The basis trade is when hedge funds, about 8 to 10 hedge funds throughout the U.S. or maybe the world, are shorting Treasuries futures and buying spot, and this trade is about $1 trillion every night now according to Bloomberg, and it needs to be bailed out according to Cash Yap. Maybe he should put his money where his mouth is and bail it out himself. Cash Yap. We’re going to go into the total amount of cash left in the Treasury, not just in its bank account at the Fed, but also the reverse repos, which are going back up because of a lack of T-bills because of the debt ceiling.

So there’s no rules for this money to go, so we’re going to add up the reverse repos plus the amount of money left in the Treasury’s bank account at the Fed. Add that with reverse repos and you have the total amount of cash that the government can spend once it raises the debt ceiling and then has to eat into bank reserves in order to fund its deficit, which will go up against the repo market funding needs. Which is the basis trade itself, which Anal Cash Yap wants the Fed to bail out. See where we’re going here.

Silver, even though it’s above $35, is still going nowhere relative to gold. The gold-to-silver ratio is still at the 2008 financial crisis highs, which means silver is still at historic lows relative to gold that is going to change. And when it changes, it’s going to signal the endgame that is the final bell. The gold-to-silver ratio is the final bell. The gold S&P 500 ratio. I’m going to show you a chart going back to 1920 that the bubble is still alive, but it is not well. Why is it still alive? Because the gold S&P 500 ratio is still above the highs achieved at the peak of the bubble in 1929.

When we break through that level, we’re going to start heading towards the 1980s low, and that is when everyone will know that the bubble has burst and everyone will head into real money at the same time. And finally, a quick chart on the gold-to-silver ratio that demonstrates exactly what silver does during a gold revaluation, which last happened in 1933 and 1934. You’ll see what happened to silver in that historic spike to an all-time high in the gold-to-silver ratio, which fell back to earth within a few weeks. This week’s silver report is brought to you by Kootenai Silver, symbol K-O-O-Y-F in the United States and symbol K-T-N in Canada.

Kootenai has four major projects. Its business model is to develop those projects to a point where they become attractive as acquisition targets to major mining companies. And I’ll show you one of those right now. This can be found on Kootenai’s website. Link in the description below. This is the La Negra Silver project. You’ll see what the business model is here. The main point here, La Negra was optioned to Pan-American silver between 2016 to June 2019, during which time Pan-American silver. Invested 3.6 million expenditures on advancing the project. The 95 holes have been drilled, completed by Kootenai and Pan-American silver with most returning high-grade widespread silver mineralization from surface to a vertical depth of over 300 meters.

Most mines in this area are shallow. This one is pretty deep. It’s not a mine yet. But if they develop it to the point where it might be reacquired, maybe by Pan-American silver or some other major silver miner, that is the business model for the company. There are two main forces that can help them achieve this goal, and that is, of course, developing the resource to the point where it can be developed into a mine and a rising silver price. The higher the price of silver goes, the more expenditure other major miners are willing to make to develop these resources themselves.

So with those two tailwinds, Kootenai may be able to go from a valuation of about 30 cents per ounce in the ground to somewhere between two and three dollars an ounce in the ground. That is why I own some shares of Kootenai silver and encourage you to look into it yourself and decide if it’s for you as well. First thing I want to show you this week is that bank reserves, those dollars that are funding the basis trade, which is worth about a trillion dollars, which we’re going to get to in a minute, bank reserves are drifting slowly higher each week.

This week they went slightly down, not much. So we see here we had a low of somewhere around three trillion dollars, which I think is the crisis zone, but we have to stay there for a few weeks in order for it to trigger something. This is the March 2023 crisis over here. It was triggered at about a three trillion dollar bank reserves level. We hit that very closely over here, but we didn’t stay there. And now bank reserves are headed slightly higher because of the money coming into the banking system from the treasury’s account at the Fed.

So while bank reserves are drifting higher, we can see this next chart, which is much more important. The total amount of cash left before the treasury must drain bank reserves directly in order to fund its deficit. So here what I did was I added reverse repos, which are rising back up now that treasury bills are shrinking because of the debt ceiling that can’t be issued on net. So we have here, despite the fact that reverse repos are rising, which money which will be available to the government at some point after the debt ceiling is raised and that reverse repo money goes back into treasury bills for the government to spend.

