{"id":1202432,"date":"2023-03-19T13:10:06","date_gmt":"2023-03-19T17:10:06","guid":{"rendered":"https:\/\/bugaluu.com\/news\/occupy-wall-street-redux\/1202432\/"},"modified":"2023-03-19T13:10:06","modified_gmt":"2023-03-19T17:10:06","slug":"occupy-wall-street-redux","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/occupy-wall-street-redux\/1202432\/","title":{"rendered":"‘Occupy Wall Street’ Redux"},"content":{"rendered":"
\"\"<\/a><\/div>\n

‘Occupy Wall Street’ Redux<\/span><\/p>\n

\n

Authored by MN Gordon via EconomicPrism.com,<\/em><\/a><\/p>\n

\n

\u201cThe bank is something more than men, I tell you.\u00a0 It\u2019s the monster.\u00a0 Men made it, but they can\u2019t control it.\u201d<\/em><\/p>\n

\u2013 John Steinbeck, The Grapes of Wrath<\/em><\/p>\n<\/blockquote>\n

Negative Carry<\/strong><\/h2>\n

Borrowing short and lending long works mostly well most of the time.\u00a0<\/strong> This is how modern banking works.\u00a0 You may be a customer at a bank.\u00a0 But you also supply the product.<\/p>\n

In short, a bank will pay you a small percent for the deposits in your checking and savings accounts, which you can withdraw at any time.\u00a0 This is the borrowing short side of the operation.<\/p>\n

The bank then takes your deposits and invests the money in some longer-term assets, such as loans and bonds that aren\u2019t paid back for years.\u00a0 Say the bank earns 2 percent on its money while paying depositors a fraction of a percent. \u00a0The bank pockets the spread, the net interest margin.\u00a0 Easy money.<\/p>\n

However, when the Federal Reserve intervenes in the market and presses the federal funds rate to zero and holds it there for 2 years (March 2020 to March 2022), driving yields across the range of maturities to 5,000-year lows, something bad is bound to happen.<\/strong><\/p>\n

The experience for consumers over the last 24 months has been raging consumer price inflation.\u00a0 But that\u2019s only a small part of the bad stuff that can happen.<\/p>\n

Because as the Fed jacked up the federal funds rate starting in March 2022, to contain the consumer price inflation of its own making, the yield curve has inverted.\u00a0 Short term yields are higher than long term yields.\u00a0 And banks, having borrowed short to lend long, have negative carry.<\/p>\n

Perhaps it would all works out for the banks if depositors stayed put.<\/strong>\u00a0 But in a world where you can score nearly 5 percent from Treasury Direct \u2013 with no brokerage fees \u2013 why keep excess deposits in the bank when you only get a fraction of a percent?<\/p>\n

It\u2019s a good question\u2026<\/p>\n

Answering the Call<\/strong><\/h2>\n

Customers at Silicon Valley Bank (SVB) recently answered this question by pulling their deposits\u00a0en masse<\/em>.\u00a0 On March 9, SVB customers withdrew more than $1 million per second for 10 hours straight \u2013 totaling $42 billion \u2013 before the Federal Deposit Insurance Corporation (FDIC) seized the bank and declared it insolvent.<\/p>\n

This, in essence, was an old fashion bank run with a twist.\u00a0 The digital age pushed the bank run into hyperdrive.<\/strong><\/p>\n

SVB isn\u2019t the first bank to go bust borrowing short and lending long.\u00a0 It certainly won\u2019t be the last.\u00a0 In fact, since SVB failed, Signature Bank has also failed.\u00a0 In addition, Credit Suisse is now getting a bailout from the Swiss National Bank.\u00a0 At this rate, any number of other banks could soon be toast.<\/p>\n

Quite frankly, we don\u2019t\u2019 care what banks go bust.\u00a0 What we\u2019re really interested in is what happens after these banks go bust.\u00a0 In the case of SVB, a bailout \u2013 above and beyond FDIC deposits \u2013 is in the works, through the creation of something called the Bank Term Funding Program (BTFP).<\/p>\n

What you need to know about BTFP is that it\u2019s code for socializing losses.\u00a0 <\/strong>The regulators may say it isn\u2019t a bailout.\u00a0 The taxpayer isn\u2019t directly paying for it.\u00a0 Nonetheless, if you \u2013 the taxpayer \u2013 have a bank account, you will be picking up the tab via surcharges and fees your bank imposes to bailout SVB depositors.\u00a0 Is that fair?<\/p>\n

