Another economic crisis is not likely to occur in our lifetimes, averred Janet Yellen in 2017. Federal Reserve officials kept making assurances two years ago that what has now proven to be stubborn inflation was merely transitory inflation.
And after the second and third largest bank failures in American history occurred in the space of just 48 hours last month, President Joe Biden assured the nation that the banks were safe.
And of course, a string of senior bank officials at places like Silicon Valley Bank and Credit Suisse who were forced to walk the plank after their banks failed might all be secure in their jobs today, but for a lack of foresight.
Are Black Swan Events Predictable?
So, the question of financial black swans is foreseeable by whom? A month ago, Fed chairman Jerome Powell insisted the bank calamities were not “a sign of wider failures to come in the U.S. banking system.”
But we are not so sure. A month ago in this space, we wrote a piece called Are Bank Runs Over? We Wouldn’t Bet on It; We Would Bet on Gold Instead!
We are still not so sure. And the signs of trouble have continued to build.
Two weeks ago, we cited evidence that commercial real estate troubles are approaching “a high boil.”
MarketWatch reports that “a bevy” of small and mid-sized banks are having to borrow heavily from an emergency Fed fund. That should not surprise anyone. Silicon Valley Bank wasn’t alone in holding portfolios of underwater bonds.
This week, the Wall Street Journal expressed its own concern in a piece called “Why the Banking Mess Isn’t Over.” Depositors continue to move out of banks large and small, which means higher funding costs.
An earthquake is a black swan. So is a tsunami. The assassination of an archduke.
But few things are as predictable as currency crises. It is simply not that difficult to foresee the high impact of decades of interest rate repression, an unbacked monetary system that creates trillions of digital dollars with nothing but a computer keystroke, and virtually unrestrained government spending and unpayable debt. Not to mention de-dollarization.
Owning physical gold and silver is one way you can protect yourself from the gathering forces of predictable monetary events that carry outsize impacts.
Red Rock Disclaimer
The opinions, beliefs, and viewpoints expressed in this article do not necessarily reflect the opinions, beliefs, and viewpoints of Red Rock Secured LLC or the official policies of Red Rock Secured LLC. Red Rock Secured LLC is not a financial advisor, is not licensed to provide investment or tax advice, and neither provides investment nor financial advice. Red Rock is a product specialist that can help evaluate your precious metals purchase options.