Miles Harris: Basel III, Good or Bad for Gold?
Tom welcomes Mile Harris to the show. Miles is an investor, free-market advocate, and macroeconomist. Miles takes us on a deep dive into how the Bank of International Settlements operates as the central bank of central banks along with upcoming Basel III changes in June. He believes their ultimate goal is facilitating monopoly control over fiat currencies and global monetary policy.
He discusses the credit risks developing in the system after real estate lending was classified as low-risk. Mortgages are much easier to get than business loans and are resulting in rising inequality. When credit begins to tighten, we will see falling home prices, and borrowers are likely to experience the joys of negative equity.
He explains how Northern Rock Bank is an interesting case study into financing arrangements and interbank lending problems. These policies resulted in a customer bank run which required the Bank of England to provide emergency lending.
He discusses the upcoming changes to Basel III standards in June.
Tier one capital refers to bank financial reserves, including its equity. Tier two capital is regarded as undisclosed funds like demand deposits. Gold is on the asset side of a bank balance sheet and is usually considered a risk-less asset. Its only risk is price changes, not unlike a foreign currency. They will consider gold as a zero-risk weighting if it’s allocated and has been hedged with a short position.
He thinks now is a perfect time to go long gold as banks are closing short positions and banks seem to be taking possession of their gold. There could be a real rush towards physical delivery and absolute chaos due to an overall lack of physical bullion. A Comex failure could potentially bring down the US currency, and gold could rise rapidly.
He believes this year we could see investment silver demand rise to nearly 50% of production. There could also be demand for companies and countries to acquire strategic reserves of the metal.
The West is now heavily indebted while having gutted much of their industrial capacity, and they appear to lack the political will to change the situation.
Time Stamp References:
0:00 – Introduction
0:42 – Bank of Int’l Settlements
2:47 – Mortgage Debt & Risk
6:16 – Northern Rock Bank
9:12 – Basel III – June Changes
12:00 – Capital, Assets, & Risks
19:05 – Allocated vs. Unallocated
20:18 – Comex Gold Outflows
21:32 – Gold & Silver Fiat Enemies
23:53 – PMs vs. Money Supply
26:56 – Gold and Valuations
30:12 – Banks and Silver Reserves
31:24 – Overall Silver Demand
33:48 – Global Transformation
35:59 – Gold and Silver Miners
38:00 – Long-term Gold Outlook
39:30 – Concluding Thoughts
Talking Points From This Episode
- Overview of Bank of International Settlements operations
- Mortgage debt, risks, and inflation.
- Gold outlook and silver investment demand in 2021.
YouTube Channel: https://www.youtube.com/channel/UCgxzDgbociRWqhDUW3YjS9g
Miles Harris has a BSc and Master’s degree in economics, with a major focus on transitional economies and financial crises. In particular, this has included the Asian financial crisis of 1997, the Russian debt default of 1998 and how China’s gradualist approach to transition has enabled the country to weather regional and global crises.
After flirting with a career in the city I chose instead to focus upon real estate investing in the early 2000s. He has since become a passionate advocate of the Austrian school of economics and enjoy sharing this common sense approach to economics with high school economists where I teach lessons on economic and financial literacy. In 2020, he launched a YouTube channel which provides global macro insights and champions the importance of sound money.
He is currently writing a book on how the economics profession was captured by central banking institutions.