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The Bank Crisis Has Democrats Scrambling Behind The Scenes To Find A Scapegoat

The Bank Crisis Has Democrats Scrambling Behind The Scenes To Find A Scapegoat

Democratic representatives are scrambling in the wake of the potentially contagious Silicon Valley Bank implosion, looking for a way to divert attention away from them should the crisis expand.  

One avenue for scapegoating the event that has been suggested among Dems and the media is to blame a 2018 law that eased Dodd-Frank capital requirements for midsize and small banks.  Republicans led the effort to pass the law, which President Donald Trump signed, but 33 House Democrats and 17 Senate Democrats also voted for it. 

No mention, of course, of the cancerous exposure SVB had to numerous woke investments through venture capital, including money losing ESG related projects, climate change-based companies and World Economic Forum stakeholder capitalism projects. 

The Dems have found their narrative, which is an old narrative:  “The conservatives did it.”

What Democrats do not seem to understand is that the easing of Dodd-Frank capital requirements was in direct response to the Federal Reserve’s announced plan to tighten liquidity and raise interest rates through 2018.  With more expensive credit and a shrinking Fed balance sheet, reducing requirements for bank buffers was one of the few ways to prevent the stimulus addicted lending sector from plummeting.  The extra capital also allowed banks to continue lending to companies that engage in stock buybacks, keeping stock markets afloat.

With a larger capital buffer even more liquidity dries up, revealing the true economic weakness underneath that Dems have denied for the past few years.  So, if Biden and the Dems get what they want (more strict capital requirements for banks), then there will be an even swifter collapse of markets and the overall economy due to lack of liquidity.    

By the end of 2018, markets began to plunge anyway under the strain of higher interest rates, which led to the Fed reversing course, and this seems to be what Democrats are really hoping for.  They have called for endless liquidity measures and have consistently demanded lower rates and looser monetary policy.  However, when Donald Trump’s Administration called for rate cuts during his term, Dems attacked.  Once again, when Republicans do it, it’s wrong; when they do it, it’s good policy.  

Another issue to consider is that each successive program by the Fed to employ bailouts and QE accelerates the inflation crisis.  While both sides of the aisle seem to want helicopter money when they are in power so they can boast about rising stock markets and improved employment, the Dems are now facing a systemic stagflationary event; the same event they originally claimed did not exist.  This means that any pursuit of new QE in the face of a credit crunch would lead to an immediate spike in inflation once again, crushing the middle class.  

Are Democrats willing to accept responsibility for something like that?  Not a chance.

The Biden Administration has so far taken full credit for the slowdown of consumer inflation as well as the shrinking deficit, but these changes are only due to the tightening actions of the central bank which sets policy independent of the White House.  Democrats can’t have it both ways – They can’t take credit for reduced inflation when the Fed tightens policy against their wishes, and then not take credit for the consequences of higher inflation when they badger the Fed to inject more stimulus.

The only recourse for the political left is to somehow lay the blame on conservatives no matter which way the wind blows, inflation or deflation.   

Emergency congressional hearings have been organized to determine the cause of the SVB crisis and the course of action needed.  Democrats including Sen. Sharrod Brown and Rep. Maxine Waters were quick to applaud the backstop initiated by the Fed and the Treasury Department, attempting to calm market concerns and reassure investors and depositors that all is well.  Maxine Waters stated that Republicans and Democrats needed to “work together to protect the safety of the financial system”, which is likely a thinly veiled assertion that Republicans must support raising the debt ceiling and commit to even more spending.  

Biden took a slightly different tone, vowing to hold the people who caused the mess responsible, specifically referring to Republicans.  Of course, to legitimately hold the true culprits responsible would require that Biden punish himself – As it was the Fed along with the Obama/Biden Administration that launched the ongoing stimulus bonanza in 2008/2009.  Obama and Biden doubled the national debt from $10 trillion to $20 trillion in the span of a mere eight years.  The normalization of fiat money creation to avoid economic consequences has created the very inflationary crisis and banking weakness we are facing today. 

And, if banks cannot withstand even a moderate rise in interest rates and reduced liquidity because of their addiction to Fed stimulus, then it is fitting if the system crashes under a new Biden regime.

Tyler Durden
Mon, 03/13/2023 – 21:40

Victor Davis Hanson: The March Madness Of The President

Victor Davis Hanson: The March Madness Of The President

Authored by Victor Davis Hanson via AmGreatness.com,

Joe Biden’s political utility and near senility serve as exemptions for his often sexist, racist, and creepy riffs…

Another couple of weeks, another bout of madness from Joe Biden and his team.

Of recent Biden delusions, consider:

Biden went off in one of his impromptu Corn Pop, or “beat-up-Trump-behind-the-bleachers” fables. These often slurred and nearly unintelligible tales characteristically virtue signal Biden’s own victimhood and “courage.” 

They are interspersed with his bizarre propensity for eerie female contact. So we see or hear of his long record of blowing into the ears and hair, or squeezing the necks of young girls. He hugs, for far too long, mature women. He can call out among a crowd an anonymous attractive teen stranger. Or, recently he relates an incoherent but quasi-sexual vignette. 

