Cryptocurrency: Fiat's Continual Fail Validates Gold Silver Crypto and more

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The Failure Of Fiat Currencies & The Implications For Gold & Silver

https://www.goldmoney.com/research/goldmoney-insights/the-failure-of-fiat-currencies-and-the-implications-for-gold-and-silver

by Alasdair Macleod

This is the background text of my Keynote Speech given yesterday to
European Gold Forum yesterday, 13 April.

To explain why fiat currencies are failing I started by defining
money. I then described the relationship between fiat money and its
purchasing power, the role of bank credit, and the interests of
central banks.

Undoubtedly, the recent sanctions over Russia will have a catastrophic
effect for financialised currencies, possibly leading to the end of
fifty-one years of the dollar regime. Russia and China plan to escape
this fate for the rouble and yuan by tying their currencies to
commodities and production instead of collapsing financial assets. The
only way for those of us in the West to protect ourselves is with
physical gold, which over time is tied to commodity and energy prices.

What is money?

To understand why all fiat currency systems fail, we must start by
understanding what money is, and how it differs from other forms of
currency and credit. These are long-standing relationships which
transcend our times and have their origin in Roman law and the
practice of medieval merchants who evolved a lex mercatoria, which
extended money’s legal status to instruments that evolved out of
money, such as bills of exchange, cheques, and other securities for
money. And while as circulating media, historically currencies have
been almost indistinguishable from money proper, in the last century
issuers of currencies split them off from money so that they have
become pure fiat.

At the end of the day, what constitutes money has always been
determined by its users as the means of exchanging their production
for consumption in an economy based on the division of labour. Money
is the bridge between the two, and while over the millennia different
media of exchange have come and gone, only metallic money has survived
to be trusted. These are principally gold, silver, and copper. Today
the term usually refers to gold, which is still in government
reserves, as the only asset with no counterparty risk. Silver, which
as a monetary asset declined in importance as money after Germany
moved to a gold standard following the Franco-Prussian war, remains a
monetary metal, though with a gold to silver ratio currently over 70
times, it is not priced as such.

For historical reasons, the world’s monetary system evolved based on
English law. Britain, or more accurately England and Wales, still
respects Roman, or natural law with respect to money. To this day,
gold sovereign coins are legal tender. Strictly speaking, metallic
gold and silver are themselves credit, representing yet-to-be-spent
production. But uniquely, they are no one’s liability, unlike
banknotes and bank deposits. Metallic money therefore has this
exceptional status, and that fact alone means that it tends not to
circulate, in accordance with Gresham’s Law, so long as lesser forms
of credit are available.

Money shares with its currency and credit substitutes a unique
position in criminal law. If a thief steals money, he can be
apprehended and charged with theft along with any accomplices. But if
he passes the money on to another party who receives it in good faith
and is not aware that it is stolen, the original owner has no recourse
against the innocent receiver, or against anyone else who subsequently
comes into possession of the money. It is quite unlike any other form
of property, which despite passing into innocent hands, remains the
property of the original owner.

In law, cryptocurrencies and the mooted central bank digital
currencies are not money, money-substitutes, or currencies. Given that
a previous owner of stolen bitcoin sold on to a buyer unaware it was
criminally obtained can subsequently claim it, there is no clear title
without full provenance. In accordance with property law, the United
States has ruled that cryptocurrencies are property, reclaimable as
stolen items, differentiating cryptocurrencies from money and currency
proper. And we can expect similar rulings in other jurisdictions to
exclude cryptocurrencies from the legal status as money, whereas the
position of CBDCs in this regard has yet to be clarified. We can
therefore nail to the floor any claims that bitcoin or any other
cryptocurrency can possibly have the legal status required of money.

Under a proper gold standard, currency in the form of banknotes in
public circulation was freely exchangeable for gold coin. So long as
they were freely exchangeable, banknotes took on the exchange value of
gold, allowing for the credit standing of the issuer. One of the
issues Sir Isaac Newton considered as Master of the Royal Mint was to
what degree of backing a currency required to retain credibility as a
gold substitute. He concluded that that level should be 40%, though
Ludwig von Mises, the Austrian economist who was as sound a sound
money economist as it was possible to be appeared to be less
prescriptive on the subject.

