Is the banking world ready to fail? “In these turbulent times, the shadow of the 2008 mortgage crisis hangs over the traditional financial system. As bank failures follow one after another, forcing the Fed (US Federal Reserve) to switch gears, economists are worried. Banks are sweating, prices are falling. An invasion at the very heart of a critical period when monetary policy is being abused.
Where is the Fed going, banks are dying
Too fast pricing…
Eventually, something had to break. Due to the fastest rate hike in history, triggered by a very aggressive Fed policy, the hitherto well-oiled machinery of the banking system eventually came to a halt. The chart below speaks for itself.
We waited for the bankruptcy of corporations and the rise in unemployment, finally the banks came. And last but not least, as Silicon Valley Bank (SVB), 16th in the ranking of the largest US banks. Far behind the giants JP Morgan, Wells Fargo or Goldman Sachs. But significant enough for the Fed to intervene, thereby correcting the exchange rate policy, which has been pursuing for more than a year. Restriction of actions to prevent the collapse of the system. But we will return to this.
Not one, not two, in order to avoid falling dominoes, Janet Yellen, US Secretary of the Treasury, and Jerome Powell’s Fed were required to act. This shows how fragile the financial pyramid they have built is. $25 billion out of nowhere to patch up the hole and avoid panic. A complete economic misinterpretation compared to the tight monetary policy that has been in place so far. A policy that proclaimed loud and clear that it wanted to make money scarce in order to counter inflation. The same policy that disables the ticket printer on the first failure. But how did it all start?
… that eventually breaks something: the banking system
Guilty? An interest rate hike by the Fed, the goal of which was so clear up until now: to make money disappear. To counteract this inflation, which for more than a year has significantly increased the cost of living for citizens. However, less money in circulation means more difficult financing for companies. Many companies, especially start-ups in the technology sector or, for that matter, cryptocurrencies, have faced a shortage of investors who could subsidize their activities. Really, what are they doing? They use their reserves. And where are these reserves? in bank vaults. In particular, the bank of Silicon Valley.
Except that this money was not liquid, not directly available. This is the principle of the bank, there is never a lot of money in the reserve. What these same financiers hastened to reproach the crypto sector for, moreover, during the FTX crisis. Exchanges that have since initiated Proofs of Reserves. However, depositors, seeing that the bank was in trouble, began to panic. If there is not enough money for everyone, they rip off the last one. By withdrawing their money consistently over a very short period of time, they thus triggered the self-fulfilling prophecy of the bank run. A threat that also puts pressure on the entire global banking system.
Bankruptcy, failed anti-crypto act?
Earlier, in March, FTX, which was the victim of a big bang, went bankrupt. Silvergate Bank, silver door with clay handle. Now we can add the Silicon Valley Bank. Like Signature Bank, the bank was shut down “preemptively” by the US government. This is unheard of. It is clear that the bank was not bankrupt, but the Fed, probably endowed with a gift of clairvoyance worthy of Mrs. Irma, chose to close it before the worst happened. The biggest disadvantage of this bank? Its famous support for the crypto sector. From there, to view this gesture as an anti-crypto attack orchestrated by the US government, there is only one step. Moreover, its recovery will be due to the fact that the buyer refuses any connection with the crypto sector.
This act forced the OKCoin exchange to temporarily suspend dollar deposits. Signature Bank is the main bank of the crypto platform.
Three bankrupt banks. Three crypto banks. That’s a coincidence? Maybe yes, maybe not. The attack will be brutal. However, the fact remains that, compared to a few weeks ago, there are fewer banking partners left for crypto players. However, contrary to appearances, crypto won’t turn off traditional bankers.
Digital Currency Group (DCG), a crypto giant whose subsidiary Genesis recently made a lot of noise, needed to find new partners due to the lack of active pro-crypto banks. And obviously the big banks are still jostling at the gate. HSBC, Deutsche Bank or Mercury would respond positively to the call.
Gambling: when finances cheat, the taxpayer pays
When he doesn’t like the game anymore, finance changes the rules
Let’s go back to the collapse of the Silicon Valley bank. The problem for the US government is this: if it sticks to the rules of the game, it carries a potential systemic risk that could engulf the entire financial system. Game over. Unless not, the government, in addition to playing poorly, also dictates the rules. Therefore, he can change them at will, when it suits him. Always in the interests of the same participants: banking giants, financiers, hedge funds and billionaires. Banks have the right to fail without consequences. Not to us.