So Joe recalled his patient days in his usual off-topic “no lie/not kidding/no joke” manner (i.e., tip offs that he’s lying). He told us that a noble nurse once would “come in and do things that I don’t think you learn in medical school—in nursing school.” The president got a nervous laugh from the apparent quasi-pornographic reference (but then again Joe is excused because he is a “feminist”), before he detailed her technique:  

She’d whisper in my ear.  I didn’t—couldn’t understand her, but she’d whisper, and she’d lean down. She’d actually breathe on me to make sure that I was—there was a connection, a human connection.

A woman leaning over to blow into a prone man’s ear certainly constitutes a “human connection.” Yet all of Joe’s fables have different Homeric-style retellings. Two years ago he claimed that the same nurse in question actually blew into his nostrils. What a strange air-pressure technique that must have entailed for a person recovering from brain surgery. But perhaps it was consistent with biblical references to God blowing the spirit of life into the nose of man.

About a week later, referencing that hospital stay, Biden added that doctors “had to take the top of my head off a couple times, see if I had a brain”—a reference that did not reassure the nation he is not enfeebled. 

No one in the media had much of a reaction because Joe Biden’s political utility and near senility serve as exemptions for his often sexist, racist, and creepy riffs. 

Instead, the media wrote off the nurse breathing into good ol’ Joe’s orifices as belonging to the same weird genre that a while back gave us inner-city kids stroking the golden hairs on Joe’s tan legs, or the shower revelations of Ashley Biden’s diary, or his “you ain’t’ black,” “put y’all back in chains,” and “junkie” sorts of racial condescension (e.g., “Why the hell would I take a test? C’mon, man. That’s like saying you, before you got on this program, you take a test where you’re taking cocaine or not. What do you think? Huh? Are you a junkie?”). 

Joe also blustered to a crowd during Black History Month, “I may be a white boy, but I’m not stupid.” 

The crowd laughed at the idea that the jester Biden believes white people are usually stupid, but that he, Joe, the exception to his race, is not stupid, despite being white. At least Biden finally referenced himself as “boy.” Usually he has used that racial putdown for prominent blacks like Maryland Governor Wes Moore or a senior White House advisor Cedric Richmond.

The February-March madness of Joe was not through. Sometimes, his venom renders him disgustedly comic, as when he took the occasion of mass American deaths from fentanyl on his watch, to chuckle that the carnage was at least worse under Trump (an abject lie): 

‘I should digress, probably. I’ve read, she [Rep. Marjorie Taylor Greene], she was very specific recently, saying that a mom, a poor mother who lost two kids to fentanyl, that, that I killed her sons. Well, the interesting thing is that fentanyl they took came during the last administration.’ Followed by the Biden laugh.

Apparently, 100,000 dead at least deserves from Joe a “Trump did it” chuckle.

Joe, for the third time in two years, tripped and nearly fell ascending the ramp of Air Force One. At some point even his supporters will concede that when octogenarians repeatedly stumble and fall, if not put under careful watch or provided a walker, it is only a matter of time until they break a hip and become bedridden.

In another replay, once again Biden finished his remarks, turned around to exit—and had no idea where he was going to go or whose invisible hand he was supposed to shake.

Amid all this, Biden more or less stuck to his now tired rhetorical themes. 

One is the serial denunciation of the MAGA Republicans. Usually, he trashes them as semi-fascists or un-American, often in the context of his “unity speeches.” After calling for reconciliation, bipartisanship, and unity, Joe then usually tightens his face, grimaces, and starts yelling about the MAGA dregs and chumps. 

If Biden is really angry, he adds the intensive adjective “Ultra” for the MAGAites. He gets particularly incensed when referencing the one percent who “don’t pay their fair share” (the one percent pays over 40 percent of all income tax revenues). Biden is oblivious that the entire Biden clan is under popular suspicion of not reporting all of the millions of dollars in quid pro quos leveraging they raked in from foreign governments without registering as their agents.

Note that his entire team, when stung by charges of incompetency or illegality, usually follows Joe’s tactic of “Trump did it.” So when Pete Buttigieg was criticized for ignoring the East Palestine rail wreck and reminded of his past serial transportation failures, junkets, and incoherent systemic racism charges, he retreated to blaming Trump for the derailment. 

Buttigieg falsely claimed that Trump’s past lifting of particular electric railcar brake regulations caused the wheel bearing failure in East Palestine, a lie that even members of his department could not stomach.

Two, Joe creates elaborate fables. In the past two weeks, he returned to his civil rights lie that he was a campus activist agitating for racial justice. At least he did not add his usual fillips of being arrested or standing up to apartheid police in South Africa.

In Biden’s world, he brags he has reduced inflation. Yet when he entered office in January 2021, the annualized inflation rate was 1.7 percent. Two years later in January 2023 inflation went up to 6.4 percent, after hitting a high in June 2022 of 9.1 percent—6.4 percentage points higher than when he took office. In mid-March we will learn of the February 2023 annualized rate, but it is expected to climb back to more than 8 percent. 

If anyone compares the current price of eggs, or rent, or diesel fuel, or a natural gas heating bill or building materials to their respective costs when Biden entered office, then he would know Biden’s inflation is cumulative and has nearly destroyed the affordability of shelter, food, and fuel—the stuff of life.

He mentioned lowering heating and cooling costs of American homes through his climate change advocacy. In truth, on average electric rates shot up over 10 percent last year. Natural gas and fuel went even higher to over 25 percent in a single year. 

