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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
PRIOR COVERAGE:
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Truth or Dare, US Empire Style; Deutsche Bank Under Fire, Tanking European Markets Friday, March 24, 2023, 8:53 am ET Chartists agree that the past two sessions were, for lack of better terms, disorganized and ugly, an apt metaphor of the US Treasury Secretary, who single-handedly spooked markets with her sloppy comments about the US financial system before the Senate Banking Committee Wednesday afternoon. Channeling Johnny Mercer [see below], mainstream financial media accentuated the positive... CNBC: "Wall Street is coming off a volatile session Thursday that ultimately ended with the major averages posting solid gains." while the rest of the world refused to eliminate the negative... Reality: The usual culprits spiked the Dow to a 430-point gain by 11:00 am ET, then puked up all of that eventually sliding to a 110-point loss before a heaven-sent, last-hour rally lifted it and the other indices back into marginally positive territory. That's two days in succession that stocks took the dipsy-doo route, higher in the morning, lower in the afternoon. While the stock market remains the focus of most of the slick Wall Street crowd, its imminent demise isn't necessarily a bad thing. After all, not everybody owns stocks. Besides, by most accounts, many stocks are still wildly overvalued, despite last year's losses that reduced the overall market. A reversion to the mean, using the Shiller CAPE enhanced p/e measure, would imply a decline of some 40% from current levels, from today's CAPE of 28.20 to the mean, 17.01. Sustained losses of that degree might be distressing to stock enthusiasts, but it would open the door to more reasonable valuations and new money entering the market. The likelihood of an overshoot makes for a more compelling case. Overvalued stocks attract speculators; undervalued stocks attract investors. No matter the condition, the fracturing of US dollar hegemony is ongoing and will not cease until global imbalances are corrected. Dominance by the war-mongering West is gradually being eroded by a more pacific wind from the East. Just two days ago, China and Russia agreed to couch international trade in yuan, eliminating the dollar from cross-border transactions. The new paradigm stems directly from and is the natural extension of US sanctions and weaponizing of the reserve currency. In the United States, the UK, and Europe, the media has been directed to portray this as some kind of evil plot by enemies of America. So be it, but, people outside the reach of the Western hegemon should be entitled to self-determination without the meddling of the gigantic military-industrial-media-cabal (MIMC). When the United States and its lapdog allies froze, stole, and sanctioned Russian assets, that was in not-so-sublte terms, an act of war, economic on the surface, but military in practice. By refusing to adhere to Minsk agreements, the US forced Russia's hand into the Ukraine conflict. Now China seeks to remove it, superseding the US-UK-EU combine with its own force for peace. Whatever crises unfold in the West, they will be largely of its own doing, though Russia and/or China will bear the blame. Many citizens only hear and see what they are told by the mainstream press. Others, people with vision who strive for peace and freedom, see things just a bit differently, siding with the so-called "bad guys" rather than accepting propaganda as gospel. At the root of all chaos, the ultimate progenitor is the Federal Reserve System and their debt-based, fractional-reserve fiat currencies, which are stumbling toward zero intrinsic value. Is it not absurd that American citizens must be concerned about the safety of their bank deposits and require guarantees or insurance via the government (FDIC)? Seriously, there has never been a time in which such dire conditions were exposed. If the US banking system is unsound, a continued exodus away from it, to safer havens, is the natural response and why more than a trillion dollars has vanished from bank deposits in the past three weeks. The US and semi-global monetary system is imploding upon itself, the government powerless to stop it unless congress does the unthinkable and terminated the