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Fed lied, banks died.

The current banking crisis is a result of the “transitory” lie. The Fed should have reacted to inflation six months earlier, and raised rates more gradually. Instead, they slammed on the brakes and now we have a car crash.

The Quantitative Easing Forever Printer goes BRRRRR.

Under the cover of Covid, the US Federal Reserve (and many other central banks) printed trillions of dollars and inflated M2 money supplies by 40% over the past three years.

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Source: The Federal Reserve Bank of St. Louis

Low-interest rates, then suddenly high-interest rates. In 2020-2022 the interest rate environment was 0% or close to it in the US and many countries.

Addressing inflation concerns with all this money printing, the Central Banks narrative went like this;

  • "We don’t see inflation on the horizon"
  • "We see a short transitory inflation period"
  • "…Ok there is some inflation but it’s unlikely to cause a recession"
  • "We expect a short recession late 2023"
  • "…We are going to have to crank up rates until inflation is under control!"

Slowly then suddenly.

With the Fed itself originally forecasting no major rate hikes as recently as 12 months ago, many banks parked huge sums in "the world’s safest asset" – US Treasuries.

This of course turned into sharp pain on the balance sheets of various mid-sized banks in particular, as they purchased multi-year Treasuries thinking they were stable and predictable (and the Fed was shouting from the rooftops assuring no major rate hikes not long ago).

This violent up, then down, then WAY up again movement of the interest rate Xbox controller effectively trapped many banks.

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Source: FDIC

"By hiking rates in a totally unprecedented manner less than a year after assuring market participants that they were NOT going to hike rates until 2024, they created conditions that predictably led to the second-largest bank failure in US history. " – The Valley of Despair by Michael W. Green.

Panic at the Disco

For reasons we’ll read deep analysis on in the future, I’m sure, Peter Thiel lit the bonfire by withdrawing a significant amount of capital from Silicon Valley Bank and he then proceeded to loudly talk about it. This created a lot of chatter among Silicon Valley insiders, starting a good old-fashioned Bank-Run.

SVB didn’t have a risk officer for eight months and all sorts of ridiculous mismanagement issues have been revealed since, but the point is the media is blaming VCs and SVB mismanagement. That is simply not the cause of these bank runs.

US Treasury Secretary Janet Yellen admits it.

SVB’s issues weren’t caused by banking tech. SVB’s issues were caused by buying Treasuries.

Contagion

The market was expecting some strong and very confident statements and emergency action to prevent panic on U.S. Monday open. Instead, the US President gave a two minute presser stating "The Banking System is Strong" and awkwardly, slowly, walked away before any questions could be answered.

A Joint Statement from the Department of the Treasury, the Federal Reserve, and the FDIC, also lacked the confidence the market expected;

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Here’s the mechanism. So, they may print away the bond losses. Given their scale, we will see if $25B is enough.

Unsurprisingly, at US Monday morning when the Banks and Stock Market opened, we saw an unprecedented rush of liquidity out of small and mid-tier banks (and their stocks) into the accounts of the Too-Big-To-Fail banks.

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Nearly the entire regional-level banking sector in the USA was on a NYSE trading HALT.

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Various bank’s listed stocks – major drawdowns!

Bitcoin and Bullion

With four of the biggest and most essential ‘Crypto Friendly’ banks collapsing, the weekend chatter was that Bitcoin was going to see a huge drop too as various companies sold bitcoin to cover payroll.

Don’t be absurd – the inevitable end of the Fiat System is what Bitcoin was born for. And capital flowed in over the weekend and Monday open – driving Bitcoin up 18% in the past four days.

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Born for this.

Gold saw a ton of inflows too – rising $100 USD per ounce from $1811 to $1911 over the same time period:

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What comes next?

More pain.

With crypto-friendly banks captured in the US and the entire global tech-sector affected with four major banks collapsing, the contagion will be real.

The real question is what does the Fed do next?

Continuing to raise rates now is political suicide but they have not indicated they will slow increasing rates to fight the inflation they created.

They can’t print more. They can’t raise rates. Central Banks are trapped.

  • There will be more bank runs and bank failures globally in the coming weeks
  • Followed by Currency Debasements
  • Followed by Sovereign Debt Defaults

And we knew this end-game would come since the US took the Dollar off the Gold Standard in 1971.

Meanwhile, what are non-G20 countries doing? While NZ, Australia, Canada, the UK, and most of the EU have been selling off productive assets and bullion reserves, the BRICS+++ nations (representing 65% of the planet) have been for over a decade buying increasing amounts of Silver, Gold, and productive farmland and infrastructure (except South Africa, which is currently in total collapse).

And with cash concentrated to the biggest banks, all it will take is the right disaster (probably a major cyber attack) to attempt a Global Reset, replacing money with ‘policy coupons’ aka CBDCs.

Buy Bitcoin, Bullion, and productive assets.

All around the world ordinary people are now questioning the nature of Money, The Banking System, and how to avoid what’s becoming a very obvious climax.

If you want to diversify a percentage of your holdings into HARD MONEY you can hold yourself like #Bitcoin – drop us a note (we service $100k + transaction sizes) [email protected].


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