Biden talks about his low unemployment rate of 3.4 percent. But it is almost identical to what the Trump Administration achieved—without Biden’s high interest rates and acute inflation—in the months before the massive COVID lockdowns. 

Moreover, current low employment is largely a reflection of reduced labor participation—due to early retirements, exits during the pandemic, fear of COVID, long COVID, the zoom culture, and most importantly the Biden continuance of massive COVID-era subsidies that discourage employment. The labor participation rate has hit near historic lows under Biden, lower than the pre-COVID rate under Trump. 

It was not until last month that the Biden economy finally achieved the level of total employed Americans who had been working in January 2020 on the eve of the Covid lockdowns. 

As far as interest rates for 30-year fixed mortgages, they were 2.9 percent when Biden took office. Now they are currently over 7 percent. 

In sum, Biden repeats the same patterns of deception: crash the economy as evidenced by many of its major indicators, then when a data point reveals a slight and likely temporary monthly recovery, he brags he “reduced” inflation, interest, or unemployment.

We also heard during the same week from Biden Attorney General Merrick Garland who was shredded during his testimony to the Senate. He argued that the vastly disproportionate FBI response to violence against abortion centers versus attacks on pro-life groups was only due to the differences between light and dark—literally: abortion centers are attacked during daytime; in contrast, pro-life shelters are attacked during night. 

Apparently his Justice Department and the FBI shut down at sunset and reawaken at dawn—as if either most violent crime does not occur at night or there is nothing to be done about it when it does. 

Garland further embarrassed himself when he could not explain the disproportionate use of force in arresting or detaining conservative suspects versus the virtual exemptions given prominent left-wing suspects. 

Most embarrassingly, when asked why he did not charge mobs that swarmed the homes of conservative Supreme Court justices to influence their decisions—a federal felony—he lamely claimed there were federals protecting the residences.

In Garland’s world, some criminals committing felonies are completely exempt if law enforcement prevents further violent manifestations of their criminal behavior. So illegally swarm a Supreme Court justice’s residence to influence a court decision, but then stop short of escalating further by the sight of law enforcement—and, presto, you never committed a crime in the first place. 

Garland finished off his recent nonsense by repeating the lie that five police officers were killed due to the January 6 protests. In fact, none were. Officer Brian Sicknick died of natural causes after the protests were over. The other four committed suicide weeks or even months later and no one has connected their self-induced deaths with any act of the protestors. 

About the same time, a beleaguered Pete Buttigieg went off on riffs about Tucker Carlson, who, he implied, lacked the grassroots, working-man fides of Buttigieg.

He claimed that for all the criticism he has endured, he believes that he will be remembered for posterity for his fight against “climate change”—although he did not point to any concrete result in reducing carbon emissions due to his singular policies. 

In fact, Buttigieg will be known but for other characteristics: He repeatedly emphasizes his identity politics gay stature both to note his supposedly pathbreaking courage and to claim victimhood when attacked. He sees transportation through the lens of race and so chases the unicorn of white privilege, whether concerning past freeway routes or the makeup of current construction crews (falsely charging that white men are overrepresented on them). Under his tenure as Transportation Secretary, the country experienced dangerous supply interruptions, ossified ports, and harbor-bound trains robbed in Wild West fashion. 

Buttigieg’s diversity mandates either did nothing to ameliorate, or actually led to, a series of near-miss airline crashes, the complete shutdown of the airline industry due to computer glitches and weather, the implosion for a week of Southwest Airlines, the East Palestine derailment disaster, and labor interruptions. In all these cases he either was on leave or a junket, wrote them off as Trump’s fault, or contextualized them as no big deal. 

Delusional Homeland Security Secretary Alejandro Majorkas has declared the border closed and the nation secure, even as 100,000 Americans per year have died from overdoses of fentanyl shipped with impunity across the open border by Mexican cartels. When upwards of 7 million aliens flow across the border illegally since Biden took office, it is written off as Trump’s fault. 

Finally, last week there were several interviews with FBI Director Christopher Wray. He could not explain why his agency goes full military mode to arrest a father and husband for protesting at an abortion clinic while having no clue who has been attacking pro-life shelters. 

In Wray’s mind, the performance art sweep into Mar-a-Lago, which he claims was not a “raid,” was no different from having Biden’s lawyers quietly conduct their own “investigations” of Biden’s improper removal of classified documents (improper with an asterisk, since no vice president has the president’s legal authority to declassify whatever he wishes). 

Wray could not explain why the FBI sat on the Biden trove until the midterm election was over and then only acted to further search Biden residences when its own asymmetrical protocols came under fire. 

Add up the last few weeks, and we learned that Christopher Wray’s FBI is doing splendidly in its even enforcement of the law. Merrick Garland’s Justice Department is absolutely disinterested and treats all sides equally. Alejandro Mayorkas has closed the border and we are now “secure.” Pete Buttigieg is building a legacy for the ages as a climate change crusader.

And an eloquent and dynamic Joe Biden has compiled an impressive legislative record on his way to a great presidency—with the energy, we are told by Dr. Jill Biden, that is more impressive than any 30-year-old’s.