Fed's charter. Whether they do or don't matters little. Chaos in finance is becoming the norm, not the exception and it's best for individuals, families, and businesses to choose sides and protect their wealth and lives. Recent actions by governments have exposed them as less-than-reliable and potentially harmful hosts. Don't mess with Mr. In-Between. For the week through Thursday, stocks have been on a roller coaster. The Dow is up 243 points (+0.76%), the NASDAQ ahead by 156 (+1.35%), S&P 500 up 11.75 (+0.30%), and the NYSE Composite down 48 points (-0.33%). Roiling markets is fear of the banking crisis spreading, with Deutsche Bank falling 13%, as its 10-year Credit default swaps (CDS) rose by what Reuters is characterizing as the most in any single day. UBS is also being bet down as rumors that the bank may back out of its deal to take under failed Credit Suisse. Managers are saying CS's debt burdens and defaults are too extreme for the take-over bank to manage without endangering its own welfare. Lawsuits are being prepared as bond-holders of $16 billion have been completely wiped out. The entire eurozone stock markets are under assault, with the majors falling by 1.75-2.65 percent. The Fed's recently-enhanced swap lines saw some $60 billion taken up on Thursday, though the guilty party was not disclosed by the Fed, as is the normal practice. The banking crisis is spreading and it seems to be heading in uncontrollable directions. The few smaller banks that failed in the US are only the tip of the spear seeking to pierce at the heart of global finance. US stock futures are cratering an hour before the opening bell. Chaos is about to re-emerge upon the US banking system, stock markets and general economy. While back-room players may be obliged to shore up stocks today, they will not be able to keep money from fleeing and currency from devaluation. Accentuate the positive: a corrupt political system of finance is being rendered useless and worthless. There's a message from the 1944 hit tune, the main takeaway "don't mess with Mr. In-Between." If you're going to be successful, chose a side and hang with it.
At the Close, Thursday, March 23, 2023:
Thursday, March 23, 2023, 8:58 am ET After the FOMC had raised the federal funds target rate by 25 basis points (as expected), about halfway through Fed Chairman Jerome Powell's press conference, across town, Treasury Secretary Janet Yellen opened her gaping yaw and announced that the Treasury and FDIC were not exploring options to backstop all bank deposits. Speaking before the Senate Banking Committee, she basically inferred that the current limit of $250,000 will remain in place for the foreseeable future. In case you have more than $250,000, you should consider spreading it around to different banks or as different accounts, say a personal account and business account. There are multiple options by which to protect yourself and your money. Keeping funds in a brokerage account is also an option. The Securities Investor Protection Corporation (SIPC) insures up to $500,000 in such accounts, but only up to $250,000 in cash. If you lose money on bad stocks, you lose, that's it. By most accounts in the whacky world of finance media, Yellen's comments were enough to send stocks spiraling downward into the close. There's a 50/50 chance that her speaking at the same time as Powell was either accidental or planned. Another school of thought believes neither. Stocks may have been overbought and needed to trade lower. The Dow lost 496 points in the final 38 minutes of trading. The S&P went from up seven points to -65.90 in the same time frame. That's a lot of people getting money out, not the kind of thing caused by a couple of fools pimping the masses. It's a mess and the bankers are in panic mode. They continue to put on the ruse that the banks are "strong" and Take your pick. Whatever the reason, bank stocks were hammered once more, taking the major averages for a wild ride in the last two hours. Chartists will note that Wednesday's session was an engulfing one, taking out the highs and lows of the prior session, usually considered a turning event. Which way? Major indices were lower from March 6 and higher from March 13 until Wednesday's late-session fireworks, so, good luck. The banking/finance/monetary/fiscal circus is, however, a sideshow to what's happening at the governmental level. By the end of the 2023 fiscal year, interest on the federal government's debt will be well over $1 trillion, making it the second-largest item in the Consolidated Appropriations Act, 2023 the $1.7 trillion omnibus spending bill that congress passed and Joe Bribem approved, sufficing as a budget. Here are the annualized interest payments on the debt for the past four quarters, as the Fed has consistently raised rates:
