The failure of Silicon Valley Bank has highlighted just how fragile the traditional financial system is.
This is an editorial by Mickey Coss, a graduate of West Point University with a degree in Economics. In the infantry he spent four years before transferring to the Treasury Corps.
This is unavoidable, and in some way unavoidable as long as the system exists as is. Collapse is always inevitable when the fix is printing more money than fixing nothing.
Looking back at the events of this weekend, I feel that this is just the tip of the iceberg, setting the stage for what may happen in the years to come. A slow-motion train wreck of the financial and banking system, systemically dependent on rising levels of credit and debt, with monetary levers being pulled in the opposite direction more and more often, a period of inflation and near collapse. fluctuating between periods.
The fact is that the Federal Reserve caused this collapse, and its inevitable return to quantitative easing will be the next cliffhanger. Easing is the only cure for the problems easing causes.To Paraphrase Jeff Booth, you cannot modify the system from within the system. They have gone too far and there is no turning back.
anti-antifragile
The collapse of the Silicon Valley Bank (SVB) has highlighted just how fragile the system has become as the Federal Reserve desperately tightens to stem the tide of inflation. has taken the Western world by storm for the past year and a half.request destructionThey call it a code for intentionally and artificially raising the cost of capital to cause unemployment. Fewer people working means fewer people consuming, giving rise to price pressures from quantitative easing, helicopter money, and the disruption of his chain of supply that characterized his COVID-19 era in the early 2020s. It is hoped that it will help alleviate
The only answer was to print money to lower yields, restore markets and keep the system from collapsing. However, to maintain confidence, the Fed quickly reversed the trend and participated in its most aggressive tightening cycle to date. Its impact is now starting to show in the banking system.
Who knows how many banks are already bankrupt and struggling to survive? Fear and tape holes in their balance sheets before investors and depositors alike get smart. Who knows how many emergency meetings were held this past weekend by management desperate to block it out?
The problem with bank runs is that they’re all confidence-based. If a bank loses credibility, subsequent deposits can drive it into bankruptcy, even if it wasn’t compromised before the bank run. It is a self-fulfilling prophecy. And now it’s a systemic risk.
The move to a 100% backstop on deposits after the SVB collapse was to preserve confidence at all costs to prevent the next bank run and the bank run after it. Federal officials are desperately trying to stop the infection before it takes hold. They need to finish their work on inflation before they can start printing money reliably again. Or so they say.
With 100% depositor guarantees, the Fed has essentially already turned the corner. Money doesn’t just appear out of nowhere unless you work for the Federal Reserve.
new though Bank Term Funding Program We don’t call it “quantitative easing,” so I don’t think there is a meaningful difference. Lending money to banks against depressed assets in order to prevent them from posting losses in the market is nothing more than accounting alchemy, printing shadow money under another name.
hidden cracks in the system
With the bond market plunging to these levels, one wonders what the next domino toppling will be. I think pension funds are in big trouble. How long can they survive the bond market bear market? How much principal are they losing to meet irrevocable obligations? How long will it take before I have to intervene to reverse the
If they start printing money outright again, lowering yields, Pension funds must increase leverage Just to do their duty again? it is cyclical. It repeats cyclically until no more survive.
Money printing created this problem in the form of quantitative easing. Printing money is the only way out of this current fiasco. It is inevitable. At the same time, the printing of banknotes only makes things worse.
It’s a cycle, destined to repeat endlessly until it can no longer be done. The next few years could be volatile with an accelerated period of easing and tightening as the Fed battles inflation, followed by a subsequent financial collapse triggered by that reversal.
Bitcoin is fundamentally different.I heard American HODL Today we call money time and inflation the theft of time. Manipulating money means manipulating time for everyone who is forced to work for a living. Bitcoin is a better system, completely detached from human whims, beyond the reach of the ruling class, who always seem eager to pull the levers of control of a complex system. To stay out of its sphere of influence, I keep my money in Bitcoin. The price I pay is fiat volatility, but in my opinion it is well worth the cost.
Bitcoin could be more important than ever, and I think people are starting to realize that.
This is a guest post by Mickey Koss. Opinions expressed are entirely his own and do not necessarily reflect those of his BTC Inc or Bitcoin Magazine.