Tyler Durden
Mon, 03/13/2023 – 21:20

Greta Thunberg Deletes Tweet Claiming “Climate Change Will Wipe Humanity” By 2023

Greta Thunberg Deletes Tweet Claiming “Climate Change Will Wipe Humanity” By 2023

Greta Thunberg embarrassingly deleted a tweet from 2018 that was connected to an article predicting the extinction of humans by 2023 due to climate change.

“A top climate scientist is warning that climate change will wipe out all humanity unless we stop using fossil fuels over the next five years,” Thunberg’s tweet read, citing an article from some obscure website that no longer exists.  

On Saturday, Jack Posobiec first revealed the deleted tweet. 

The self-described “autistic climate justice activist” was merely a teenager with no credentials when she touted end-of-the-world prophecies that millions of ‘climate-tards’ believed. Progressive media outlets, ‘green’ lawmakers, corporate execs, and non-governmental organizations praised her for her bold predictions that have turned out to be nothing but lies. 

Greta is a ‘useful idiot’ for the climate change scam. Every decade a new and improved climate activist emerges. It just so happened that a child replaced former Vice President Al Gore. 

Recall Gore released a 2006 documentary called “An Inconvenient Truth” that warned global sea level could rise as much as 20 feet “in the near future.”

The true weakness of the climate movement lies in its intellectually deficient spokespeople, like Greta and Gore. 

So who comes next? Well, we found the new and improved Greta 2.0. 

Tyler Durden
Mon, 03/13/2023 – 21:00

As Banking Collapses Erode Trust, Bitcoin Fixes Moral Hazard

As Banking Collapses Erode Trust, Bitcoin Fixes Moral Hazard

Authored by Mickey Koss via BitcoinMagazine.com,

As the underlying issues in our economy are exposed by recent banking failures, Bitcoin stands as a trustless, alternative money…

As unrealized losses piled up, Silicon Valley Bank (SVB) gradually, then suddenly became insolvent, followed by the collapse of Signature Bank and people beginning to wake up to issues pervading our financial system. Modern day bank runs, though digital, can force banks to sell reserve assets at a loss, inevitably leading to insolvency.

As Balaji Srinivasan has pointed out, what was once considered the gold standard for risk-free reserve assets is now on the precipice of a potential new banking crisis. Is this the end of the U.S. treasury as we know it?

If nothing else, the events over the weekend — from SVB’s failure to issues with other financial institutions to alarming intervention by the government — demonstrate just how fragile the system has become, underscoring its dependence upon money printing even as it is being undone by the low-yield, low-interest-rate environment that was caused by the printing in the first place. The dichotomy is stark, but there are lessons to be learned.

YOU CAN’T TAPER A PONZI: WHY THE LEGACY BANKING SYSTEM IS RIPE FOR FAILURE

The way the banking system works is, essentially, banks take your deposits and lend them out at higher interest rates than they pay you. They often keep reserves in U.S. treasury bonds, among other things, and everything seems to work until it doesn’t.

With the Federal Reserve’s tightening cycle, raising interest rates meant decreasing the price of bonds, devaluing banks’ staple reserve asset. When depositors come to redeem their deposits, banks are forced to sell their assets at a loss, eventually becoming unable to stem the bleeding.

Regional banks will bear the brunt of this hit, as demonstrated by the recent collapse of SVB. Federal regulators are desperately trying to prop up confidence in the system by backing 100% of depositors’ money, but at what cost?

Depositors are surely already fleeing to the big boys, which will result in a more concentrated and fragile system than before. I think everyone knows deep down that they won’t be able to save every bank customer. Just how much money printing will the public tolerate in the name of financial stability?

In terms of equity holders, why would anybody want to hold stock in a small bank at this point? If banks fail and the Feds choose to make depositors whole while everybody else suffers, all of the risk is transferred onto everyone but the depositors, incentivizing stock sell offs and eating away at struggling banks’ risk-absorbing capital. This move could force smaller banks into much worse positions than they were before.

SYSTEMIC TRUST VS. SYSTEMIC TRUSTLESSNESS

The scenario playing out before us is a stark illustration of what happens when trust starts to break down in a system fundamentally based on the idea of trusting, rather than verifying. In modern times, people think they need to hold their money in banks, but they have to trust the banks to maintain effective risk-management strategies in order to secure their deposits.

Bitcoin is fundamentally different. You can eliminate reserve requirements, duration and interest rate risks, counterparty risks and the like. There is no trust in Bitcoin. There is only code. It is backed one to one with itself, and as long as you hold your own keys properly, you don’t need to worry about a bank run.

As companies struggle to make payroll this week, I think this might just be a spark that lights a fire behind Bitcoin. Trustless money might just be the thing that helps to stem the tide of catastrophe in a system where trust appears to be crumbling.

Tyler Durden
Mon, 03/13/2023 – 20:40

Spring-Breakers Begin South Florida Invasion As Police Prepare For Chaos

Spring-Breakers Begin South Florida Invasion As Police Prepare For Chaos

South Florida has been a popular destination for college students during spring break, particularly in cities such as Miami Beach, Panama City Beach, and Fort Lauderdale. However, in recent years, the influx of these visitors has led to overcrowding and rowdy behavior. 

South Florida law enforcement agencies in Miami-Dade, Broward, and Palm Beach are preparing for potential turmoil that could occur on the streets and beaches.