The effect of a working gold standard is to ensure that money of the
people’s choice is properly represented in the monetary system. Both
currency and credit become bound to its virtues. The general level of
prices will fluctuate influenced by changes in the quantity of
currency and credit in circulation, but the discipline of the limits
of credit and currency creation brings prices back to a norm.

This discipline is disliked by governments who believe that money is
the responsibility of a government acting in the interests of the
people, and not of the people themselves. This was expressed in Georg
Knapp’s State Theory of Money, published in 1905 and became Germany’s
justification for paying for armaments by inflationary means ahead of
the First World War, and continuing to use currency debasement as the
principal means of government finance until the paper mark collapsed
in 1923.

Through an evolutionary process, modern governments first eroded then
took away from the public for itself the determination of what
constitutes money. The removal of all discipline of the gold standard
has allowed governments to inflate the quantities of currency and
credit as a means of transferring the public wealth to itself. As a
broad representation of this dilution, Figure 1 shows the growth of
broad dollar currency since the last vestige of a gold standard under
the Bretton Woods Agreement was suspended by President Nixon in August
1971.

>From that date, currency and bank credit have increased from $685
billion to $21.84 trillion, that is thirty-two times. And this
excludes an unknown increase in the quantity of dollars not in the US
financial system, commonly referred to as Eurodollars, which perhaps
account for several trillion more. Gold priced in fiat dollars has
risen from $35 when Bretton Woods was suspended, to $1970 currently. A
better way of expressing this debasement of the dollar is to say that
priced in gold, the dollar has lost 98.3% of its purchasing power (see
Figure 4 later in this article).

While it is a mistake to think of the relationship between the
quantity of currency and credit in circulation and the purchasing
power of the dollar as linear (as monetarists claim), not only has the
rate of debasement accelerated in recent years, but it has become
impossible for the destruction of purchasing power to be stopped. That
would require governments reneging on mandated welfare commitments and
for them to stand back from economic intervention. It would require
them to accept that the economy is not the government’s business, but
that of those who produce goods and services for the benefit of
others. The state’s economic role would have to be minimised.

This is not just a capitalistic plea. It has been confirmed as true
countless times through history. Capitalistic nations always do better
at creating personal wealth than socialistic ones. This is why the
Berlin Wall was demolished by angry crowds, finally driven to do so by
the failure of communism relative to capitalism just a stone’s throw
away. The relative performance of Hong Kong compared with China when
Mao Zedong was starving his masses on some sort of revolutionary whim,
also showed how the same ethnicity performed under socialism compared
with free markets.
The relationship between fiat currency and its purchasing power

One can see from the increase in the quantity of US dollar M3 currency
and credit and the fall in the purchasing power measured against gold
that the government’s monetary statistic does not square with the
market. Part of the reason is that government statistics do not
capture all the credit in an economy (only bank credit issued by
licenced banks is recorded), dollars created outside the system such
as Eurodollars are additional, and market prices fluctuate.

Monetarists make little or no allowance for these factors, claiming
that the purchasing power of a currency is inversely proportional to
its quantity. While there is much truth in this statement, it is only
suited for a proper gold-backed currency, when one community’s
relative valuations between currency and goods are brought into line
with the those of its neighbours through arbitrage, neutralising any
subjectivity of valuation.

The classical representation of the monetary theory of prices does not
apply in conditions whereby faith in an unbacked currency is paramount
in deciding its utility. A population which loses faith in its
government’s currency can reject it entirely despite changes in its
circulating quantity. This is what wipes out all fiat currencies
eventually, ensuring that if a currency is to survive it must
eventually return to a credible gold exchange standard.

The weakness of a fiat currency was famously demonstrated in Europe in
the 1920s when the Austrian crown and German paper mark were
destroyed. Following the Second World War, the Japanese military yen
suffered the same fate in Hong Kong, and Germany’s mark for a second
time in the mid 1940s. More recently, the Zimbabwean dollar and
Venezuelan bolivar have sunk to their value as wastepaper — and they
are not the only ones.

Ultimately it is the public which always determines the use value of a
circulating medium. Figure 2 below, of the oil price measured in
goldgrams, dollars, pounds, and euros shows that between 1950 and 1974
a gold standard even in the incomplete form that existed under the
Bretton Woods Agreement coincided with price stability.

