The Economic Collapse

When there is fear in the air, banks start getting really tight with their money, and right now there is lots of fear in the air.  A major credit contraction would be a nightmare scenario for the economy, and as you will see below, there is evidence that this is already starting to happen.  Hopefully our leaders can find a way to calm things down, because we all remember what happened during the last financial crisis.  Banks decided to substantially tighten their lending standards and that really deepened the economic downturn.  So our leaders should be doing what they can to support the stability of the system, but in so many cases they end up doing just the opposite. (Read More...)

They actually did it.  The Federal Reserve just raised interest rates by another 25 basis points right in the middle of a major banking crisis.  I honestly do not understand what Fed officials are thinking.  They had already blown a 620 billion dollar black hole in the balance sheets of U.S. banks by raising rates so aggressively, and that resulted in the second and third largest bank failures in U.S. history earlier this month.  Apparently they are not yet satisfied with the carnage that they have caused, and so they have decided to make things even worse.  What we are witnessing is either extreme incompetence of epic proportions, or they are trying to crash the economy on purpose.  I am sitting here trying to think of a third alternative, but so far I am coming up blank. (Read More...)

We could not survive without the giant ball of fire that our planet revolves around, and so the stability of our sun is of the utmost importance.  Unfortunately, it has started to behave very erratically lately.  Scientists are telling us that they think everything is just fine, but the truth is that they don’t really know.  We are witnessing activity that is truly unusual, and I believe that should deeply alarm all of us.  In fact, I am entirely convinced that the behavior of the sun will become a really big story in the years ahead. (Read More...)

Fear is in the air.  In recent days we have seen a level of panic that we have not witnessed since 2008, and in such an environment people just want to make sure that their money is safe.  But there are very few places in our financial system that are truly “safe” at this point.  The cryptocurrency industry has already experienced an absolutely disastrous crash, collapsing bond prices have blown a 620 billion dollar black hole in bank balance sheets, residential real estate prices have started to plummet, and now the largest commercial real estate crisis in the entire history of the United States is looming.  The good news is that stock prices are holding steady for now, but that can only last for so long.  Just like we witnessed in 2008, a major banking crisis will inevitably hit the stock market really hard. (Read More...)

They are desperately trying to plug one leak in the system after another, but what happens if the entire system suddenly comes crashing down all around them?  Back on January 4th, I specifically warned that our problems would “greatly accelerate over the next 12 months”, and that is precisely what has happened.  We are now in the midst of the most severe banking crisis since 2008, and it could soon get a whole lot worse.  We have already witnessed the second and third largest bank failures in the entire history of our nation, and now it is being reported that 186 more banks “are at risk of failure”… (Read More...)

What in the world was she thinking?  When a bailout was hastily arranged for uninsured depositors at Silicon Valley Bank and Signature Bank, the implication was that the same thing would be done for uninsured depositors at any other banks that failed.  But now U.S. Treasury Secretary Janet Yellen is telling us that is not actually what will happen.  She just admitted that depositors at a failed bank will only be protected if officials determine that a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences”.  So that means that depositors at big banks are likely to be protected and that depositors at small banks are much less likely to be protected.  In other words, Janet Yellen just poured lighter fluid on every small bank in America. (Read More...)

Every single day there are more twists and turns to this new banking panic.  In fact, we just learned that the big banks have gotten together to save First Republic.  That is good news, because a collapse of First Republic would have been a major catastrophe.  But First Republic is just one in a very long list of banks that are in very serious jeopardy.  For months, I relentlessly warned that our financial system could not handle higher interest rates.  It was inevitable that financial institutions would start to break, and that is precisely what has happened.    We are in far more trouble than most people realize, and we are still only in the very early chapters of this crisis. (Read More...)

Do you remember when wealthy people all over the world would stash their money in Swiss banks because there were so strong and so private?  Well, the second largest bank in Switzerland is literally on the brink of collapse.  As I discussed yesterday, Credit Suisse is a prime candidate to be one of the next dominoes to fall.  It has been on very shaky ground for a long time, and now the global banking panic has greatly accelerated the outflow of assets from the bank.  So why should you care if it fails?  Unlike Silicon Valley Bank and Signature Bank, Credit Suisse is so critical to the worldwide banking system that it has officially been designated “as being systemically important by the international Financial Stability Board”… (Read More...)