In summary, it is very clear that the government is going to do everything within its money creation and regulatory powers to keep this banking system failure in check. The PTB even trotted out Joe Biden to tell Americans “the US banking system is safe” even as shares plummeted up to 74% in pre-market trading despite president’s guarantee scheme for SVB and Signature Bank.
The financial powers first had to halt all trading in bank stocks while they organized a stock intervention response so the “crash” of bank stocks was blunted. The fact that the “plunge protection team” had to intervene so forcefully to stop the run on bank stocks indicates the big boys aren’t ready for a market crash yet.
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World Affairs Brief, March 17, 2023 Commentary and Insights on a Troubled World.
Copyright Joel Skousen. Partial quotations with attribution permitted. Cite source as Joel Skousen’s World Affairs Brief (http://www.worldaffairsbrief.com).
WHY THE CURRENT BANKING SYSTEM IS ALWAYS SUBJECT TO COLLAPSE
The collapse of three high-risk banking institutions this week may seem like an anomaly, but it’s not, considering the fragile nature of our banking system. All banks are inherently susceptible to bank runs because they, like insurance companies, are only required to keep a small portion of their assets in cash or liquid assets available for withdrawal within a short time. When cash funds are exhausted, banks must sell their most liquid assets, which are usually in the form of US Treasury bonds. When demands for withdrawal exceed a bank’s cash and liquid assets, the bank becomes insolvent—unless it can get other larger banks to give them some “bridge loans” at higher interest rates, which they just did for First Republic Bank. But they won’t be willing to do if the problem bank’s balance sheet contains too many weak performing loans. Silicon Valley Bank and Signature Bank both ran out of the foregoing options this week and collapsed, but what was different this week was that the Federal Reserve and FDIC stepped in and decided to bailout all depositors, most of which far exceeded the $250K cap on federal deposit insurance, in order to stave off a larger bank panic. While this may work in the short term, it sets a very dangerous precedent in that it is 1) illegal, 2) rewards risky bank speculation, and 3) it sets up a double standard for bailouts that the government can’t possible fulfill if more banks default. This week I will discuss the many reasons why SVB failed and why other banks are similarly vulnerable.
First, a Primer on Banking Continue reading “Skousen: Overview of the Banking Crisis – What you need to know”