Imagine tyranny that will make Covid totalitarianism look innocuous. From Kit Knightly at off-guardian.org:
Last Friday saw the total failure of the Silicon Valley Bank, the 16th biggest bank in the United States. The biggest bank failure since the 2008 financial crisis
By Sunday, the Silvergate Bank and Signature Bank had joined SVB in full collapse. All three are now safely under Federal Deposit Insurance Corporation (FDIC) control.
The FDIC has taken the unusual step of fully guaranteeing all deposits kept with the SVB – meaning the federal government will give taxpayer money out to compensate every SVB customer.
But the damage didn’t stop there. Naturally, this put pressure on other regional banks, with two more – First Republic Bank and PacWest Bank – coming close to collapsing themselves, following mini-runs.
That is despite the California Department of Financial Protection and Innovation finding that SVB was a “sound financial institution” as late as March 9th, and that it only entered insolvency after investors caused a run.
It’s not easy putting together monetary arrangements that will be accepted by nations comprising over half the world’s population. (SLL maintains that it will be impossible.) From Pepe Escobar at thecradle.co:
In an exclusive interview with The Cradle, Russia’s top macroeconomics strategist criticizes Moscow’s slow pace of financial reform and warns there will be no new global currency without Beijing.
The headquarters of the Eurasian Economic Commission (EEC) in Moscow, linked to the Eurasia Economic Union (EAEU) is arguably one of the most crucial nodes of the emerging multipolar world.
That’s where I was received by Minister of Integration and Macroeconomics Sergey Glazyev – who was previously interviewed in detail by The Cradle – for an exclusive, expanded discussion on the geoeconomics of multipolarity.
Glazyev was joined by his top economic advisor Dmitry Mityaev, who is also the secretary of the Eurasian Economic Commission’s (EEC) science and technology council. The EAEU and EEC are formed by Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia. The group is currently engaged in establishing a series of free trade agreements with nations from West Asia to Southeast Asia.
Our conversation was unscripted, free flowing and straight to the point. I had initially proposed some talking points revolving around discussions between the EAEU and China on designing a new gold/commodities-based currency bypassing the US dollar, and how it would be realistically possible to have the EAEU, the Shanghai Cooperation Organization (SCO), and BRICS+ to adopt the same currency design.
Glazyev and Mityaev were completely frank and also asked questions on the Global South. As much as extremely sensitive political issues should remain off the record, what they said about the road towards multipolarity was quite sobering – in fact realpolitik-based.
Cash, gold and silver, and Bitcoin are going to be salvation for a lot of people during the next financial crises. From Nick Giambruno at internationalman.com:
It’s hard to think of a topic where following conventional wisdom is more dangerous than banking.
The general public and most financial experts accept as absolute truth that putting your money in a bank is safe and responsible. After all, the government insures your deposits, so if anything were to go wrong…
As a result, most people put more thought into the shoes they purchase than the bank they entrust with their life savings.
However, the banking system is a mile-high house of cards that could collapse anytime.
Here are three reasons why.
Reason #1: Government Deposit Insurance Is a False Sense of Security
The Federal Deposit Insurance Corporation (FDIC) insures bank deposits in the US.
When a bank fails, the FDIC pays depositors up to $250,000. The FDIC has a reserve of around $126 billion for this purpose.
Now, $126 billion is a lot of money. But, considering there are around $9.8 trillion in insured deposits in the US, $126 billion is just a drop in the bucket, around 1.3%, to be exact.
In other words, the FDIC’s reserve has around one penny for every dollar of deposits it insures.
It wouldn’t take much to wipe out the FDIC’s reserves. One large bank failure and the FDIC itself could go bust.
For example, the recently failed Silicon Valley Bank—the largest bank failure since the 2008 crisis—had around $210 billion in customer deposits. That’s $84 billion more than the FDIC’s entire reserve.
Two from James Howard Kunstler tonight. From Kunstler at kunstler.com:
“As for the evil: It lurks in the interstices of our bureaucratic institutions, which, as they have grown in size and complexity since the nineteenth century, behave in ways that are increasingly impossible to understand and contrary to human flourishing.” — Eugyppius on Substack
Money is all theoretical… until it’s not. Paper money is bad enough, as France learned under the tutelage of the rascal John Law in the early 1700s. The nation was broke, exhausted by foolish wars, and heaped under unbearable debt. Monsieur Law, a Scottish genius-wizard (the Jerry Lewis of political economy), landed in Paris, cast a spell on the regent Duc d’Orléans, set up a magic credit engine fueled by dreams of untold riches-to-come burgeoning out of the vast, new-found lands called Louisiana up the Mississippi River, and modern finance was born!
The stock-and-money schemes known as the Mississippi Bubble soon ruined France and put finance in such a bad odor that the word “banque” could not be used in polite society there for a century to come. Monetary inflation became a thing for the first time since Roman days — a much easier trick with printed paper banknotes than with silver coins — but the effect was the same: the evaporation of “wealth” (which is what money supposedly represents). At the height of the crisis, trading in gold was criminalized, though that was so easily worked-around due to sheer custom and habit that the Crown had to re-legalize it. The frenzy from start to finish lasted only a few years, but the nation was set on the path that would eventually lead to revolution. Law ended his days dolefully running card games in Venice.