It took just a few years from the ending of Bretton Woods for the
consequences of the loss of a gold anchor to materialise. Until then,
oil suppliers, principally Saudi Arabia and other OPEC members, had
faith in the dollar and other currencies. It was only when they
realised the implications of being paid in pure fiat that they
insisted on compensation for currency debasement. That they were free
to raise oil prices was the condition upon which the Saudis and the
rest of OPEC accepted payment solely in US dollars.

In the post-war years between 1950 and 1970, US broad money grew by
167%, yet the dollar price of oil was unchanged for all that time.
Similar price stability was shown in other commodities, clearly
demonstrating that the quantity of currency and credit in circulation
was not the sole determinant of the dollar’s purchasing power.
The role of bank credit

While the relationship between bank credit and the sum of the quantity
of currency and bank reserves varies, the larger quantity by far is
the quantity of bank credit. The behaviour of the banking cohort
therefore has the largest impact on the overall quantity of credit in
the economy.

Under the British gold standard of the nineteenth century, the
fluctuations in the willingness of banks to lend resulted in periodic
booms and slumps, so it is worthwhile examining this phenomenon, which
has become the excuse for state intervention in financial markets and
ultimately the abandonment of gold standards entirely.

Banks are dealers in credit, lending at a higher rate of interest than
they pay to depositors. They do not deploy their own money, except in
a general balance sheet sense. A bank’s own capital is the basis upon
which a bank can expand its credit.

The process of credit creation is widely misunderstood but is
essentially simple. If a bank agrees to lend money to a borrowing
customer, the loan appears as an asset on the bank’s balance sheet.
Through the process of double entry bookkeeping, this loan must
immediately have a balancing entry, crediting the borrower’s current
account. The customer is informed that the loan is agreed, and he can
draw down the funds credited to his current account from that moment.

No other bank, nor any other source of funding is involved. With
merely two ledger entries the bank’s balance sheet has expanded by the
amount of the loan. For a banker, the ability to create bank credit in
this way is, so long as the lending is prudent, an extremely
profitable business. The amount of credit outstanding can be many
multiples of the bank’s own capital. So, if a bank’s ratio of balance
sheet assets to equity is eight times, and the gross margin between
lending and deposits is 3%, then that becomes a gross return of 24% on
the bank’s own equity.

The restriction on a bank’s balance sheet leverage comes from two
considerations. There is lending risk itself, which will vary with
economic conditions, and depositor risk, which is the depositors’
collective faith in the bank’s financial condition. Depositor risk,
which can lead to depositors withdrawing their credit in the bank in
favour of currency or a deposit with another bank, can in turn
originate from a bank offering an interest rate below that of other
banks, or alternatively depositors concerned about the soundness of
the bank itself. It is the combination of lending and depositor risk
that determines a banker’s view on the maximum level of profits that
can be safely earned by dealing in credit.

An expansion in the quantity of credit in an economy stimulates
economic activity because businesses are tricked into thinking that
the extra money available is due to improved trading conditions.
Furthermore, the apparent improvement in trading conditions encourages
bankers to increase lending even further. A virtuous cycle of lending
and apparent economic improvement gets under way as the banking cohort
takes its average balance sheet assets to equity ratio from, say, five
to eight times, to perhaps ten or twelve. Competition for credit
business then persuades banks to cut their margins to attract new
business customers. Customers end up borrowing for borrowing’s sake,
initiating investment projects which would not normally be profitable.

Even under a gold standard lending exuberance begins to drive up
prices. Businesses find that their costs begin to rise, eating into
their profits. Keeping a close eye on lending risk, bankers are
acutely aware of deteriorating profit prospects for their borrowers
and therefore of an increasing lending risk. They then try to reduce
their asset to equity ratios. As a cohort whose members are driven by
the same considerations, banks begin to withdraw credit from the
economy, reversing the earlier stimulus and the economy enters a
slump.

This is a simplistic description of a regular cycle of fluctuating
bank credit, which historically varied approximately every ten years
or so, but could fluctuate between seven and twelve. Figure 3
illustrates how these fluctuations were reflected in the inflation
rate in nineteenth century Britain following the introduction of the
sovereign gold coin until just before the First World War.