1Q 2022: $603 billion Only 4Q 2022 applies to the current Federal fiscal year, which began on October 1, 2022 and will end on September 30, 2023, but the pattern is clear. Interest due on the debt rose by $45 billion between the 1st and 2nd quarters, $88 billion between the 2nd and 3rd quarters, and again, by $116 billion, between the 3rd and 4th quarters. It's accelerating, and the government hasn't even begun to roll over most of its debt. The increase from Q2 to Q3 was a whopping 95%; between Q3 and Q4, 32%. Even if the percentage increase is smaller, say averaging 20% between Q4 and Q1 of 2023 (+170 B), and 15% between Q2 and Q3, 2023, the annualized expenditure would amount to $1.022 trillion and $1.175 trillion respectively. Making matters even scarier, congress has not authorized an increase to the debt ceiling, which means that by June or July, the Treasury may not be making full payment to the Fed, in effect, stiffing their very own money machine. What a mess this is, though it should be of vital interest that Yellen was a former Fed Chair, making the relationship between Treasury and the Fed and her and Powell somewhat incestuous. Even TMZ or the National Enquirer don't get stories as juicy as this. A hearty tip of the cap to Investment Watch Blog for providing this insight. In the mayhem during and after Wednesday's Yellen/Powell blather festival, gold and silver were shooting higher, with gold closing out in New York at $1990.20 and silver finishing at $23.09 after top-ticking at $23.20, its best price in six weeks. It seems apparent that both metals, but especially silver, have further to go. Bitcoin, meanwhile, was ravaged, losing $1,942, from $28,688 to $26,746 between 2:00 and 4:00 pm ET. Easy come, easy go for the not-so-stable store of value. The movement in opposite directions by precious metals and bitcoin should be sufficient to determine which form of non-fiat money you should prefer. (Hint: Not crypto) Over on the other side of the world, Presidents Putin and Xi Jinping wrapped up a few days of face-to-face talks in Moscow, punctuated by the two leaders agreeing to use China's yuan as the trade currency between nations of Asia, Mid-East, Africa, and South America. The communique is one more blow in the ongoing de-dollarization effort of the East against the reserve currency hegemony of the United States. This is a major story, though Western media outlets barely touched upon it in their usual superficial reportage. Loss of reserve currency status for the USA will bring about the death of fiat currencies in a hurry. Runaway, Weimar-style inflation could be the result in a very short time, probably less than a few years. US citizens and those of Europe are feeling only the tip of the spear at present, but are poised to be fully gorged by the growing alliances of the BRICS and what's commonly referred to as the "Global South." When a sufficient number of countries no longer desire to use the US currency to settle trade, it's game over, lights out for the West. Gold and silver will survive as money, but not before domestic chaos and possibly widespread wars occur. That's the usual process for restructuring global currency. History doesn't necessarily repeat, though it often rhymes. Approaching the opening bell in the US, European bourses are sporting losses of less than one percent, while stock futures for the Dow are up $53, NASDAQ futures up $108, S&P, +$17. Gold has been tickling $2,000 all night, but it's a safe bet that somewhere before it crests over 2K, overlords at the COMEX, CME, and LBMA will make sure to beat it down substantially, along with silver. They hate it when their favored fiat currencies are challenged. Eventually, they will be powerless to stop the demise of the dollar and rise of precious metals. Remember, the banks are safe, higher prices are good for the economy, and Janet Yellen is a financial mastermind.
