The dumbass West really only wants a final confrontation that will end all life on Earth. The West is being led by evil forces.
GOODBYE
Xi: “Now there are changes that haven’t happened in 100 years. When we are together, we drive these changes.
” Putin: “I agree.”
Xi: “Take care, dear friend.”
Putin: “Have a safe trip.”
How would the UK react if Vlad would deposit a dirty bomb in front of the UK Parliament? Bloody horrible Hypocrites.
Global Research, March 20, 2023
Region: USA
Theme: Global Economy
***
There are two main avenues to a potential US financial crisis. Such a crisis, because of US financial dominance and because of the interconnections of globalism, which was a huge mistake for humanity, would be international.
One avenue to crisis is the Federal Reserve’s current policy of raising interest rates. This policy follows many years of nearly zero interest rates in nominal terms, and negative interest rates in real terms.
During these many years the financial assets banks accumulated on their balance sheets, such as bonds, pay a low rate of interest. When the central bank (Federal Reserve) raises interest rates, the values of the lower interest rate financial instruments fall, thus shrinking the asset side of banks’ balance sheets but not the liabilities side.
Thus the central bank’s policy is pushing banks toward insolvency. When depositors realize that their deposits could be frozen for some time or lost if over $250,000 in size, as many corporation payrolls and some individual accounts are, they withdraw their deposits.
The banks cannot meet the withdrawals because their assets have shrunk in value relative to deposits and because as they sell the depreciated assets to meet the withdrawals the prices of the troubled assets fall further. Silicon Valley Bank had assets heavily weighted with low-interest rate US Treasury bonds, the value of which was driven down by the Federal Reserve raising interest rates. The other two banks were victims of crypto-currency which is too volatile for a bank’s balance sheet.
To prevent the failure of the three US banks from causing a general panic, it was announced that the central bank would provide all banks with sufficient cash to meet withdrawals and that all deposits were insured even if they were higher than the insured amount. This should prevent panic.
However, if the central bank continues to raise interest rates, the higher rates will push more banks into insolvency. Central banks make mistakes just like everyone else. In Europe Credit Suisse, a large international bank, is in trouble, yet the European Central Bank just announced a rise in interest rates.
The Looming Quadrillion Dollar Derivatives Tsunami
The second avenue to the crisis is the trillions of dollars in derivatives held by the five large US banks, which are international in their transactions. According to published reports, the five largest banks have $188 trillion in derivative exposure. This sum is vastly greater than the banks’ capital base. No one knows what the risk is in these derivatives. But the dollar amount is much higher than in 2008, so the potential for a worse crisis exists. A crisis only takes one mistake by one bond trader at a large institution to ignite a crisis.
The derivative crisis that occurred in 2008 (slowly building during 2006 and 2007) resulted from the repeal in 1999 of the Glass-Steagall Act which had prevented financial crisis for 66 years since its passage in 1933. Advocates of repeal claimed that “financial markets are self-regulating and do not need regulators setting rules.” They were wrong as became clear 9 years later.
The Glass-Steagall Act separated commercial from investment banking. Commercial banks that take in deposits and lend on that basis were not permitted to undertake more risky and speculative ventures as investment banks that at that time were capitalized by the personal fortunes of their partners. This prevented commercial banks from speculating with depositors’ money. The repeal of Glass-Steagall let commercial banks use depositors’ deposits, not the banks’ own money, to behave like investment banks. This is how the large commercial “banks too big to fail” acquired massive derivative exposure. The derivative risks were not understood either by the banks, the rating agencies, or the regulators and exploded into the 2008 crisis resulting in taxpayer bailouts of banks and a decade of low interest rate policy in order to rebuild the asset side of banks’ balance sheets.
The public was annoyed by the bailout. The result was the Dodd-Frank Act which was misrepresented by politicians, economists, and financial media as a fix of the problem caused by the repeal of Glass-Steagall. But it was not a fix. Dodd-Frank created a new problem. What the Dodd-Frank Act “fixed” was to prevent taxpayer bailouts. Instead, there would be “bail-ins.” What this means is that banks in trouble would bail themselves out by being permitted to seize depositors’ money. In other words, the Dodd-Frank Act created a powerful incentive for runs on troubled banks. A troubled bank doesn’t necessarily mean, or result in, the bank’s failure. But because of the Dodd-Frank Act the depositors cannot take the risk, so they withdraw their funds and cause the bank to fail.