What we see here is that the total amount of cash that is available in those reverse repos plus the treasury’s account at the Fed is now at a low of 570 billion. It keeps going lower and lower and lower ever since 2022. And once this thing hits zero after the bank, after the debt ceiling is raised, then the treasury is going to have to tap bank reserves directly. They will not have any other extra cash in order to tap. And that is when we will see a major banking crisis as those bank reserves get tapped and then used to fund the government’s deficit.

And then it comes into direct conflict with the repo market, which uses those same bank reserves. Although gold and silver are going higher, silver is still going nowhere relative to gold. So there’s still plenty of time to get in on silver if you believe it’s going higher, which I do, which probably most of you watching this video also do. We see here that we are still at the gold-to-silver ratio of just around 90. We’re at 88.88 now. Let’s just say 90. That is the peak of the ratio during the silver crash of 2008 when silver crashed to what was it? I think it was like $10 or something.

That is that peak ratio over here. This is where we still are. Silver has not moved relative to gold since that peak financial crisis in 2008. There’s still plenty of time to get in on silver and it will descend. This ratio will descend. And we’re going to go now into the S&P 500 to gold ratio. This represents the bubble in the broadest terms, stock bubble in the broadest terms, S&P 500 bubble. The higher this ratio is, the more pronounced the bubble is. You can see here, this is the 1929 peak of the S&P 500 relative to gold.

That’s when the stocks were overvalued. Gold was undervalued in 1929. We’re still above that ratio now, meaning stocks are still overvalued relative to gold compared to what they were overvalued relative to gold in 1929. We see this is a major pivot point that was hit in 2018, I think it was, or maybe it was 2016. It was hit again in 2020. We didn’t get below it, but you can see here that we’re running out of fuel. And though the bubble is alive, it is not well. We’re nowhere near the all-time high over here of 5.5. We’re going to descend from here and it’s going to be pretty fast once the momentum gets started.

We’re going to head towards the 1980 low of whatever that is. Is it 0.2, 0.25, who knows exactly? But that is the all-time low match in the 1940s and the 1930s. We’re going to get there again. And this is the last chart before we get into the interesting stuff from Anal Kashyap, the guy with the… Arachnospores, the fatal spore with a funny name. …who wants to bail out the $1 trillion treasury basis trade. This is what happens to silver during a gold revaluation. You can see here the long term of the gold to silver ratio.

This is from GoldChartsRUs. This is a pretty good chart. They’re adding some nice charts over there. I highly recommend subscribing to GoldChartsRUs. I’m not affiliated with them. I just think it’s a really good service. Gold revalued here from 21 to 35. This is 1933, 1934. Obviously, during a gold revaluation from 21 to 35, it’s going to take silver a little bit of time to catch up because silver is not statutorily revalued. Your only gold is, and then it’s going to take, it looks like a few weeks, maybe a month or two, before the ratio descended back down again because gold didn’t move once it hit 35 because it was statutorily controlled by a gold standard.

And then all of a sudden, silver started moving in the months ahead from a ratio of about 133 to a low of about 60, so meaning silver doubled in value relative to gold in those short months. And it took some time, and eventually it got down to 15 to 1 in 1968 and 1980 over here. We’re going to see the same thing. It’s not going to be in the same exact pattern, but if there is a gold revaluation, I don’t think there’s going to be a statutory gold revaluation, but in case there is, this is historically what happens.

The ratio goes crazy higher, meaning silver is undervalued relative to gold, and then the market quickly recalibrates and sends silver higher. And it takes a few weeks, a few months, but it does happen. And now let’s go to the clamoring for a bailout of the basis trade. We’re going to go to Bloomberg. Here’s Bloomberg. Fed urged Tamola hedge fund bailout facility for basis trades. This came out March 27th by Alex Harris. That is the plumbing correspondent at Bloomberg. I call her the plumbing correspondent. I don’t think that’s her actual title, though it’s a cool title.