Last year, around this time, Miami Beach declared a curfew after a series of shootings, street fights, and stampedes. Using last year as a guide, the chaos could only be days away, perhaps, as early as this weekend. 

Already, The Sun reports, “packed beaches, plenty of booze flowing, parties raging” in Fort Lauderdale. Here are some of the scenes from the beach town:

Some Floridians have expressed their concerns about the impending chaos and have said they don’t want spring breakers in their town. 

Well, too bad. Spring break traffic is already en route to Miami. 

Individuals who relocated to South Florida from the Northeast to escape the pandemic and chaos of imploding liberal cities might want to stay away from beaches and metro areas in anticipation of what is predicted to be a wild week.

Tyler Durden
Mon, 03/13/2023 – 20:20

Simon Black: The Unraveling Can Happen In An Instant

Simon Black: The Unraveling Can Happen In An Instant

Authored by Simon Black via SovereignMan.com,

If SVB is insolvent, so is everyone else

On Sunday afternoon, September 14, 2008, hundreds of employees of the financial giant Lehman Brothers walked into the bank’s headquarters at 745 Seventh Avenue in New York City to clear out their offices and desks.

Lehman was hours away from declaring bankruptcy. And its collapse the next day triggered the worst economic and financial devastation since the Great Depression.

The S&P 500 fell by roughly 50%. Unemployment soared. And more than 100 other banks failed over the subsequent 12 months. It was a total disaster.

These bank, it turned out, had been using their depositors’ money to buy up special mortgage bonds. But these bonds were so risky that they eventually became known as “toxic securities” or “toxic assets”.

These toxic assets were bundles of risky, no-money-down mortgages given to sub-prime “NINJAs”, i.e. borrowers with No Income, No Job, no Assets who had a history of NOT paying their bills.

When the economy was doing well in 2006 and 2007, banks earned record profits from their toxic assets.

But when economic conditions started to worsen in 2008, those toxic assets plunged in value… and dozens of banks got wiped out.

Now here we go again.

Fifteen years later… after countless investigations, hearings, “stress test” rules, and new banking regulations to prevent another financial meltdown, we have just witnessed two large banks collapse in the United States of America– Signature Bank, and Silicon Valley Bank (SVB).

Now, banks do fail from time to time. But these circumstances are eerily similar to 2008… though the reality is much worse. I’ll explain:

1) US government bonds are the new “toxic security”

Silicon Valley Bank was no Lehman Brothers. Whereas Lehman bet almost ALL of its balance sheet on those risky mortgage bonds, SVB actually had a surprisingly conservative balance sheet.

According to the bank’s annual financial statements from December 31 of last year, SVB had $173 billion in customer deposits, yet “only” $74 billion in loans.

I know this sounds ridiculous, but banks typically loan out MOST of their depositors’ money. Wells Fargo, for example, recently reported $1.38 trillion in deposits. $955 billion of that is loaned out.

That means Wells Fargo has made loans with nearly 70% of its customer’s money, while SVB had a more conservative “loan-to-deposit ratio” of roughly 42%.

Point is, SVB did not fail because they were making a bunch of high-risk NINJA loans. Far from it.

SVB failed because they parked the majority of their depositors’ money ($119.9 billion) in US GOVERNMENT BONDS.

This is the really extraordinary part of this drama.

US government bonds are supposed to be the safest, most ‘risk free’ asset in the world. But that’s totally untrue, because even government bonds can lose value. And that’s exactly what happened.

Most of SVB’s portfolio was in long-term government bonds, like 10-year Treasury notes. And these have been extremely volatile.

In March 2020, for example, interest rates were so low that the Treasury Department sold some 10-year Treasury notes at yields as low as 0.08%.

But interest rates have increased so much since then; last week the 10-year Treasury yield was more than 4%. And this is an enormous difference.

If you’re not terribly familiar with the bond market, one of the most important things to understand is that bonds lose value as interest rates rise. And this is what happened to Silicon Valley Bank.

SVB loaded up on long-term government bonds when interest rates were much lower; the average weighted yield in their bond portfolio, in fact, was just 1.78%.

But interest rates have been rising rapidly. The same bonds that SVB bought 2-3 years ago at 1.78% now yield between 3.5% and 5%… meaning that SVB was sitting on steep losses.

They didn’t hide this fact.

Their 2022 annual report, published on January 19th of this year, showed about $15 billion in ‘unrealized losses’ on their government bonds. (I’ll come back to this.)

By comparison, SVB only had about $16 billion in total capital… so $15 billion in unrealized losses was enough to essentially wipe them out.

Again– these losses didn’t come from some mountain of crazy NINJA loans. SVB failed because they lost billions from US government bonds… which are the new toxic securities.

2) If SVB is insolvent, so is everyone else… including the Fed.

This is where the real fun starts. Because if SVB failed due to losses in its portfolio of government bonds, then pretty much every other institution is at risk too.

Our old favorite Wells Fargo, for example, recently reported $50 billion in unrealized losses on its bond portfolio. That’s a HUGE chunk of the bank’s capital, and it doesn’t include potential derivative losses either.

Anyone who has purchased long-term government bonds– banks, brokerages, large corporations, state and local governments, foreign institutions– are all sitting on enormous losses right now.