By regulation, only deposits under $270,000 must be guaranteed by the FDIC, the Federal Deposit Insurance Corporation. A guaranteed fund set aside for just such an occasion. But after the bankruptcy of SVB, and in order to end the panic, the Fed announced that it would cover all deposits in order to avoid a panic attack and the risk of infection of the entire system. An unfair blackmail of the famous “too big to fail” phrase that allows the twisted mechanics of a failed system to continue working. Blackmail with Big Consequences: How Can an Individual or Company Protect Their Funds? From now on, this is done by placing them in one of those famous banks that are “too big to fail.” That’s what the senator managed to get from US Treasury Secretary Janet Yellen. In fact, we are seeing an influx of applications for registration in large banks to the detriment of smaller ones. This means a likely concentration of banking players in the US.
Of course, on the one hand, this assistance is aimed at preserving jobs, ensuring business prosperity, and preventing bankruptcies and unemployment. On the other hand, it is a pure moral injustice to the rest of the population, which in a certain way will suffer the consequences of this magic money, this unlimited money printing. And who is already suffering from them through inflation, as we shall see later.
Contagion for fear in Europe?
And despite this salvation of the state, now the various governments must cope with a crisis of confidence. Growing crisis of confidence. At the beginning of the week, the American banking sector fell sharply. To the extent that traditional stock exchanges have temporarily suspended the listing of some banking shares. Admittedly, this is a very practical “stop button” to avoid facing the reality of the market.
A non-existent button in the crypto world and a scenario reminiscent of the 2008 mortgage crisis. That is why Satoshi Nakamoto created Bitcoin. As an echo of the very identity of this digital gold, its price jumped 20% as the markets crashed. Recalling its deepest nature as an uncensored monetary alternative and devoid of any government influence. The symbolism is strong when you consider that Satoshi included in the very first block of the Bitcoin blockchain an article from the Times, headlined on the same day, January 3, 2009:
“Chancellor Alistair Darling is about to bail out the banks for the second time. »
Now the contagion is gradually spreading to the European banking market, while CAC 40 is also starting to fall. Bank prices are falling sharply. First Credit Suisse, then step by step BNP Paribas and Crédit Agricole. Thus, the European banking system does not appear to be as firm in its support as we are led to believe, no offense to our Economics Minister Bruno Lemaire. The latter shouts, wanting to calm us down, with a big reinforcement “calm down, calm down”. But a storm on the coast is unlikely to find time to listen to a sailor exhausted by rough waters.
Inflation, retribution for the banking excesses of the privileged
When Biden says he will do everything possible to ensure that the taxpayer has nothing to pay, this is not true. Because the price, on the contrary, will be very high. Making magical money will have to pay off somehow. The price at which consumers become the first victims. Rise in rent, real estate prices, basic necessities, food in general, shorter cost of living.
Forced fiscal austerity, constrained by the obligation to pay interest on the ever-increasing public debt. Capital is inevitably amputated every year, leading to the gradual decline of our public services: hospitals, courts, schools, universities… The infrastructure is already in critical condition, deprived of funds and financial support from the state. It’s bad when you think that these same billions are springing up out of nowhere to help a banking system steeped in its own sin of greed.
A rise in prices that has gone unnoticed for years, but which can no longer be hidden today, when inflation is difficult to control and has remained at the level of 6% to 10% for more than a year. Do you know that if inflation is maintained at 10% for 5 years, 40% of the assets placed in your Livret A will disappear like smoke? Swallowed by rising prices.
In gambling, governments dictate their own rules, modifying them at will to keep their little system alive. And, in the end, the taxpayer pays. But one day they will have to make a choice. Decide between the death of your currency or the death of the markets. Are we on the verge of collapse of our economy, or is it just a fleeting panic in anticipation of an even greater cataclysm? Nobody knows, but the boat is rocking, rocking. In these troubled times, buying a lifeboat is far from a bad idea. And the bitcoin buoy is still within reach.