Besides illustrating the regularity of the consequences of a cycle of
bank credit expansion and contraction marked by the inflationary
consequences, Figure 3 shows there is no correlation between the rate
of price inflation and wholesale borrowing costs. In other words,
modern central bank monetary policies which use interest rates to
control inflation are misconstrued. The effect was known and named
Gibson’s paradox by Keynes. But because there was no explanation for
it in Keynesian economics, it has been ignored ever since. Believing
that Gibson’s paradox could be ignored is central to central bank
policies aimed at taming the cycle of price inflation.
The interests of central banks

Notionally, central banks’ primary interest is to intervene in the
economy to promote maximum employment consistent with moderate price
inflation, targeted at 2% measured by the consumer price index. It is
a policy aimed at stimulating the economy but not overstimulating it.
We shall return to the fallacies involved in a moment.

In the second half of the nineteenth century, central bank
intervention started with the Bank of England assuming for itself the
role of lender of last resort in the interests of ensuring
economically destabilising bank crises were prevented. Intervention in
the form of buying commercial bank credit stopped there, with no
further interest rate manipulation or economic intervention.

The last true slump in America was in 1920-21. As it had always done
in the past the government ignored it in the sense that no
intervention or economic stimulus were provided, and the recovery was
rapid. It was following that slump that the problems started in the
form of a new federal banking system led by Benjamin Strong who firmly
believed in monetary stimulation. The Roaring Twenties followed on a
sea of expanding credit, which led to a stock market boom — a
financial bubble. But it was little more than an exaggerated cycle of
bank credit expansion, which when it ended collapsed Wall Street with
stock prices falling 89% measured by the Dow Jones Industrial Index.
Coupled with the boom in agricultural production exaggerated by
mechanisation, the depression that followed was particularly hard on
the large agricultural sector, undermining agriculture prices
worldwide until the Second World War.

It is a fact ignored by inflationists that first President Herbert
Hoover, and then Franklin Roosevelt extended the depression to the
longest on record by trying to stop it. They supported prices, which
meant products went unsold. And at the very beginning, by enacting the
Smoot Hawley Tariff Act they collapsed not only domestic demand but
all domestic production that relied on imported raw materials and
semi-manufactured products.

These disastrous policies were supported by a new breed of economist
epitomised by Keynes, who believed that capitalism was flawed and
required government intervention. But proto-Keynesian attempts to
stimulate the American economy out of the depression continually
failed. As late as 1940, eleven years after the Wall Street Crash, US
unemployment was still as high as 15%. What the economists in the
Keynesian camp ignored was the true cause of the Wall Street crash and
the subsequent depression, rooted in the credit inflation which drove
the Roaring Twenties. As we saw in Figure 3, it was no more than the
turning of the long-established repeating cycle of bank credit, this
time fuelled additionally by Benjamin Strong’s inflationary credit
expansion as Chairman of the new Fed. The cause of the depression was
not private enterprise, but government intervention.

It is still misread by the establishment to this day, with
universities pushing Keynesianism to the exclusion of classic
economics and common sense. Additionally, the statistics which have
become a religion for policymakers and everyone else are corrupted by
state interests. Soon after wages and pensions were indexed in 1980,
government statisticians at the Bureau of Labor Statistics began
working on how to reduce the impact on consumer prices. An independent
estimate of US consumer inflation put it at well over 15% recently,
when the official rate was 8%.

Particularly egregious is the state’s insistence that a target of 2%
inflation for consumer prices stimulates demand, when the transfer of
wealth suffered by savers, the low paid and pensioners deprived of
their inflation compensation at the hands of the BLS is glossed over.
So is the benefit to the government, the banks, and their favoured
borrowers from this wealth transfer.

The problem we now face in this fiat money environment is not only
that monetary policy has become corrupted by the state’s
self-interest, but that no one in charge of it appears to understand
money and credit. Technically, they may be very well qualified. But it
is now over fifty years since money was suspended from the monetary
system. Not only have policymakers ignored indicators such as Gibson’s
paradox. Not only do they believe their own statistics. And not only
do they think that debasing the currency is a good thing, but we find
that monetary policy committees would have us believe that money has
nothing to do with rising prices.

All this is facilitated by presenting inflation as rising prices, when
in fact it is declining purchasing power. Figure 4 shows how
purchasing power of currencies should be read.