The FDIC (the Federal Deposit Insurance Corporation, i.e. the primary banking regulator in the United States) estimates unrealized losses among US banks at roughly $650 billion.

$650 billion in unrealized losses is similar in size to the total subprime losses in the United States back in 2008; and if interest rates keep rising, the losses will continue to increase.

What’s really ironic (and a bit comical) about this is that the FDIC is supposed to guarantee bank deposits.

In fact they manage a special fund called Deposit Insurance Fund, or DIF, to insure customer deposits at banks across the US– including the deposits at the now defunct Silicon Valley Bank.

But the DIF’s balance right now is only around $128 billion… versus $650 billion (and growing) unrealized losses in the banking system.

Here’s what really crazy, though: where does the DIF invest that $128 billion? In US government bonds! So even the FDIC is suffering unrealized losses in its insurance fund, which is supposed to bail out banks that fail from their unrealized losses.

You can’t make this stuff up, it’s ridiculous!

Now there’s one bank in particular I want to highlight that is incredibly exposed to major losses in its bond portfolio.

In fact last year this bank reported ‘unrealized losses’ of more than $330 billion against just $42 billion in capital… making this bank completely and totally insolvent.

I’m talking, of course, about the Federal Reserve… THE most important central bank in the world. It’s hopelessly insolvent, and FAR more broke than Silicon Valley Bank.

What could possibly go wrong?

3) The ‘experts’ should have seen this coming

Since the 2008 financial crisis, legislators and bank regulators have rolled out an endless parade of new rules to prevent another banking crisis.

One of the most hilarious was the new rule that banks had to pass “stress tests”, i.e. war game scenarios to see whether or not banks would be able to survive certain fluctuations in macroeconomic conditions.

SVB passed its stress tests with flying colors. It also passed its FDIC examinations, its financial audits, and its state regulatory audits. SVB was also followed by dozens of Wall Street analysts, many of whom had previously issued emphatic BUY ratings on the stock after analyzing its financial statements.

But the greatest testament to this absurdity was the SVB stock price in late January.

SVB published its 2022 annual financial report after the market closed on January 19, 2023. This is the same financial report where they posted $15 billion in unrealized losses which effectively wiped out the bank’s capital.

The day before the earnings announcement, SVB stock closed at $250.04. The day after the earnings call, the stock closed at $291.44.

In other words, despite SVB management disclosing that their entire bank capital was effectively wiped out, ‘expert’ Wall Street investors excitedly bought the stock and bid the price up by 16%. The stock continued to soar, reaching a high of $333.50 a few days later on February 1st.

In short, all the warning signs were there. But the experts failed again. The FDIC saw Silicon Valley Bank’s dismal condition and did nothing. The Federal Reserve did nothing. Investors cheered and bid the stock up.

And this leads me to my next point:

4) The unraveling can happen in an instant.

A week ago, everything was still fine. Then, within a matter of days, SVB’s stock price plunged, depositors pulled their money, and the bank failed. Poof.

The same thing happened with Lehman Brothers in 2008. In fact over the past few years we’ve been subjected to example after example of our entire world changing in an instant.

We all remember that March 2020 was still fairly normal, at least in North America. Within a matter of days people were locked in their homes and life as we knew it had fundamentally changed.

5) This is going to keep happening.

Long-time readers won’t be surprised about this; I’ve been writing about these topics for years– bank failures, looming instability in the financial system, etc.

Late last year I recorded a podcast explaining how the Fed was engineering a financial meltdown by raising interest rates so quickly, and they would have to choose between a rock and a hard place, i.e. higher inflation versus financial catastrophe.

This is the financial catastrophe, but it’s just getting started. Like Lehman Brothers in 2008, SVB is just the tip of the iceberg. There will be other casualties– not just in banks, but money market funds, insurance companies, and even businesses.

Foreign banks and institutions are also suffering losses on their US government bonds… and that has negative implications on the US dollar’s reserve status.

Think about it: it’s bad enough that the US national debt is outrageously high, that the federal government appears to be a bunch of fools incapable of solving any problem, and that inflation is terrible.

Now on top of everything else, foreigners who bought US government bonds are suffering tough losses as well.

Why would anyone want to continue with this insanity? Foreigners have already lost so much confidence in the US and the dollar… and financial losses from their bond holdings could accelerate that trend.

This issue is particularly of mind now that China is flexing its international muscle, most recently in the Middle East making peace between Iran and Saudi Arabia. And the Chinese are starting to actively market their currency as an alternative to the dollar.

But no one in charge seems to understand any of this.

The guy who shakes hands with thin air insisted this morning that the banking system is safe. Nothing to see here, people.

The Federal Reserve– which is the ringleader of this sad circus– doesn’t seem to understand anything either.

In fact Fed leadership spent all of last week insisting that they were going to keep raising interest rates.

Even after last week’s banking crisis, the Fed probably still hasn’t figured it out. They appear totally out of touch with what’s really happening in the economy. And when they meet again next week, it’s possible they’ll raise rates even higher (and trigger even more unrealized losses).

So this drama is far from over.