Should you have to pick up the tab for California Governor\u00a0Gavin Newsom\u2019s wineries<\/a>, billionaire businessman\u00a0Mark Cuban\u2019s drug company<\/a>, or any of the other rich elites that failed to appropriately manage their risk?<\/p>\n

On top of that, what will ultimately happen to the remains of SVB or other failed banks? \u00a0Will the FDIC sell them off to one of the big banks like Washington Mutual (WaMu) was to JPMorgan Chase in 2008?<\/p>\n

Government bailouts and the consolidation of the banking business does not make banking safer.\u00a0 Rather it spreads the risk across the whole landscape like mustard seeds on a hillside.\u00a0 This, in effect, propagates a much larger banking crisis sometime in the future.<\/p>\n

It also propagates civil disorder and social discontent.\u00a0 And for what?<\/strong><\/p>\n

When banks merge and consolidate over and over again the implications can be heinous.\u00a0 To this point, for fun and for free, we\u2019ll take a look back at the quintessential bank failure of the 20th century.<\/p>\n

Where to begin\u2026<\/p>\n

Epic Bank Failure<\/strong><\/h2>\n

In 1820, Salomon Mayer von Rothschild (1774-1855) established his business, S M von Rothschild, Vienna.\u00a0 Vienna was the capital of the Austrian Empire at the time.<\/p>\n

When S M von Rothschild died in 1855, his son Anselm von Rothchild (1803-1874) founded Credit-Anstalt as K. k. priv. \u00d6sterreichische Credit-Anstalt f\u00fcr Handel und Gewerbe.\u00a0 This Rothchild bank became the largest bank in Eastern Europe before World War II.<\/p>\n

Credit-Anstalt held assets and took deposits from all over Europe.\u00a0 Then, in 1931, it failed at the worst possible time.<\/p>\n

The bank\u2019s failure was a direct result of the United States\u2019 Smoot-Hawley Tariff Act, which raised tariffs on over 20,000 imported goods.\u00a0 The act crippled Europe\u2019s economy and led investors to redeem all the capital they\u2019d lent to the bank.<\/p>\n

The failure of Credit-Anstalt caused Austria to abandon the gold standard, which set off a series of economic dominoes.\u00a0 Germany left gold.\u00a0 Then Great Britain.\u00a0 And finally, in 1933, so did America.<\/strong><\/p>\n

The failure of Credit-Anstalt is what really kicked off the Great Depression.\u00a0 The real story, of course, is not Credit-Anstalt\u2019s collapse.\u00a0 It\u2019s what let up to its collapse.<\/p>\n

Today, with the Federal Reserve having first compelled banks to stretch for yield in long dated maturities, before then hiking short-term interest rates, banks are being put to an extraordinary test.\u00a0 Without question, there will be more SVBs in the coming weeks.<\/p>\n

What\u2019s more, a series of bank bailouts and consolidations could be the perfect setup for a very destructive Credit-Anstalt situation.\u00a0 The BTFP bailout of SVB \u2013 and Gavin Newsom \u2013 offers a pathway to a mega crisis.<\/strong><\/p>\n

Here\u2019s why\u2026<\/p>\n

Forced Mergers<\/strong><\/h2>\n

When the Austro-Hungarian Empire collapsed at the end of World War I, Credit-Anstalt continued to offer commercial, investment and savings to customers in both the former empire states as well as Amsterdam, Berlin, Bucharest, Paris, and Sofia. \u00a0Its shares were traded on eleven exchanges, including New York.<\/p>\n

Credit-Anstalt became the largest bank in Austria through a series of forced mergers to bailout other Austrian banks that had failed. \u00a0These forced mergers may have been expedient.\u00a0 But they were not intelligent.\u00a0 That is, they did not always pencil out.<\/p>\n

Moreover, it resulted in the creation of a bank that was larger than the rest of Austria\u2019s banks put together. \u00a0It also concentrated the accumulated losses of Austrian industry in a single super bank.<\/strong><\/p>\n

Over time, Credit-Anstalt\u2019s balance sheet eclipsed the size of the government\u2019s expenditures.\u00a0 Approximately, 70 percent of Austria\u2019s corporations did business with it.<\/p>\n

In 1925, Credit-Anstalt\u2019s equity was only 15 percent of what it had been in 1914 (at the onset of WWI) and its debt-to-equity ratio rose from 3.64 in 1913 to 5.68 at the end of 1924.\u00a0 By the end of 1930 it had ballooned to 9.44.<\/p>\n

