Cryptocurrency: BANK RUN PANIC Spreads Around Globe, Crypto and Gold Demand Skyrockets, FDIC Coverup

[grarpamp]

https://usdebtclock.org/
https://usdebtclock.com/
https://usdebtclock.day/
https://www.youtube.com/watch?v=Vk7gPypWP3Y Maxed Out 2006
Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders (2006)


And Then Something Broke...

https://schiffgold.com/exploring-finance/and-then-something-broke/
https://schiffgold.com/exploring-finance/calling-the-feds-bluff-they-are-holding-a-losing-hand/
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

Peter Schiff via SchiffGold.com,

Over the past several months, Mike Maharrey and I have posted numerous
articles that conclude the same way… the Fed is bluffing and when
something breaks, they will fold. On every podcast, Mike has walked
through exactly why this is inevitable. Back in September, I laid out
the math that showed why the Fed would fold and laid out a series of
risks that may cause such an event. One of those risks was “What if
the financial markets freeze because there is a credit event
somewhere?”.

Well, that just happened. Silicon Valley Bank (SVB) and now Signature
Bank has collapsed. Sure enough, the Fed folded within 48 hours. They
stood with the Treasury and FDIC and explained how they are stepping
in to prevent systemic risks from spreading. They have established a
new Bank Term Funding Program (BTFB) to allow banks to borrow billions
and blah blah… Sure, okay. Everything is now fine, right?

Nope, sorry, it’s not. SVB is just the latest domino. The dominos have
been moving down the risk curve. It started in Crypto with Three
Arrows Capital and Luna. Then FTX was exposed for being a fraud. We
were told these issues were contained. And they were! SVB didn’t
collapse because of FTX contagion or anything related to Crypto. It
collapsed all on its own because it was the next step along the risk
curve. Let’s do a quick replay…

SVB gets tons of cash and capital all through 2021. They have so much
cash they don’t have anywhere to put it. They could go into Treasury
Bills, but that was yielding 0.25%, so they decide to take a bit more
risk. They buy longer-dated treasuries to get more yield. NOT Bitcoin,
NOT high-risk stocks. They bought some of the safest securities you
can buy… US Treasuries. The mistake they made was forgetting to hedge
their interest rate exposure… whoopsie.

Fast forward 12 months… yields have been pushed higher by the Fed, and
all those Treasuries have lost value. Forced to sell, SVB realizes
huge losses, and poof… they gone! Were they surprised? Was the Fed
surprised? Because anyone with a calculator wasn’t surprised. This was
going to happen; it was just about when. If it wasn’t SVB, it would be
someone else. This is what happens when the tide goes out, you see who
has been swimming naked.

I won’t link to every article on SchiffGold where this was discussed
because it’s essentially every article. I think Mike and I are pretty
good analysts, but we don’t have PhDs in Economics and our primary job
is not about trying to protect the economy from systemic risks. How
did we see this coming and the Fed, FDIC, and Treasury all missed it?
No doubt I was early, I thought this would have happened months ago…
but it was always going to happen!
What did the regulators just do?

The Fed has come out and said that anyone with “high quality” debt
like Treasuries can pledge it as collateral and get back par value for
up to a year. So, you bought a Treasury Note for $100 in 2021, it’s
now worth $95. Whatever you do… DO NOT SELL IT. Come to the Fed and
they will give you $100 for the debt. Treasuries don’t get dumped on
the market and everyone is made whole. BOOM, everyone wins and problem
solved, right?

Sure, for now. But let’s think through a couple of things:

    First, SVB was not the first domino to fall, and it won’t be the
last. The Fed just set up a program for a very specific issue. The
next domino will likely be another issue. What then? Another emergency
measure? If it doesn’t pose systemic risks then maybe the domino will
be allowed to fall. Where does the Fed draw the line? What is
systemic?

    Second, what if you are an unsecured bond holder or stock holder
in a smaller regional bank? Well, the government just said you are
getting zero if your bank collapses. So, do you really want to be a
stock or bond holder in a small regional bank? Probably not. What does
that mean?

    Third, the FDIC just raised its insurance from $250k to basically
infinity… overnight! I mean, that’s like every insurance company
dropping premiums to zero and saying that all claims will be paid in
full without question. Sounds like a party at first, but the hangover
could be deadly. The moral hazard here is undeniable.

    Fourth, the Fed just guaranteed all US Debt at 100% of par value.
What are the implications of this incredible Put in the market? If the
market decides to test the Fed, they may end up printing boat loads of
money.

What’s next?

The Fed, Treasury, and FDIC just stood together and backed the entire
US financial system. But really, this amounts to another big fat
Band-Aid. The Fed also officially pivoted, as has been obvious for
months. Sure, they may hike rates in 10 days, but that would just be
to save face. Powell cannot come out, put a 50-point hike back on the
table, and say “The latest economic data have come in stronger than
expected, which suggests that the ultimate level of interest rates is
likely to be higher than previously anticipated” … and then two weeks
later not raise rates. That’s not how you bluff! Then again Goldman is
already saying hikes are off the table, so we shall see.

The broader market sees a 25% chance of no hike next week and is now
predicting that 50bps is all the Fed has left in this entire rate
hiking cycle. That’s half what it was a week ago. Well, it’s going to
be really hard to get inflation back down to 2% if the Fed is almost
done hiking… but that’s a future problem, right? I would be surprised
if the Fed even made it another 50bps.

SVB was not FTX. SVB was a well-established and respected institution.
Everyone can look in the rear-view mirror and understand why SVB
collapsed, but it doesn’t seem obvious until it happens. And wow! It
happened really fast! The stock was trading at $270 on March 8th and
on March 10th it was worth exactly $0. Holy smokes! Powell just said
everything looks fine on March 7th and 4 days later he is in emergency
meetings trying to save the entire US Financial System. That’s not
such a good look.

In the end, the Fed has bought itself time, but it also likely just
damaged its reputation and announced to everyone that they can talk
tough but can’t act tough. So, how much time did they buy? Is it more
than a week? Probably. But we have seen this show before. Bear Stearns
collapsed on March 14th, 2008. It wasn’t until 6 months later that the
Global Financial Crisis started with the collapse of Lehman on
September 15th, 2008.

The Fed brokered the sale of Bear Stearns to JPM and bought itself 6
months. This time around, did the Fed buy 1 month, 6 months, a year?
Impossible to know. But if I was a betting man, I wouldn’t bet on more
than 6 months. That means you still have time to protect yourself from
the obvious outcome that lies ahead. Buy an insurance policy with no
counterparty and that needs no bailout. Buy some physical gold and
silver!