Gold is the best antidote to central bank digital currencies. From Eric Peters at ericpetersautos.com:
A reader mentioned the way chicken and egg prices have been manipulated – upward – by culling flocks, ostensibly on account of some avian virus, probably as dubious as the ‘Rona but just as useful. Now comes word that the flocks are to be “vaccinated,” just as we were all supposed to have been – with the grift going straight into the pockets of the drug cartels who, conveniently, have “vaccines” at the ready.
Meanwhile, we’re paying $7 for a dozen eggs – probably soon $12.
But there is a way to immunize ourselves against this – and not just with regard to eggs and chickens – although that’s as good a place as any to start, if you’re able.
We got our own chickens – and so have our own eggs. We are immune from the grift – and our birds don’t have whatever’s-in-those-drugs coursing through their bodies and so, inevitably, ours.
We have unvaccinated chickens – and eggs.
Just as important, we are not dependent on the rent-seekers’ supply of chicken and eggs. We pay what it actually costs us to raise our birds – and get their eggs – which is less than what the corporate-owned stores charge for theirs. Over which we have no meaningful control, precisely because they are corporations – and so own practically all the stores (most of the small, independent ones having been “locked-down” out of business during the “pandemic,” which strangely was held in abeyance at those big corporate stores, which were curiously allowed to remain open).
India is in an enviable position. Its population and economy are too large for either the West or the Eurasian alliance to ignore it. The country is basically free to pursue its own national interest. From Andrew Korybko at theautomaticearth.com:
Reuters reported on Wednesday that “India’s Oil Deals With Russia Dent Decades-Old Dollar Dominance”, which informed their audience that the growing trend of those two using national or third-party currencies like the UAE’s is something significant for everyone to pay attention to. To that outlet’s credit, it also reminded readers that IMF Deputy Managing Director Gita Gopinath foresaw in the month after Russia’s specialoperation began that the West’s sanctions “could erode the dollar’s dominance”.
Lo and behold, that’s precisely what happened, with India of all countries accelerating de-dollarization through its non-dollar-denominated energy deals with Russia. About them, Russia has since become India’s largest supplier over the past year and now provides a whopping 35% of that country’s needs, which is also the world’s third-largest oil importer and fifth-largest economy. Their new energy ties, and particularly the growing de-dollarization dimension of their deals, are thus globally important.
None of what was just described is driven by any anti-American animus on India’s part since everything is purely motivated by the pursuit of that country’s objective national interests. Delhi had no choice but to gradually diversify away from dollar-denominated energy deals with Moscow due to Washington’s illegal sanctions. Its multipolar leadership wasn’t going to let the world’s most populous country slip into an economic crisis just to please the US by eschewing the import of discounted oil from Russia.
Tom Luongo is not trying to be cute and his points and arguments are clear, which is not always the case. He takes a complicated set of issues and makes them understandable. This is one of his best. From Tom Luongo at tomluongo.me:
Live images flashing by Like windshields towards a fly Frozen in that fatal climb But the wheels of time, just pass you by -RUSH, “Between the Wheels”
In part I of this series I told you the war over the US dollar was over because the bane of domestic monetary policy, Eurodollar futures, lost the battle with SOFR, the new standard for pricing dollars.
The ignominious end of the Eurodollar system is a study in the evolution of markets, as a new system replaces an old one. Old systems don’t die overnight. We don’t flip a switch and wake up in a new reality, unless we are protagonists in a Philip K. Dick novel.
More than a decade ago I looked at the responses to President Obama cutting Iran out of the SWIFT system as the beginning of the end of the petrodollar system. The goal was to take Iran out of the global oil markets by shutting Iran out from the dominant dollar payment system.
Out of necessity Iran opened up trade with its major export partners, most notably India, in something other than dollars. India and Iran started up a ‘goods for oil’ trade, or as Bloomberg called it at the time, “Junk for Oil.”
The stick of sanctions created a new market for pricing Iranian oil and a way around the monopoly of US dollar oil trading. India, struggling with massive current account deficits because of their high energy import bill, welcomed the trade as a way to lessen the pressure on the rupee.
Iran needed goods. They worked out some barter trade and the first shallow cuts into the petrodollar system were made.
The Nigerians are no fools. From Micheal Maherrey at schiffgold.com:
Violent protests in Nigeria reveal that getting average people to embrace central bank digital currencies (CBDCs) might be more difficult than government officials would like.
Nigerians recently took to the streets to protest a cash shortage caused by government policies adopted in order to push the country into the adoption of its central bank digital currency (CBDC).
Protesters attacked bank ATMs and blocked streets, and demonstrations turned violent in some cities.
According to The Guardian, “Nigeria has been struggling with a shortage in physical cash since the central bank began to swap old bills of the local naira currency for new ones, leading to a shortfall in banknotes.” According to reporting by the news outlet, the protests erupted when bank customers couldn’t access their cash or change old banknotes for new ones. Tensions ratcheted up when the government set a February deadline to change old notes.