I think you should accept it. The Federal Reserve should consider setting up an emergency program that would close out highly leveraged hedge fund trades in the event of a crisis in the $29 trillion US Treasuries market, according to a panel of financial experts. Who are these experts? We see here a Brookings Institution paper. We’ll see the paper in a second by Anal Kashyap at the University of Chicago, Harvard University’s Jeremy Stein, former Fed governor, Harvard Business School’s Jonathan Wallin, and Columbia University’s Joshua Younger. So you see it’s the same Ivy League people and Chicago’s school.

We see Harvard, Columbia, former Fed officials, the same crowd of people saying the same stuff, former Fed officials saying that current Fed officials should bail out the basis trade. This is all just a big circle jerk, but whatever. This is the paper from the Bookings Institute. You can see here Anal Kashyap. I would challenge Anal Kashyap to put his cash where his yap is, put his money where his mouth is, and bail out the basis trade himself with the trillion dollars he has in his pocket. What has it got in its pocket, Susan? Instead of advocating for more bailouts, for more rich people, this is complete and total corruption.

But what can you expect these days? And this just came out from Bloomberg yesterday, also by Alex Harris, my favorite correspondent at Bloomberg. Title is Fed Backstop Fears Could Threaten Dollar, Deutsche Bank Says. If the Fed Backstop, they mean currency swap lines. Basically, when there’s a financial crisis in Europe and they need dollars to finance their dollars-denominated debt and there’s a dollar rush, the Fed prints a bunch of dollars in exchange for a bunch of currency that the European Central Bank prints, meaning euros. So it’s a swap of printed euros for printed dollars so that dollar-denominated debt can be financed.

And now these people in Europe are not sure if the Trump administration is going to stop the Fed from providing emergency liquidity during a financial crisis, and they’re pretty scared about it. Choice paragraph over here I would like to read. Should the Fed choose to withhold liquidity support in times of immediate stress or attempt to leverage the facility as a quid pro quo, Clarice? Quid pro quo? I tell you things, you tell me things. Quid pro quo, doctor. For other U.S. policy goals, it would have far-reaching consequences, Saravellos added.

The U.S. currency would sharply appreciate as global institutions scramble for dollar funding, driving higher demand. It could also lead to fire sales of U.S. assets. Oh, my God! We’re having a fire sale! Oh, the party! It burns me! That are often hedged in the foreign exchange swap market. Why are they concerned about this? It says in this paragraph, there has not been any indication that the Trump administration wants the Fed to scale back the so-called swap lines that the central bank has offered during past crises. But the reported conversations in Europe came as the U.S.

is stepping away, metamorphosizing, changing like a moth into a butterfly. The moth is change. Caterpillar into chrysalis or pupa. And from thence into beauty. Our belly wants to change, too. From its European allies on other fronts, even without the Fed taking action, any fears about the reliability of the swap lines could be damaging to the dollar. George Saravellos, Deutsche Bank’s head of foreign exchange research, wrote in a note to clients Thursday. Now, the last thing I would like to clarify here is that how can, if the dollar is going up and up in value, how could it be damaging to the dollar? Well, it’s like this.

If there is a dollar-denominated debt crisis in Europe and Europe needs more dollars to finance its dollar-denominated debt, the dollar goes up and up and up in value as demand for the dollar rises. But once you have defaults, then once the defaults kick in, the demand for the dollar falls through the floor. So you have the situation where the dollar goes up and up and up and up, and then you have a bunch of defaults, and the dollar falls down. That’s what would happen if those swap lines are stopped, if the Trump administration somehow, legally or not, stops the Fed from bailing out Europe with dollar swap lines during times of financial crisis.

I don’t know if it’s going to happen or not, but eventually this entire system is going to come apart at the seams. And with gold at 3,100 and counting, and silver not quite catching up yet, but it will catch up, and it will catch up quickly once the momentum starts, and it could start any time now, the entire system is going to come apart at the seams, which are everywhere, because the seams are held together with central bank spit. And with that imagery, we will end this week’s silver report brought to you by Kootenai Silver, symbol K-O-O-Y-F, symbol K-T-N, in Canada.

Check them out at the link in the description below, and I’ll see you guys next week. [tr:trw].

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