At the Close, Wednesday, March 22, 2023:
Wednesday, March 22, 2023, 9:03 am ET There's nothing like an FOMC meeting in the middle of a banking crisis to get everybody's attention. With the Fed's latest policy meeting set for a 2:00 pm ET federal funds target interest rate announcement, it's expected that stocks aren't going to be moving very much, though, if any direction is preferred, higher is more probable than lower. Stocks have been zooming along for the past two days, so there's reason to believe the rally will continue at least until right before the Fed release and Chairman Powell's press conference a half hour later. Not that it actually matters, but Wall Street and the moronic financial press makes a bigger deal out of these things than necessary. The Fed has three choices, and here's how they break down: 1. Do nothing, aka, pause. Unlikely, because it would send a signal that the recent banking issues have them unnerved and they dearly need to show some fortitude, even if it's completely fake. 10% chance of this. 2. Hike the FF rate by 25 basis points (0.25%) to 4.75-5.00%. There's an 85% probability that is what will happen because it's the easiest way out. Besides most voting members of the FOMC being self-absorbed morons, they are, more than all else, cowards. Easy ways out are their bread and butter. 3. Raise 50 basis points (0.50%), bringing the FF rate to 5.00-5.25%, which would send stocks into a deep decline because, while it would look like the Fed is serious about containing inflation, it would also disrupt commerce to a severe degree. According to most of the people who generate income from rising or falling interest rates, a hike of this magnitude would seem to be overkill, and the Fed doesn't want to kill anything, particularly stocks and especially their precious bond (credit) market. But, it's out there as a possibility, albeit a very small one. If they go the 50 basis point route, it's a pretty good sign they are tanking the economy on purpose. People with mean streaks or hatred of the monetary regime (a number that grows daily) prefer this or an even higher rate hike. There's only a five percent chance of this happening. Nothing else to do toady except wait and watch... or buy gold and silver, because those are real assets, real money, with no counter-party risk. While precious metals have seen significant advances over the past few weeks, the "all's well" narrative being pumped endlessly by Wall Street and the lapdog media has slowed their progress and they are, by most accounts, still in bargain-basement territory. Have you ever paid more than you thought you should for something you really wanted? Sure. Housing, big game or concert tickets, and lately, food, gas, cars, building materials come to mind. Heck, paying a premium for true money that's untaxed and largely untraceable wouldn't be a mistake. Then there's bitcoin. Not just any coin, only bitcoin. It's been raging of late, and it may be a little bit pricey now, but, maybe not. Much of what bitcoin does in terms of movement has plenty to do with the stability of the global economic system. It remains something of a safe haven, though there's no guarantee it will remain so in the future. Holding some with pin money - not serious investment funds - could prove profitable in the short run and maybe even the longer term. Buying assets outside the current financial regime renders the Fed and their interest rate antics moot. One more thing:
Yesterday: In remarks prepared for a speech to the American Bankers Association, Janet Yellen said, "The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion." Note the words "intervention" and "contagion." Does anybody believe a financial system that depends on the decisions of this woman, doing a very bad impersonation of Kaptain Kangaroo before a disengaged gaggle of bankers, is safe and sound?
At the Close, Tuesday, March 21, 2023:
Tuesday, March 21, 2023, 9:21 am ET What do you get when you have:
??????????????? Naturally, a stock market rally, but especially one set up to allay fears of imminent economic demise, crashing GDP, currency debasement, runaway inflation, and bank failures because the only important thing is the FOMC meeting on Wednesday. Bunk. Pure manipulation by the largest scammers in history, the Fed, US Treasury, and the likes of Vanguard, Blackrock and their fellow stock-pimping travelers. Switzerland's largest bank, UBS, has agreed to buy up the country's second-largest bank for the tidy sum of 3 billion Swiss francs ($3.2 billion), the low-ball price backed by explicit guarantees from the government and Swiss National Bank (SNB). Additionally, about $17 billion of Tier-1 debt has been rendered worthless, as AT1 bond holders take a 100% haircut.
"Switzerland's standing as a financial centre is shattered," Octavio Marenzi, CEO of Opimas, said in a research note. "The country will now be viewed as a financial banana republic." European stocks rallied on Monday as well. Stock market gains are supposed to signal to the unsuspecting public that all is well, however, after years of government falsity coming to light in the aftermath of COVID, lockdowns and kill shots, the people aren't quite as unsuspecting as they used to be. Money has left the coffers of many regional banks and will likely continue to do so, putting smaller banks at risk of failure. Fears of economic armageddon have been heightened as inflation decimates household budgets, credit card usage soars, and recent economic data suggests a recession straight ahead, if not already begun. It's entirely plausible that the US has been in recession since January, 2022, and that government numbers are shading the truth at best and outright lying at worst. With US markets about to open, futures are soaring. Gold and silver are off their recent highs, though dealer stock is running very low. All is well. Move along, nothing to see here.
