Light At The End Of The Tunnel?

Mar 21, 2023

Clarity appears to be emerging regarding the meaning of the banking crisis. And with that clarity there may be some hope for our future as a nation.

The day began auspiciously with a comment from Melinda Romanoff:

henry posted these, you know where. Here's my spin:
This is trading floor quality distillation. Too good not to share:

The Cryptocalypse Chronicles

How Everyone Is Getting The Story Of Silicon Valley Bank and Signature Bank Completely Wrong

"Beware the ides of March." - William Shakespeare I usually don’t write a new post so soon after the last post but it seemed kind of necessary given the implosion of Silicon Valley and Signature Banks and the potential collapse of capitalism itself. I have watched with increasing alarm as seemingly every reporter on the planet gets the story com…

2 years ago · 17 likes · 1 comment · Michel de Cryptadamus

Ryan Grim

Jay Powell kicked over a log, now everything's crawling out

The Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank announced tonight that the U.S. is going to loosen access to dollars for the rest of the world’s central banks, a repeat of a move made in 2009…

2 years ago · 102 likes · 4 comments · Ryan Grim

Language alert, but “Operation: Break Shit” is just epic in its simplicity.

The second link is the 25 words or less version of the first. What it explains is the significance of what was going on in the SVB loan portfolio. Specifically, the reason behind the SVB requirement that loan recipients bank exclusively at SVB (re the loan proceeds). SVB was basically running a Ponzi scheme with its loans to startups program:

The bank specialized in making loans to startups that didn’t have any obvious way to pay them back, but had a decent likelihood of getting bought themselves by bigger companies as long as the easy money kept flowing. And SVB required those companies to keep those loans in SVB as deposits to be drawn down, which then allowed the bank to make even more loans off of the same money, and on and on.

I responded:

Yeah, I was very surprised when I first saw the requirement that loan recipients at SVB had to keep their money there. I'm not up on banking law, but I wondered at the legality of that. Now I see cryptadamus calling that a Ponzi scheme, and it certainly looks like that. His other question is spot on: Why aren't "smart" people talking about that? Jim Rickards, a lawyer, focused on the questionable loans themselves, but the banking requirement should be a flag [all on its own].

Yesterday Tom Luongo did an interview with Mel K. It’s closely related to his blog post today, but the first twenty minutes or so distill some of that into what I hope will be a digestible form. Luongo answers a lot of the concerns that I saw among commenters here and the claims that this was just one more Fed bailout enabling the Big Banks to feast on the Little Banks. I’ve done another summary cum transcript that I’ve tried to organize in a readable way. Before we get to that, here’s another comment I wrote this morning which I think will prove relevant:

So my initial take is that one plausible narrative goes like this: The focus of the Fed was to take down crypto [all the entities that the Fed has taken down have been major crypto players] and they were willing to allow others off their hooks for the sake of that big picture. For starters. At least that would be a rational explanation. But then there's the conclusion which is pure gold.

Now, Luongo.

Mel K & Tom Luongo | Is the Reset of the Great Reset Here? | 3-20-23

Mel K kicks it off by inviting TL to give a “forty thousand foot view” of the banking crisis, and TL responds by saying he’s feeling pretty smug. His predictions are coming true, from the way it’s all developing. He also gives credit to Danielle DiMartino Booth (DDB), who for months has been maintaining that Jay Powell’s Fed is engaged in a “controlled demolition” operation. TL agrees with that assessment and points out that the fed is doing exactly what the Fed is supposed to do—protect the banking system. And it was the Fed and its allies that took out SVB and Signature, just like they took out FTX.

Now, going forward, I’ll add something we need to keep in mind. The Fed isn’t a law enforcement agency, nor a prosecutive office. There’s plenty of scope here for investigative and regulatory agencies to get involved. The Fed has other—and, from forty thousand feet, much bigger—fish to fry.

TL gets started by decrying the misinformation that’s going around. For example, he says, all the hysteria over the FedNow program being CBDC is misplaced. It is CBDC, but only on the wholesale level.

FedNow, which is the Fed's version of wholesale CBDC, is nothing to be afraid of. It's a natural evolution of the central bank payment system. It's a good thing for all of us, it makes the domestic dollar payment layer cheaper and faster and more reliable than the current system. It's the right thing to do.

The big picture remains the same. Davos is doing in Europe what it hopes to do in the US. Davos is using offshore dollars, “Eurodollars”, to gain control of entire countries with the goal of collapsing them into a global government. The Fed, which under previous Dem management was part of the globalist scheme, is now bucking Davos, is asserting US independence of the European banks, and taking control over the US dollar. The Davos cabal needs control over the US political and monetary system because without that control the EU is too small a player to advance its global ambitions:

Davos pushed for the end of commercial banking and for unlimited defaulting on political promises. We see that in France. It's been clear for a long time that eventually governments would have to default on the promises of socialism. Macron was put in power [by Davos] to do this, and he's doing it now by executive order. Davos has no other options, so they're moving forward with their script. They're insolvent, they can't pay, and they eventually want to move quickly to default on their promises--and then on their debt. George Soros has told us what the game plan is for Europe--the promises are unpayable, we're gonna default on the debt, and pay you back with digital Euros. You're not gonna get your capital back.
How does the Fed respond?
Davos has got control of parliaments and heads of state and they've leveraged that control to also control the monetary system. In Europe they do that through the ECB. In the United States (and Japan) Davos controls the political system, but not the monetary system, and you need to control both to control a country. They don't control the Fed. Europe is screaming about the Fed's incompetence--but the Fed is playing Lucy-with-the-football with Davos as Charlie Brown. Everything else is managing the fallout. The problems that have followed from the Fed’s controlled demolition actions were inevitable--you can't break things and not have repercussions. The system was broken so this controlled demolition had to take place to rebuild.