Part of the increase in the size of the bank came from loans which Credit-Anstalt made to businesses of the former Austro-Hungarian Empire.\u00a0 To make these loans, Credit-Anstalt borrowed money, primarily from Great Britain and the United States.<\/p>\n

However, the loans from Great Britain and the United States were only on a short-term basis.\u00a0 Any failure to renew these loans would lead to the demise of the bank.\u00a0 The effect of the Smoot-Hawley Tariff Act essentially toppled the credit pyramid.<\/strong><\/p>\n

On May 11, 1931, the bank announced that it had lost more than half of its capital.\u00a0 This was a criterion under Austrian law by which a bank was declared failed. \u00a0The announcement of losses led to a panic and bank runs on Austrian banks.<\/p>\n

Occupy Wall Street Redux<\/strong><\/h2>\n

The crisis that started in Austria and extended to the European continent, continued to Great Britain.\u00a0 The island nation went off the Gold Standard on September 21, 1931, after its gold reserves shrank from \u00a3200 million to \u00a35 million.<\/p>\n

Twenty-five countries soon followed in Britain\u2019s footsteps, depreciating their currency against the U.S. dollar or leaving the gold standard. \u00a0By the end of 1931, the Depression (with a capital D) was global.<\/strong><\/p>\n

FDR took the U.S. off the Gold Standard in April 1933, confiscated the gold of U.S. citizens, and devalued the dollar.\u00a0 By this, workers, savers, and taxpayers got a raw deal.\u00a0 They always do.<\/p>\n

For example, during the 2008-09 great financial crisis and bank bailouts, workers, savers, and taxpayers also got a raw deal.\u00a0 They lost their jobs.\u00a0 They lost their houses.\u00a0 They lost their life savings.\u00a0 Yet the big bankers still got their big bonuses.<\/strong><\/p>\n<\/p>\n

If you recall, these bailouts triggered major social discord where the 99 percent took to the streets to Occupy Wall Street.\u00a0 The current bailout of SVB depositors \u2013 above and beyond FDIC limits \u2013 is resurfacing these same strifes.<\/strong><\/p>\n

California Governor Gavin Newsom\u2019s wineries got a bailout.\u00a0 Billionaire businessman Mark Cuban\u2019s drug company got a bailout.\u00a0 Many other Silicon Valley rich elites got a bailout.<\/p>\n

Therefore, shouldn\u2019t students get a bailout of their student loans?\u00a0 Shouldn\u2019t mortgage and credit card debt be cancelled?\u00a0 Shouldn\u2019t RIFed Googlers get a bailout so they can keep making big bucks sitting in padded\u00a0hypnotic meditation chambers<\/a>?<\/p>\n

These questions are absurd.\u00a0 But so are the bailouts of SVB\u2019s big depositors and the further consolidation of the banking industry.\u00a0 What if, like Credit-Anstalt, JPMorgan Chase or Bank of America were to fail?<\/p>\n

These are the grim opportunities that bank bailouts and bank consolidations make available.<\/p>\n

After decades of prolificacy, followed by decades of ambivalence and apathy, America\u2019s headed for complete financial, economic, and societal catastrophe.\u00a0 You can see it.\u00a0 You can hear it.\u00a0 You can feel it.\u00a0 You can taste it.\u00a0 You can smell it.<\/strong><\/p>\n

First stop: Occupy Wall Street Redux.<\/p>\n

In closing, owning physical gold and silver has never been more critical.<\/p>\n

*\u00a0 *\u00a0 *<\/p>\n

When things get bad the global elites always channel the discontent of the masses into a great cause.\u00a0 Is Washington secretly provoking China to attack Taiwan?\u00a0 Are your finances prepared for such madness?\u00a0 Answers to these important questions can be found in a unique Special Report.\u00a0 It\u2019s called,\u00a0\u201cWar in the Strait of Taiwan?\u00a0 How to Exploit the Trend of Escalating Conflict.\u201d<\/a>\u00a0 You can\u00a0access a copy<\/a>\u00a0for less than a penny.<\/em><\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nSun, 03\/19\/2023 – 15:30<\/span><\/p>\n

From:Zerohedge<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

‘Occupy Wall Street’ Redux Authored by MN Gordon via EconomicPrism.com, \u201cThe bank is something more than men, I tell you.\u00a0 It\u2019s the monster.\u00a0 Men made…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1202432","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1202432","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1202432"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1202432\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1202432"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1202432"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1202432"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}