At the Close, Monday, March 20, 2023:
Sunday, March 19, 2023, 1:30 pm ET The week just past was the most consequential since the fall of Lehman Brothers in September, 2008. Chaos in the banking system spilled over into bank runs, bailouts and a bond bounce. The two-year note fell 79 basis points in one week and 105 (1.05%) in the last two. Stocks more or less rolled with the punches. The NASDAQ actually put on one of its better weekly gains of the year, which is considerable, since the index is up nearly 12 percent in the first two-and-a-half months of the year. At the root of all issues were banking woes, exacerbated by quick actions from the Fed and US Treasury, via the FDIC essentially guaranteeing all deposits in the two failed US banks, Silicon Valley and Signature. As the week wore on, focus shifted overseas, to Credit Suisse, a SIFI (Significantly Important Financial Institution), deemed too big to fail, bailed out by the Swiss National Bank to the tune of a $54 billion cash infusion but eventually merging with the country's largest bank, UBS, a situation still evolving. As events unfolded, Janet Yellen was assuring the Senate Banking Committee that the banking system was sound, while out of the other side of her mouth telling the Senators that not all deposits would be guaranteed. Fed speakers were silent, as they entered their "quiet period" prior to the upcoming FOMC meeting (March 21-22). Odds of a 50 basis point rate hike fell back to a split expectation of either a pause or a hike of 0.25%, a sharp departure from Fed Chairman Powell's recent congressional testimony. The emerging uncertainty left regular folks with the daunting task of monetary decision-making. Depositors pulled funds from smaller, regional banks, moving them to larger banks or into money market funds, gold, and silver. Assuring the safety of one's own money was a paramount concern even though at the root of the issue was Federal Reserve solvency and the US dollar as a viable currency. There's an ill feeling in the air. Confidence has been shattered. American citizens do not trust their leaders, institutions, nor their currency, all with good reason. Corruption at the highest levels of government and finance, coupled with manipulative and often false media narratives has left an awakened public staring into a dark abyss.
Equities spent the week gyrating over a barrage of headlines and conflicting media recitals. One day, all was fine, the next, the sky was falling. The Fed bailed out Signature and Silicon Valley banks, set up the BTFP lending facility, and then coerced 11 of the largest banks to rescue First Republic (FRC) with a $30 billion pledge of uninsured deposits.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo announced today they are each making a $5 billion uninsured deposit into First Republic Bank. Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5 billion, and BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank are each making an uninsured deposit of $1 billion, for a total deposit from the eleven banks of $30 billion. It didnt really help. Shares of First Republic were down 81% since March 6th and did not rebound, instead falling another 30% in the aftermath of the bailout. A growing number of smaller, regional banks were also deemed vulnerable, including PacWest (PACW), Zion's (ZION), US Bancorp (USB), and Western Alliance (WAL). On the week, the Dow was essentially flat, producing a minor loss. The NASDAQ added 491.63 points (+4.41%), while the S&P showed a more modest gain of 55.05 points (+1.43%). Conversely, the NYSE Composite: fell 295.13 points (-1.98%) and the Dow Jones Transportation Average dropped 435.55 points (-3.07%), falling headlong off the equity cliff. None of this is very appealing to holders of stock certificates, 401k plungers or people looking 10, 20 or 30 years down the retirement road. Stocks are more likely to fall into a deep abyss than rise back to the frothy levels of 2021 (now ancient history, not to be regained for a very long time, possibly ever).
Everybody and their friends flocked to the perceived safety of bonds as the banking crisis depend through the week. As previously noted, the yield on the two-year note fell by 79 basis points, the ten-year dropped to 3.39%, just two weeks after engaging 4.00%. The entire curve is inverted, from highest (4-month, the favored funding vehicle of the federal government) to lowest (30-year bond), the inversion from 4.79% to 3.60% is a shocking 119 basis points. These are not recession figures. These point to a systemic collapse, depression and worse. Taken at face value, anybody with money or currency to either gamble or invest is playing a dangerous game of three-card monte. On one day, bills, notes, and bonds are the place to be. The next, they're unwanted scrip. Nothing good comes of this. Playing in the treasury sandbox requires steel shovels, pick-axes, hard hats and other protective gear. Being denominated in US$, it is as unstable as the currency itself. The Fed and US Treasury can't save either stocks not bonds. Everything is at risk.