To summarize, smaller conservative and prudent banks that invested in “safe” assets such as US Treasury bonds face bank runs. Larger banks with massive derivative risks are one bond trader’s mistake away from exploding the financial system. The 2008 crisis and the potential for more crises rests entirely on the repeal of Glass-Steagall and the enactment of Frank-Dodd. We are looking at the total, complete failure of intelligence on the part of the US government and economists. Their handiwork has the capability of collapsing the existing financial system of the world. It was the work of total idiots.
There is, of course, the question: Is this real stupidity or is a plot unfolding to collapse the financial system as we have known it in order to “save” us with the introduction of central bank digital currency? Are we passing from the remnants of democracy and self-government into total tyranny?
A study finds that 200 US banks face the same risk as those that destroyed Silicon Valley Bank. The Federal Reserve’s higher interest rates are destroying the banks’ solvency. Yet the Federal Reserve has not backed off its disastrous policy, and with Credit Suisse’s failure looming, the EU central bank raised interest rates! Yes, people are stupid. But are they this stupid? Could this be intentional with a secret agenda in mind such as digital currency? See this.
Paul Craig Roberts is a renowned author and academic, chairman of The Institute for Political Economy where this article was originally published. Dr. Roberts was previously associate editor and columnist for The Wall Street Journal. He was Assistant Secretary of the Treasury for Economic Policy during the Reagan Administration. He is a regular contributor to Global Research.
The original source of this article is Global Research
Copyright © Dr. Paul Craig Roberts, Global Research, 2023
Global Research, March 21, 2023
Region: Russia and FSU, USA
Theme: Law and Justice
***
This paradigm of International Relations isn’t about upholding the UN Charter, but arbitrarily implementing double standards in advance of America’s interests and even sometimes at the expense of its own reputation in pursuit of its goals. This was recently expressed through its hypocritical approach towards Georgia-Moldova and Bosnia-Serbia as well as its equally hypocritical condemnation of the US-inspired foreign agents laws proposed by Bosnia’s Republika Srpska and Georgia.
Biden just praised the “International Criminal Court’s” (ICC) decision to issue an unenforceable warrant for President Putin’s arrest as “justified” despite the US itself still refusing to participate in that partially recognized and highly scandalous body. The Russian Embassy in DC reacted to this hypocrisy by calling that declining unipolar hegemon out for its “sluggish schizophrenia”, which perfectly embodies its “rules-based order” concept and inadvertently extends credence to Moscow’s criticism thereof.
This paradigm of International Relations isn’t about upholding the UN Charter, but arbitrarily implementing double standards in advance of America’s interests and even sometimes at the expense of its own reputation in pursuit of its goals. This was recently expressed through its hypocritical approach towards Georgia-Moldova and Bosnia-Serbia as well as its equally hypocritical condemnation of the US-inspired foreign agents laws proposed by Bosnia’s Republika Srpska and Georgia.
Leading Provider of Financial Research Says US Is Headed for Third World Status
The only “rules” that matter enough for the US to care about enforcing are those that it regards as suiting its interests at any given point in time. This explains why Biden just praised the ICC in spite of the US itself refusing to participate in it. His country’s interests are served through this public relations spectacle due to the amount of global media attention its unenforceable warrant for President Putin’s arrest has generated, which in turn contributes to misleading the public about the Ukrainian Conflict.
The targeted Western audience is made to think that there’s supposedly some credence to the false accusation that he himself personally as well as another Russian official are allegedly responsible for “abducting” Ukrainian children, thus reinforcing their perception that he’s the ultimate evil. As long as they continue wrongly thinking that he is, they’ll keep supporting their governments’ policy of extending a blank check to Kiev for indefinitely funding their de facto New Cold War bloc’s proxy war on Russia.
It doesn’t matter to them that the US is supporting a partially recognized and highly scandalous body that it doesn’t even participate in since all that’s important to them is that it’s “on the right side of history” in trying to “bring justice” to those Ukrainian children that they’re convinced were “abducted”. Those who see through this information warfare charade and thus are already skeptical of the West’s “official narrative” about the conflict or outright oppose it won’t be swayed by this latest provocation.
This insight therefore suggests that the only purpose in issuing an unenforceable warrant for President Putin’s arrest and Biden’s hypocritical support of the ICC’s decision is to reinforce the perceptions of this proxy war’s remaining supporters in the West ahead of what’ll likely be a spree of bad news very soon. “The Washington Post Finally Told The Full Truth About How Poorly Kiev’s Forces Are Faring”, which preconditioned the public to expect Kiev to experience some serious setbacks in the coming future.