Only now, it seems, we are aware that inflation of prices is not
transient. Referring to Figure 1, the M3 broad money supply measure
has almost tripled since Lehman failed, so there’s plenty of fuel
driving a lower purchasing power for the dollar yet. And as discussed
above, it is not just quantities of currency and credit we should be
watching, but changes in consumer behaviour and whether consumers tend
to dispose of currency liquidity in favour of goods.

The indications are that this is likely to happen, accelerated by
sanctions against Russia, and the threat that they will bring in a new
currency era, undermining the dollar’s global status. Alerted to
higher prices in the coming months, there is no doubt that there is an
increased level of consumer stockpiling, which put another way is the
disposal of personal liquidity before it buys less.

So far, the phases of currency evolution have been marked by the end
of the Bretton Woods Agreement in 1971. The start of the petrodollar
era in 1973 led to a second phase, the financialisation of the global
economy. And finally, from now the return to a commodity standard
brought about by sanctions against Russia is driving prices in the
Western alliance’s currencies higher, which means their purchasing
power is falling anew.
The faux pas over Russia

With respect to the evolution of money and credit, this brings us up
to date with current events. Before Russia invaded Ukraine and the
Western alliance imposed sanctions on Russia, we were already seeing
prices soaring, fuelled by the expansion of currency and credit in
recent years. Monetary planners blamed supply chain problems and covid
dislocations, both of which they believed would right themselves over
time. But the extent of these price rises had already exceeded their
expectations, and the sanctions against Russia have made the situation
even worse.

While America might feel some comfort that the security of its energy
supplies is unaffected, that is not the case for Europe. In recent
years Europe has been closing its fossil fuel production and Germany’s
zeal to go green has even extended to decommissioning nuclear plants.
It seems that going fossil-free is only within national borders,
increasing reliance on imported oil, gas, and coal. In Europe’s case,
the largest source of these imports by far is Russia.

Russia has responded by the Russian central bank announcing that it is
prepared to buy gold from domestic credit institutions, first at a
fixed price or 5,000 roubles per gramme, and then when the rouble
unexpectedly strengthened at a price to be agreed on a case-by-case
basis. The signal is clear: the Russian central bank understands that
gold plays an important role in price stability. At the same time, the
Kremlin announced that it would only sell oil and gas to unfriendly
nations (i.e. those imposing sanctions) in return for payments in
roubles.

The latter announcement was targeted primarily at EU nations and
amounts to an offer at reasonable prices in roubles, or for them to
bid up for supplies in euros or dollars from elsewhere. While the
price of oil shot up and has since retreated by a third, natural gas
prices are still close to their all-time highs. Despite the northern
hemisphere emerging from spring the cost of energy seems set to
continue to rise. The effect on the Eurozone economies is little short
of catastrophic.

While the rouble has now recovered all the fall following the
sanctions announcement, the euro is becoming a disaster. The ECB still
has a negative deposit rate and enormous losses on its extensive bond
portfolio from rapidly rising yields. The national central banks,
which are its shareholders also have losses which in nearly all cases
wipes out their equity (balance sheet equity being defined as the
difference between a bank’s assets and its liabilities — a difference
which should always be positive). Furthermore, these central banks as
the NCB’s shareholders make a recapitalisation of the whole euro
system a complex event, likely to question faith in the euro system.

As if that was not enough, the large commercial banks are extremely
highly leveraged, averaging over 20 times with Credit Agricole about
30 times. The whole system is riddled with bad and doubtful debts,
many of which are concealed within the TARGET2 cross-border settlement
system. We cannot believe any banking statistics. Unlike the US,
Eurozone banks have used the repo markets as a source of zero cost
liquidity, driving the market size to over €10 trillion. The sheer
size of this market, plus the reliance on bond investment for a
significant proportion of commercial bank assets means that an
increase in interest rates into positive territory risks destabilising
the whole system.

The ECB is sitting on interest rates to stop them rising and stands
ready to buy yet more members’ government bonds to stop yields rising
even more. But even Germany, which is the most conservative of the
member states, faces enormous price pressures, with producer prices of
industrial products officially increasing by 25.9% in the year to
March, 68% for energy, and 21% for intermediate goods.

There can be no doubt that markets will apply increasing pressure for
substantial rises in Eurozone bond yields, made significantly worse by
US sanctions policies against Russia. As an importer of commodities
and raw materials Japan is similarly afflicted. Both currencies are
illustrated in Figure 5.