Oil crashed. Closing out the week, WTI crude fell to $66.53, a drop of more than $10 from last Friday's $76.74 per barrel. The trading range between $71 and $81 since mid-November, 2022, has been voided as tight conditions rapidly turned into glut economics for producers which had already cut back as demand weakened. The Eastern trade is being amply supplied by Russia and Mideast oil, with OPEC crude continuing to flow into Europe and the Americas, and Russian oil finding a more roundabout route through China, India, and elsewhere, with appropriate markup. The price drop could become more severe as economies seize up amidst the evolving liquidity crisis. The national average price of gas at the pump was fairly static over the course of the week. Gasbuddy.com reports the national average at $3.42, just a penny lower than last week. California ($4.82), Nevada ($4.24), and Washington ($4.22) remained the only states averaging above $4.00. Illinois ($3.62) and Pennsylvania ($3.58) are the highest in the Northeast/Midwest, though both are trending lower and will probably drop 10 to 15 cents in the next few weeks should oil remain under pressure. The Southeast continued with the lowest prices overall. Oklahoma ($2.91) and Mississippi ($2.97) are the only states under $3.00, but they are soon to be joined by Louisiana ($3.04), Texas ($3.01), Arkansas ($3.02), Missouri ($3.07), Kansas ($3.06), Alabama ($3.07, Tennessee ($3.08), and South Carolina ($3.09). Look for the national average to drop close to $3.00 as the oil glut precedes the coming general recession.
Bitcoin certainly has risen to the occasion the past few weeks - even the past few months - its rise from the $16,500-17.000 range in January to the more than $5,000 gain this past week typically volatile for the grandaddy of cryptocurrencies. Other alt-coins have made gains, but the move has been, in the main, from at-risk dollars, euros, yen and the alt-universe into the lone proof-of-work coin. How this plays out, even as bitcoin and other blockchain currencies and assets come under the gun of government regulators, will be of particular interest to... well, everybody. Bitcoin's role in the new financial dynamics are still to be resolved. The opportunity exists for bitcoin to exceed all-time highs and even approach $100,000 in a short time. It's still risky to the extreme, but, honestly, less so than holding cash in fiats.
This week: $27,925.10
Gold:Silver Ratio: 88.34; last week: 90.91
Gold price 02/17: $1,851.30
Silver price 02/17: $21.88 To say that precious metals served their purpose this week would be a serious understatement. If anything, the incredible move by gold of nearly $200 higher in less than a month demonstrates why it is money. Silver has kept pace, with the silver:gold ratio falling, though there seems to be significantly more upside for silver over gold. Whereas gold is held by central banks and silver is not, the latter will - during, and in the aftermath of the evolving currency crisis - serve as "good as gold" when it comes to smaller purchases like food, fuel, and various services (Go ahead and ask any tradesman or contractor if they accept silver). In just the past week, gold gained 7.32%, while silver shocked the world with a 10.44% rise. In a mere matter of hours (Sunday, 6:00 pm ET), precious metals markets will open in Shanghai and Eastern countries, the action likely to be rather dramatic. The planet may indeed have hit the "Minsky Moment" at which fiat currencies are thrown into the trash heap of history, replaced by the real money of which only gold and silver qualify. While the March Madness that is the NCAA Mens' Basketball Tournament rages, the real games will be in the pits of the metals exchanges. By the time Europeans and Americans awaken on Monday morning, gold and silver may have already exploded higher, with more enormous gains in the near term. This is the time stackers and bugs have been awaiting. It's becoming not only possible, but probable that both gold and silver will easily exceed their all-time highs within days, weeks and months. Gold, for all intents and purposes, is already on the cusp of such a move. Friday's $70 gain, if repeated, would exceed the forever top ($2063.60, August 6, 2020). Silver will require more time to get back to its April 25, 2011 high of $48.03, it being most-hated by central banks, thus more severely repressed, but it will eventually get there and probably rise to extreme valuation in comparison to the soon-to-be-devalued US$. Just in case the LBMA and COMEX exert their considerable influence, which is likely, there's always online dealers and eBay, where prices are less affected by the master manipulators and fiat followers. Anybody currently exchanging gold or silver for fiat is either not paying attention, has a huge stack from which to pull, or is in a cash-lite condition. There may occur a slight respite in the meteoric price gains, but there appears to be general assurance that this is the beginning of the great blow out. Note our Sunday eBay price survey and the SOSMPB, below. Here are the most recent prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) rose significantly during the week, up to $36.56, a gain of $1.85 from the March 10 level of $34.71.