Tyler Durden
Mon, 03/13/2023 – 19:20

Michigan Governor Admits COVID-19 Lockdowns Went Too Far

Michigan Governor Admits COVID-19 Lockdowns Went Too Far

Michigan Gov. Gretchen Whitmer (D) admitted on Sunday that her administration’s pandemic-era lockdown policies went too far, such as her April 2020 executive order barring most stores from selling gardening supplies, including seeds and plants, to Americans who anted to grow their own fruits and vegetables.

“There were moments where, you know, we had to make some decisions that in retrospect don’t make a lot of sense, right? If you went to the hardware store, you could go to the hardware store but we didn’t want people to be congregating around the garden supplies,” Whitmer told CNN’s Chris Wallace.

“People said ‘oh, she’s outlawed seeds.’ It was February in Michigan, no one was planting anyway,” she continued (except it was in April). “But that being said, some of those policies I look back and think, you know, maybe that was a little more than what we needed to do.”

Whitmer’s office even published a list of prohibited items deemed “not necessary to sustain or protect life,” which couldn’t be sold during the height of the pandemic, and which required that businesses physically restrict customers from certain areas of stores, or to remove nonessential items – including gardening items, flooring materials, furniture and paint.

Just weeks after Whitmer imposed the statewide controversial ban, the order was rescinded due to widespread backlash, including from the Institute for Justice.

In a letter (pdf), the non-profit law firm criticized the governor’s “unconstitutional prohibition” for “impeding the rights of the many Michigan families who seek to grow their own food.” -Epoch Times

Whitmer’s order even banned travel from one residence to another, including vacation properties, rental properties, or second homes within the state.

Tyler Durden
Mon, 03/13/2023 – 19:00

Johnstone: Imperial Narrative Managers Always Try To Make Peace Seem Unnatural

Johnstone: Imperial Narrative Managers Always Try To Make Peace Seem Unnatural

Authored by Caitlin Johnstone via Medium.com,

I’ve been ranting all week about the shocking war-with-China propaganda escalation in Australian mainstream media, and I feel like I could easily scream about it for another month without running out of vitriol for the disgusting freaks who are pushing this filth into the consciousness of my countrymen. One really really can’t say enough unkind things about people who are openly trying to pave the way toward an Atomic Age world war; in a remotely sane world such monsters would be driven from human civilization and die cold and alone in the wilderness with nothing but their bloodlust to keep them company.

One of the most obnoxious things said during this latest propaganda push appeared in the joint statement provided by the five “experts” (read: empire-funded China hawks) recruited by The Sydney Morning Herald and The Age to share their obscenely hawkish opinions in an official-looking media presentation. This paragraph has been rattling around in my head since I first read it:

“Australia must prepare itself. Most important of all is a psychological shift. Urgency must replace complacency. The recent decades of tranquillity were not the norm in human affairs but an aberration. Australia’s holiday from history is over. Australians should not feel afraid but be alert to the threats we face, the tough decisions we must make and know that they have agency. This mobilisation of mindset is the essential prerequisite to any successful confrontation of China.”

Do you see what they’re doing there? These professional China hawks are explicitly trying to frame peace as a strange “aberration”, and war as the status quo norm. They’re saying Australians require a “psychological shift” and a “mobilisation of mindset” from thinking peace is normal and healthy to thinking war is normal and healthy.

Which is of course ass-backwards and shit-eating insane. Every normal, healthy person regards peace as the default position and violence as a rare and alarming aberration which must be avoided whenever possible.

We know this is true from our normal human experience of our own personal lives. None of us spend the majority of our time getting into fist fights, for example; anyone who spends most of their waking life physically assaulting people has probably been locked up a long time ago. If you have ever been in a fist fight you will recall that it was experienced as a rare and alarming occurrence, and everything in your body was screaming at you that this was a freakish and unnatural thing which must end as quickly as possible the entire time. In healthy people violence is experienced as abnormal, and its absence is experienced as normal.

This normal, baseline position is what imperial narrative managers spend their time trying to “psychologically shift” everyone away from, propagandizing us instead into accepting continuous conflict and danger as the norm. Such a shift is beneficial to the empire, to war profiteers, and to professional war propagandists, and is entirely destructive to everyone else. It causes us to accept material conditions which directly harm our own interests, and it makes us crazy and neurotic as a civilization.

You see it all the time though, like whenever there’s a push to withdraw imperial troops from some part of the Middle East they’ve been in for years, or the slightest discussion of maybe not raising the military budget this year, or skepticism that pouring weapons into a violence-ravaged part of the world is the wisest and most helpful thing to do.

Any time we see the slightest beginnings of the tiniest movement toward stepping away from the path of nonstop warmongering and militarism, pundits and politicians begin bleating words like “isolationism” and “appeasement” in an attempt to make calls for de-escalation, demilitarization, diplomacy and detente look freakish and abnormal in contrast to the sane, responsible status quo of hurtling toward nuclear armageddon at full tilt.

Their job is to abnormalize peace and normalize war, which means our job as healthy human beings is to do the exact opposite. We must help everyone understand the horrors of war and the unfathomable nightmares that can be unleashed by reckless brinkmanship, and help people to understand that peace is what’s healthy and to imagine a future where it is the norm.

The bad news is that we are pushing against a narrative-manufacturing apparatus that is backed by the might of a globe-spanning empire. The good news is that our vision is the one that’s based on truth, and deep down everyone can sense it. All we need to do to get people viewing peace as normal and war as abnormal is to remind people of what they already know inside.