Zelensky himself recently told CNN that Russia might roll through the rest of Donbass if it succeeds in capturing Artyomovsk/“Bakhmut”, which could result in some of this proxy war’s most spirited supporters losing hope in their side and thus beginning to question whether any more aid is worth it. If these same folks think that continuing to indefinitely fund this conflict could “bring justice” to those Ukrainian children that they’re convinced were “abducted”, however, then they might soldier on.
Should a critical mass of them change their minds due to forthcoming events, then public opinion would decisively shift against their elites’ blank check policy, thus possibly placing enough pressure on some of them to consider whether they should change this policy. It’s this scenario that scares Western leaders more than anything else since the last thing they want is large-scale protests in the streets over this issue, hence why they’re doubling down on their deflection tactics via the ICC’s ridiculous decision.
*
This article was originally published on Andrew Korybko’s Newsletter.
Andrew Korybko is an American Moscow-based political analyst specializing in the relationship between the US strategy in Afro-Eurasia, China’s One Belt One Road global vision of New Silk Road connectivity, and Hybrid Warfare. He is a frequent contributor to Global Research.
He is a regular contributor to Global Research.
The original source of this article is Global Research
Copyright © Andrew Korybko, Global Research, 2023
https://www.zerohedge.com/news/2023-03-20/financial-crisis-will-be-none-other-history
BY QUOTH THE RAVEN
MONDAY, MAR 20, 2023 – 5:34
Submitted by QTR’s Fringe Finance
It looks as though Credit Suisse is going to be sold off for pennies on the dollar, temporarily postponing a financial trainwreck, at least for a couple more hours or days, until the next shoe inevitably drops.
The Fed doesn’t seem keen to wait. U.S. dollar swap lines are being used to “enhance liquidity” and the Central Bank has all but thrown in the towel on the tightening cycle, it appears.
In response to the news and at the time of this writing, about 3:30AM EST, equity futures are mixed after being higher immediately after opening on Sunday night.
It’s tough to solidify exactly what’s going happen in the short term with U.S. markets, especially with things changing by the hour. But there are two things that I think are worth solidifying about the conundrum markets and the Federal Reserve find themselves in now.
The first is that this crisis isn’t going away anytime soon – it may shape-shift, but it’s not going away. The second is that the outcome of this crisis is going to be unlike anything that’s ever occurred in history.
Even though Central Bank bailouts look as though they’re going to be ubiquitous in coming weeks (as we’re already seeing with the Fed and the Swiss National Bank), it doesn’t mean that the crisis isn’t going to persist in another form.
These blowups in the system are zero sum games. Stop them from erupting through one manhole cover, and they have to eventually find another one to blow open.
When Central Banks all over the world bail out their respective institutions and equity markets, many will think it’s just been another crisis…and another crisis averted.
The usual Austrian “crazies” will prattle on about moral hazard, the wealth divide will get even wider, there will be “Occupy”-style protests again…but life will go on.
“Ho hum,” most market participants will say to themselves, content that another SuperSized™ bag of dogshit didn’t hit the fan during their lifetime and will instead be bequeathed unto their grandchildren at about the same point the U.S. dollar has the global appeal of a moldy Kraft Single™ cheese slice that’s been sitting out in the sun for 5 weeks straight.
But that lot has another thing coming this go-round, if you ask me. This time, the crisis truly is different because of the geopolitical setup.
As I have written about extensively over the last year, the global economy is dividing into two. On one hand, you have the West and our printing-press-based Central Banking policies. On the other hand, you have a growing constituency born out of a maturing Russian and Chinese alliance, now also inclusive of India, Saudi Arabia, and other nations. The petrodollar is dead, China and Russia are openly hoarding gold and some fund managers believe that Xi and Putin know that the West is running a ponzi scheme.
For a recent primer on just how the global economy is shifting, I’ll once again recommend this exceptional February 2023 interview with Andy Schectman, who lays out the global landscape in surgical detail, in less than an hour.
Andy lays out the thesis “that the world is poised for a monetary reset which would result in the BRICS having their own reserve currency, likely backed by gold, and how this goes hand-in-hand with de-dollarization trends that are currently unfolding”.
The important thing to realize when thinking about our current “crisis” is that this unprecedented setup globally that Andy describes very well will likely lead to an unexpected and unprecedented result.
People need to understand that the Fed can’t stop what has already been put into motion. Market psychology has broken, as I noted last week several times, and risk aversion is now front and center. The Fed has capitulated, as Zero Hedge accurately noted last night.
But no matter what the Fed does now, it’s going to be on a lag. This means they can’t just cut rates tomorrow and have the problem fixed by Wednesday. They’re now in a “dead zone” where the seeds for the next several months have already been sown no matter what action they take with rates.