The yen appears to be in the most immediate danger with its collapse
accelerating in recent weeks, but as both the Bank of Japan and the
ECB continue to resist rising bond yields, their currencies will
suffer even more. The Bank of Japan has been indulging in quantitative
easing since 2000 and has accumulated substantial quantities of
government and corporate bonds and even equities in ETFs. Already, the
BOJ is in negative equity due to falling bond prices. To prevent its
balance sheet from deteriorating even further, it has drawn a line in
the sand: the yield on the 10-year JGB will not be permitted to rise
above 0.25%. With commodity and energy prices soaring, it appears to
be only a matter of time before the BOJ is forced to give way,
triggering a banking crisis in its highly leveraged commercial banking
sector which like the Eurozone has asset to equity ratios exceeding 20
times.

It would appear therefore that the emerging order of events with
respect to currency crises is the yen collapses followed in short
order by the euro. The shock to the US banking system must be obvious.
That the US banks are considerably less geared than their Japanese and
euro system counterparts will not save them from global systemic risk
contamination.

Furthermore, with its large holdings of US Treasuries and agency debt,
current plans to run them off simply exposes the Fed to losses, which
will almost certainly require its recapitalisation. The yield on the
US 10-year Treasury Bond is soaring and given the consequences of
sanctions on global commodity prices, it has much further to go.
The end of the financial regime for currencies

>From London’s big bang in the mid-eighties, the major currencies,
particularly the US dollar and sterling became increasingly
financialised. It occurred at a time when production of consumer goods
migrated to Asia, particularly China. The entire focus of bank lending
and loan collateral moved towards financial assets and away from
production. And as interest rates declined, in general terms these
assets improved in value, offering greater security to lenders, and
reinforcing the trend.

This is now changing, with interest rates set to rise significantly,
bursting a financial bubble which has been inflating for decades.
While bond yields have started to rise, there is further for them to
go, undermining not just the collateral position, but government
finances as well. And further rises in bond yields will turn equity
markets into bear markets, potentially rivalling the 1929-1932
performance of the Dow Jones Industrial Index.

That being the case, the collapse already underway in the yen and the
euro will begin to undermine the dollar, not on the foreign exchanges,
but in terms of its purchasing power. We can be reasonably certain
that the Fed’s mandate will give preference to supporting asset prices
over stabilising the currency, until it is too late.

China and Russia appear to be deliberately isolating themselves from
this fate for their own currencies by increasing the importance of
commodities. It was noticeable how China began to aggressively
accumulate commodities, including grain stocks, almost immediately
after the Fed cut its funds rate to zero and instituted QE at $120
billion per month in March 2020. This sent a signal that the Chinese
leadership were and still are fully aware of the inflationary
implications of US monetary policy. Today China has stockpiled well
over half the world’s maize, rice, wheat and soybean stocks, securing
basics foodstuffs for 20% of the world’s population. As a subsequent
development, the war in Ukraine has ensured that global grain supplies
this year will be short, and sanctions against Russia have effectively
cut off her exports from the unfriendly nations. Together with
fertiliser shortages for the same reasons, not only will the world’s
crop yields fall below last year’s, but grain prices are sure to be
bid up against the poorer nations.

Russia has effectively tied the rouble to energy prices by insisting
roubles are used for payment, principally by the EU. Russia’s other
two large markets are China and India, from which she is accepting
yuan and rupees respectively. Putting sales to India to one side,
Russia is not only commoditising the rouble, but her largest trading
partner not just for energy but for all her other commodity exports is
China. And China is following similar monetary policies.

There are good reasons for it. The Western alliance is undermining
their own currencies, of that there can be no question. Financial
asset values will collapse as interest rates rise. Contrastingly, not
only is Russia’s trade surplus increasing, but the central bank has
begun to ease interest rates and exchange controls and will continue
to liberate her economy against a background of a strong currency. The
era of the commodity backed currency is arriving to replace the
financialised.

And lastly, we should refer to Figure 2, of the price of oil in
goldgrams. The link to commodity prices is gold. It is time to abandon
financial assets for their supposed investment returns and take a
stake in the new commoditised currencies. Gold is the link. Business
of all sorts, not just mining enterprises which accumulate cash
surpluses, would be well advised to question whether they should
retain deposits in the banks, or alternatively, gain the protection of
possessing some gold bullion vaulted independently from the banking
system.