The problem is there aren’t enough new banknotes to go around, and that appears to be on purpose. Bloomberg called the policy “demonetization.”
According to the Associated Press, the Central Bank of Nigeria introduced the redesigned notes last fall. The plan was to recover about 85% of the total currency in circulation outside the banking system. The Nigerian central bank said the policy was implemented to remove counterfeit currency from the system and to discourage cash ransom payments to kidnappers and other criminals. But there is an underlying reason for the new policy that The Guardian only mentions in passing.
Alan Greenspan initiated the “Fed Put” back in 1987 when the stock market crashed. Now, Jerome Powell may be the buy who ends it. From Charles Hugh Smith at oftwominds.com:
Choose one, and only one: a stock market that inflates and pops in an endless series of ever-more destructive bubbles, or a real economy that is no longer in thrall to the engines of wealth inequality and speculative frenzy.
“The Fed Put”–the implicit Federal Reserve policy of bailing out the stock market as soon as it swoons by unleashing a flood of monetary stimulus–is now accepted as a guarantee not unlike financial gravity. Regardless of the bleatings of Fed officials, “everyone knows” the Fed will quickly “pivot” should the market swoon, slashing interest rates and ramping up liquidity via Quantitative Easing (QE).
Recall the definition of excess liquidity: the difference between real money growth and economic growth. The Fed juices excess liquidity not to further expansion in the real economy but to force-feed new money into the stock market and other risk assets.
The only possible result of “The Fed Put” is a credit/asset bubble, which is why we’re currently experiencing the third such monumental speculative bubble in 23 years.
“The Fed Put” is the logical endpoint of neoliberalism, which places “markets” (and thus finance) at the core of the real economy. The neoliberal fantasy is that “markets” solve all problems via the magic of “the invisible hand” and so everything becomes subservient to the gyrations of “markets.”
The second part of the fantasy is that “markets” are self-regulating, meaning there’s no need for a moral order or government regulations; the magic of markets includes a godlike ability to restrict its own motivations, i.e. greed and exploitation to maximize gains by any means available.
A society’s well being is directly calibrated to its adherence to the brain standard.
The world is moving towards multipolarity. One axis, the West, is led by the U.S., the other—Eurasia and the global south—by Russia and China. Ukraine currently serves as a cauldron of the military conflict between the two axes. Taiwan may become a second such cauldron.
Through sanctions, the West has made economic and financial warfare a part of the conflict. The longest arrow in the U.S.’s quiver is the dollar’s reserve currency status. Western economies are based on credit. Central banks serve as the focal point of fiat debt issuance and monetization, interest rate manipulation, and currency debasement. Russia, China, and their cohorts are exploring alternatives to the dollar’s role and the West’s fiat currency, debt, and financialization, discussing arrangements based on gold and commodities, and economic activity centered on agriculture, mining, petroleum, manufacturing, and trade.
It’s a common sense conclusion that these are a more durable economic foundation than fiat debt, whose value is wholly dependent on the ever-shifting whims of politicians and monetary functionaries. Several commentators have hailed the shift away from the West’s fiat currencies and credit to that which is tangible and real. Currently, however, Russia and China’s currencies and credit are just as fiat as the West’s.
Oil was as tangible and real in 1600 as it is now. Why was it regarded as a useless nuisance back then and now it trades at around $76 (or about 1/24th of an ounce of real money, or gold) per barrel? What made oil valuable, the linchpin of the global economy, for which countries have been invaded and wars fought? Somebody figured out how to unlock and control oil’s energy and use it to generate light and power, and to distill it to derive chemicals now used in everything from fertilizers and plastics to pharmaceuticals and cosmetics.
Direct barter is the means of exchange in primitive economies. Money is the intermediary agent that allows a producer to indirectly trade his or her production for someone else’s, to the benefit of both parties. Gold’s suitability as money has been recognized for millennia. Credit allows those who consume less than they produce to invest their surplus in economic activity that generates returns higher than the interest charged.
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Do you like what you’re reading? SLL cuts through the reams of intellectual clutter, nonsense, and lies that bombard us daily. SLL is based on the premises that freedom is the foundation of human progress and happiness, truth is paramount, and inquiry and logic are the essential tools for realizing those objectives. What readers value the most are its clarity and understanding. Please consider compensating SLL for value received. The payment links are on the right or click the button below. Thank you.
There is no mystery what the best and brightest seek: freedom to think, express, and produce; protection of property and contract rights; security from crime and war. The conundrum is how few times those conditions have even come close to being fulfilled. They stand out like isolated lighthouses, beacons shining through history’s all-too-frequent darkness and tempest tossed seas. There are no such beacons today; the world shuns the brain standard.
It is the human mind and productive activity that imparts value to oil, gold, and credit. The mind is the fountainhead of human progress and wealth. The world has always run on the brain standard. A society’s well being is directly calibrated to its adherence to that standard. Its requirements are not conceptually complicated, but throughout history its sporadic implementation has proven problematic.