*  *  *

My work is entirely reader-supported, so if you enjoyed this piece please consider sharing it around, following me on FacebookTwitterSoundcloud or YouTube, throwing some money into my tip jar on Patreon or Paypal, or buying an issue of my monthly zine. If you want to read more you can buy my books. The best way to make sure you see the stuff I publish is to subscribe to the mailing list for at my website or on Substack, which will get you an email notification for everything I publish. Everyone, racist platforms excluded, has my permission to republish, use or translate any part of this work (or anything else I’ve written) in any way they like free of charge. For more info on who I am, where I stand, and what I’m trying to do with this platform, click here. All works co-authored with my husband Tim Foley.

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Tyler Durden
Mon, 03/13/2023 – 18:40

DB: “Today’s Events Are Consistent With An Imminent US Recession”

DB: “Today’s Events Are Consistent With An Imminent US Recession”

One of the better big picture recaps of today’s price action comes from DB FX strategist George Saravelos, who writes that “the market is sending a consistent message today: it fears that a US recession is about to start.”

Below we excerpt from his note:

We are now pricing in Fed cuts rather than hikes, the yield curve is bull steepening sharply, commodities and equities are down with cyclicals underperforming.This is all consistent with an imminent US recession.

Without taking a strong view on whether this will indeed happen, it is worth making three observations.

  • First, a systemic financial event is not a necessary condition for recessionary dynamics. Competition for deposits is likely to become irreversibly more intense in the US banking system going forward, leading to an upward drift in the bank-based cost of financing and an extra layer of tightening hitting the real economy. How large this is remains to be seen but as our economists have highlighted, the starting point of bank lending conditions has in any case already been extremely weak.

  • Second, the dollar is behaving extremely unusually, down against the vast majority of G10 and EM currencies despite a recession priced in. Can this be sustained? If dollar funding and money markets remain well behaved, we argued earlier today the answer is most likely yes. This is an exceptionally unusual cycle where the dollar has front-loaded recessionary pricing far more than any other period in history. What is more, given the relative starting point of monetary policy, there remains asymmetric potential for an interest rate differential narrowing against the USD even in a slower global growth environment. In other words, what matters most for the USD is if the Fed decides to paused then eventually cut.

  • Third, the correlation breakdown between risk appetite and the dollar will put pressure on portfolio construction if sustained. Most asset manager’s asset allocation has over the last decade been constructed on the basis of a negative correlation between the USD and risk appetite. When equities sell-off, the dollar rallies providing natural protection for foreign currency investors and creating an incentive to hold dollar positions unhedged. We highlighted earlier this year how this dynamic was slowly starting to shift. If the dollar entirely stops providing hedging value to underlying US risky asset positions it would likely add another leg of pressure to the USD.

More in the full note available to pro subs.

Tyler Durden
Mon, 03/13/2023 – 18:20

China To Host Major Middle East Summit After ‘Success’ Of Iran-Saudi Deal

China To Host Major Middle East Summit After ‘Success’ Of Iran-Saudi Deal

Via The Cradle,

A high-level gathering of Gulf Arab states and Iranian officials is on track to take place later this year in the Chinese capital Beijing, according to sources that spoke with the Wall Street Journal (WSJ).

Chinese President Xi Jinping pitched the idea for the summit during a regional summit he attended in Riyadh last December. According to the report published on Sunday, the leaders from the six-country Gulf Cooperation Council (GCC) welcomed Xi’s proposal to reduce tensions with Iran.

Via AP

On Friday, Beijing brokered a historic deal to restore relations between Iran and Saudi Arabia. These two superpowers cut ties in 2016 and have historically backed rivaling factions in regional conflicts.

The agreement was praised across the Global South. It was described by many as a significant power play by China in becoming a top power broker in West Asia at a time when US influence continues to diminish.

This reality was made evident during last week’s secret talks between Iranian and Saudi officials in Beijing, where, per the WSJ, “all parties agreed not to use English in the negotiations, with speeches and documents conducted in Arabic, Farsi or Mandarin.”

The agreement gives Riyadh and Tehran two months to hammer out all details before the countries’ foreign ministers meet to sign a finalized deal. Sources say the Iran-GCC summit would occur “sometime after that.”

According to the report, the deal signed on Friday calls – among other things – for Saudi Arabia to order Iran International to “tone-down critical coverage” of the Islamic Republic. At the same time, Tehran reportedly agreed to “stop encouraging cross-border attacks on Saudi Arabia” by Yemen’s Ansarallah resistance movement.

Saudi officials have hopes that Beijing can “use its economic ties to influence Iran’s behavior,” as China remains the biggest importer of Iranian oil.

According to Iran’s state-owned Mehr News Agency, ahead of Friday’s deal, China allowed Tehran to access parts of funds frozen in Chinese banks due to Washington’s “maximum pressure” sanctions campaign.

During his visit to Riyadh in December, Xi called on Arab states to remain “independent and defend their common interests,” adding that China “supports Arab states in independently exploring development paths suited to their national conditions and holding their future firmly in their own hands.”

He also vowed to import more oil and natural gas from Gulf Arab states while not interfering in their affairs, a departure from Washington’s long-standing policy of interference and domination.

Tyler Durden
Mon, 03/13/2023 – 18:00