Contrary to what so many people are screaming, this time really is different. In fact, 2023 is the exact opposite of what happened in 2008. The difference became clear when SVB was shut down midday, rather than at the end of the day as is usually done with bank closures:

Davos/Zhou regime/Yellen closed SVB midday as a counter move to create disorder and panic when the Fed moved to take SVB down. The Fed was closing another crypto/Eurodollar "faucet". Like the Fed closed FTX.

Compare this with 2008—the differences are stark:

In 2008, when Bear Stearns and Lehman collapsed, the ones on the hook were the big banks--they were in danger of failing. The FDIC and Obama dithered for weeks while the small banks were getting crushed under the uncertainty--no liquidity, their assets were drying up, even though the small banks' balance sheets were fine. What happened was the big banks needed the good assets on the small banks' balance sheets in order to fill the holes in their own balance sheets created by the collapse of Lehman and Bear Stearns. The regulatory uncertainty is what allowed Wall St. to eventually roll up the small banks, take their good assets, throw the bad assets aside. Then Bernanke comes in and backstops the whole thing--after the bad assets are bought up for 5 cents on the dollar by vulture capitalists like Paul Singer and Warren Buffet and all the rest of them. They then get the big bailout--all those bad assets go back from 5 cents to 40 cents on the dollar. The vulture capitalists make a killing and the rest of us get screwed. Then we sit here for the next 15 years at the zero bound.
The exact opposite happened this week. The Fed immediately responds to stop the bank runs. They insured FDIC deposits in the banks that weren't shuttered. They cut a deal with the Zhou regime to make all the depositors whole--even though they don't deserve it. But these are all highly politically connected people--Gavin Newsoms, Nancy Pelosis

There you have it. In 2008 Bernanke and Obama essentially encouraged the panic, whereas in 2023 Powell acted expeditiously to squash any bank run.

With regard to those politically connected (and undeserving) depositors, TL presents his version of what the Fed, in effect, told them:

"Fine. What will it cost us to make you people go away? $20 billion dollars? Fine, here's $20 billion dollars. Shut up. We get to kill the bank. We get to kill the source of your leverage."

That’s the key. The Fed is getting what it needs to kill off the Davos attempt to take over the US entirely through the politicians it bought with leveraged Eurodollars. The Fed is trying to cleanse our political system of the Davos leveraged Eurodollars that have corrupted the country. That’s very good news:

People are complaining about the "bailout". The money was stolen by the bucketful, and we didn’t get the buckets back—that’s what those complaints amount to. The big picture is that the Fed got control of the faucet, shut it off, then disabled it. Another spigot of leveraged recycled offshore dollars coming back into the country to fund NGOs, summers of violence, politically connected AG campaigns, buying elections, vote fraud--all of this stuff. Migrant trains, fentanyl trade, the whole nine yards. Everything you can think of that the Dems have been doing? A lot of it flowed through SVB, a lot of flowed through FTX. Yes, there are other faucets out there, but the Fed got three of them last week. If you think the Fed can do this without any costs, that's just terminally naive. Stop complaining, when the Fed is trying to derail the Commies from destroying the country. Is that worth $20 billion dollars and rolling your sleeves up for a couple of months? Yes.
Moreover, let's take it a step further. This happened immediately. The Fed knew what they wanted to do. They could have waited five days and JPMorgan and Citigroup and everybody else could have been out there sucking up all the small banks. Instead, the big banks actually put money into First Republic Bank, who didn't deserve to be taken out. First Republic was a counter move by Davos to try to spark contagion fears throughout the US banking system. The Fed put the kibosh on that and pumped money into First Republic. So SVB goes into bankruptcy, but there are plenty of buyers for First Republic. Yellen tried to broker a buyer for SVB--to sweep everything under the rug--but couldn't.
A tale of two banks. Wall St. helped and bailed out First Republic but let the Woke SVB die. If you look at the money flow for the BTFP, the big banks--through increased FDIC payments--will end up paying for the smaller banks. It's the exact opposite of 2008. The Fed has actually put in place a shoring up of the regional banking model of the United States. There are still things that will have to be done. But four regional bankers, who feared takeovers, by the end of the day Monday found net capital inflow. Also, by the Fed backing up the old treasury portfolios at par, the banks can start getting their balance sheets back in better shape and pay more competitive interest rates.

Another major effect of this could have a major impact as a result:

Pension funds in the US will be the biggest beneficiaries. Now the Fed can continue raising interest rates, probably more slowly, and the pension funds will be able to put their money into reasonably termed accounts and get decent yield.
There will be chaos, but this is where we're headed.

The conversation continued from there, for more than another half hour. Two interesting talking points emerge. The first is that Luongo believes these actions by the Fed will disrupt the influence of offshore dollars on US politics to the extent that he maintains that the 2024 election will not be stolen.

The second is something we’ve discussed recently. TL says to keep an eye on the Swiss banking situation. Luongo believes that Davos will do everything in its power to take out the Swiss banks because of the amount of US equity holdings they have. The Fed, on the other hand, will—and this is speculative—do what it can to support those Swiss banks to ensure capital flow to the US. Luongo wrote about this at great length today.