So, where does this leave the general public? On its own, in the main. The country is (un)governed by an unelected grifting geezer in the White House, a Treasury Secretary who's exceeded her "use-by" date, and crony political allies in congress which sould be stripped of power and very well may be well upon that route already via their own actions and brainless inaction. Many of the nation's banks are underwater and/or illiquid; even the central bank, the wholly unconstitutional Federal Reserve, is technically bankrupt, insolvent by the most astute analysts - including Dick Bove, James Grant, and Mike Maloney - and they will continue to add bad debt to their blown-up balance sheet and issue more unbacked currency into an already-ailing system. The Fed disclosed in December that it had $66 billion in unrealized losses on its portfolio of long-term mortgage securities and bonds (its quantitative easing, or QE, investments), as of the end of September. Their next disclosure, within days, is likely to show it's even worse off than before. The New York Sun deftly encapsulates the condition of the Fed and the near-global economy in a Saturday article, The 'Insolvency' of the Fed (free, login required), with various links, including one to James Grant from 2019, Is the Fed Insolvent? The answer is yes, but everybody from Jerome Powell down to the poorest paupers on the homeless streets of San Francisco have been playing the game of denial for decades (since Nixon ended gold convertibility in 1971). In just two words: "We're F--ked." The question now becomes twofold. When will the collapse occur, or, actually, now that it has begun, how long will it take?, and more importantly, what's on the other side? Best guesses how the world will work post complete fiat meltdown and intrinsic devaluation to zero range from some form of programmable money, i.e., central bank digital currency (CBDC), a dystopian nightmare, to Bitcoin emergent, to backing with gold and/or silver. There's more than a slight chance that various places will experience differing currency regimes, as cities crumble into chaos and rural enclaves survive more or less by the sweat of their brows, seats of their pants and some incarnation of "Bartertown." In the end, the US and its Western allies don't have the answers, their solutions ranging from printing banknotes to infinity and blowing the world to smithereens in a nuclear exchange. China, Russia, and the remaining BRICS+ nations will emerge as saviors with some form of commodity-backed real money, a plan that's been in the works since before the start of the Ukraine war, though access to their currency or currencies is more than likely to be banned or a cause for asset confiscation and imprisionment in the US, UK, EU, and elsewhere in the Western world. If last week was indeed the most consequential since the GFC, then what lay ahead will be even moreso, rivaling the Great Depression in depth and magnitude. Some combination of gold, silver, Bitcoin, barter, gardening, and self-reliance will rank high on survivability options. Events are happening at such a rapid pace that what was important a day ago may be moot tomorrow, but what remains the whole truth is that fiat currencies are headed to their graves and fresh monetary regimes are emerging, adding to life's imperative functions that of economist for the able-minded. It's no easy task. Survivors will be measured by their level-headedness and steadfast commitment to the truth. Finally, here's the esteemed James Grant from 2016, via the Mises Institute, expounding on his Time magazine article, "The United States of Insolvency."
At the Close, Friday, March 17, 2023:
For the Week:
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