I have guessed that the blowups we are seeing now are result of rate hikes that took place last year. That means that the consequences of current rates won’t be felt for another several quarters to come.
Silicon Valley Bank blew up because it was reaching for bonds when yields were near 1.5%. Their portfolio likely started to sustain serious damage as soon as rates were hiked from that level. If you don’t think other funds were taking similar bets, including continuing to buy bonds as yields became more attractive, you’re crazy.
This means that as the Fed “stayed the course” the last 12 months, others likely suffered similar-style losses as SVB’s. We just haven’t heard about them yet.
Rate expectations are moving lower now, but it’s too little too late for others whose fates have been sealed already, in my opinion. We may hear about these names in coming days.
Putting aside that this crisis will almost certainly be used to usher in a Central Bank digital currency, one could mistakenly believe that money printing will once again get everything “under control”.
But instead of that being the case this time, what if the BRICS nations use this crisis as an opportunity to challenge the Western Central Banking empire? All I’ve been writing about for the last year and a half is how central banks in places like Russia and China have been stockpiling gold.
There’s no point in doing this unless you eventually feel as though, to some degree, you’re going to have to fall back on gold as a baseline or a safeguard.
And a financial crisis is the point where people lose their faith in the existing system the most, thereby making it vulnerable to be usurped, if not practically at least psychologically. That makes a strong argument for (1) bitcoin perhaps either gaining traction or upsetting regulators enough to draw more ire right now and (2) the BRICS nations seeing this as an opportune time to try and challenge the U.S. dollar openly.
The pieces have already been put into place. The timing has never looked better:
(Chart: Zero Hedge)
Lest we forget that inflation continues to run rampantly out of control. Last year I was asking whether or not we would endure inflation or a recession, arguing that we would have to deal with one or the other due to the Fed raising rates.
It has now become clear that the central banks of the west are going to surrender to inflation. The idea of easing and trying to manage this crisis with inflation as high as it already is sets the table for the longshot hyperinflationary scenario that many people laughed at over the last year. I’m not saying it’s definitely going to happen, but I’m saying that the setup is making it look more like a possibility than ever.
As is a function of Keynesian theory, bubbles get bigger and bigger as we kick the can down the road. This means that bailouts also get bigger and bigger as we kick the can down the road. Eventually, at some point, we lose control and some economic variables (like gold and M2) go into an unstoppable parabolic spike upward while others (like, perhaps, equities) go into a dead engine stall.
To be honest, for the long-term, it’s difficult to forecast whether or not current policy will result in U.S. markets moving drastically higher on a nominal basis, or whether they will simply wind up like Japan, treading water for years to come as the Fed expands QE into every asset that isn’t nailed down.
It also remains difficult to try to forecast what’s going to happen in the short term. My guess is that equities are going to crash before eventually catching a bid once the lag of central bank panic being put into place today passes by, over the next year or so.
When the smoke clears, who knows what the situation looks like. We will have moved one iteration further into an alternate euphoric Keynesian reality than we were in March 2020, which seems impossible. Will the NASDAQ trade at a 60x multiple? Will the dollar index be at 40? Is there even a case where the US dollar holds up here and remains global reserve currency? It’s difficult to foresee, but that doesn’t make it an impossibility.
In addition to inflation, we also have to be acutely aware that there is a very real chance that war drums beat louder over the next year.
China moving into Taiwan is a real risk and we are already fighting a war against Russia via proxy in Ukraine. As China moves closer to Russia in supporting them and the US moves closer to Ukraine, the stage is set not just economically, but also militarily: the west and NATO are at war with Russia, China, and soon to be the nations they are supported by, like India and Saudi Arabia.
This war will not just be militarily, it will be over the fate of the new global reserve currency as well.
From CNN:
Chinese leader Xi Jinping will fly to Moscow next week to meet with President Vladimir Putin in his first visit to Russia since Putin launched his devastating invasion of Ukraine more than a year ago.
The visit will be seen as a powerful show of Beijing’s support for Moscow in Western capitals, where leaders have grown increasingly wary of the two nations’ deepening partnership as war rages in Europe.
It will also be Xi’s first foreign trip since securing an unprecedented third term as president at the annual meeting of China’s rubber-stamp legislature last week.
The face to face was revealed on Friday by statements from both Beijing and the Kremlin.
Now, a look at how I’m positioned and what I continue to buy and own…(READ THE REST OF THIS PIECE HERE).
Contributor posts published on Zero Hedge do not necessarily represent the views and opinions of Zero Hedge, and are not selected, edited or screened by Zero Hedge editors.
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