US Banks Are OK — China Peace Plan — Saudi King Invites Iran President — First & Last Crypto Bailout — US Economic Report — Celebrities Charged — Yellen Warns Russia & China on Dollar – [03-26-2023]

 

Direct from BOOM Finance and Economics at the links below

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THIS WEEK’S EDITORIAL

US BANK LOAN DELINQUENCIES:  There has been a lot of buzz recently concerning a possible US “banking crisis”. Such buzz is usually accompanied by the claim that all banks everywhere are currently at risk of failure. The authors of such stories inevitably advise the reader to purchase “sound” money (whatever that means) such as “gold” or silver. The Internet is full of these rumours and stories.

However, it appears that none of the so-called “experts” who write these articles (ad infinitum) have examined the delinquency rate of US bank loans. BOOM has and it may surprise readers to learn that the rate on “all loans” is currently at the lowest level in 40 years.

You can check easily yourself by searching for “Delinquency Rate on All Loans, All Commercial Banks FRED “.  You can also look at the sub-headings at FRED for —

Delinquency Rate on Business Loans, Delinquency Rate on Consumer Loans, Delinquency Rate on Credit Card Loans, Delinquency Rate on Loans secured by Real Estate, Delinquency Rate on Single Family Residential Mortgages, Delinquency Rate on All Loans and Leases Secured by Real Estate, Single-Family Residential Mortgages, Delinquency Rate on Commercial and Industrial Loans, Delinquency Rate on Commercial Real Estate Loans (excluding Farmland).

Alternatively, you can continue to read the DOOM and Gloom authors all over the Internet while you “stack” your physical gold bars in the basement, buy Bitcoins and keep your single shotgun functional.

CHINA PEACE PLAN:  In case you have not heard from the mainstream media, China has a Peace Plan for Ukraine which it is discussing with Russia. There are recent reports that Ukraine has also expressed interest in having China play a mediating role.

If you wish to examine the 12 Point Plan, you can search for it using the words — “China’s Position on the Political Settlement of the Ukraine Crisis”. It makes for interesting reading. https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/202302/t20230224_11030713.html

SAUDI KING INVITES IRAN LEADERSHIP:  Another report which the mainstream media may not have brought to your attention concerns the plan by Saudi Arabia to welcome the President of Iran in a State visit to meet the King of Saudi Arabia.

An Iranian official reportedly said that the King of Saudi Arabia had issued a formal invitation to the Iranian President, Ebrahim Raisi, to visit Riyadh. Raisi is said to have “welcomed” the invite from King Salman. The date has not yet been set. Such an official head of state visit has not taken place in over 20 years.

Of course, the US will see this as an “expansionist threat” from China and a betrayal from Saudi Arabia. But there is little they can do about this outbreak of Peace and Goodwill.

THE FIRST AND LAST CRYPTO BAILOUT:  Last week, BOOM explained how the Federal Reserve saved all the depositors of Silicon Valley Bank (SVB) and, subsequent to that, the Crypto market — all in one operation. Janet Yellen, the United States Secretary of the Treasury has since said that such a full bailout of all depositors is a special case and will not apply to other bank failures.

So, it is clear that there was, indeed, a very special large depositor of SVB who was rescued for special reasons, just as BOOM hypothesized. Of course, the identity of that large depositor which had some strong connection to the Crypto market will be kept a closely guarded secret. But it is not hard to guess if you start by perhaps looking at Circle Internet Financial LLC, a private company registered in Dublin Ireland and a Hong Kong-based company called Tether. There are plenty of other possible candidates to research but the quest is futile. Why? Because this will be the first and last bail out of the Crypto world by the Fed.

ECONOMIC REPORT OF THE PRESIDENT:  Last week, the White House Council of Economic Advisers released the Economic Report of the President to the Congress. The White House Council has only three members. It is chaired by Cecilia Elena Rouse, a frequent economic adviser to various Democratic Presidents. Notably, she is a director of T. Rowe Price Equity Mutual Funds and an advisory board member of T. Rowe Price Fixed Income Mutual Funds.  The other two members are Jared Bernstein and Heather Boushey.

Chapter 8 of the Report is titled “Digital Assets: Relearning Economic Principles”. The first sentence is not what you would expect in a report on digital assets — “Multiple financial crises have struck the United States during the last two centuries. Many of these crises have been caused by institutions that function like banks but are not registered or regulated as banks, so-called shadow banks”.

BOOM does not understand why they would choose to start this chapter with such an odd introduction. But perhaps it is not so odd?

It then goes on to say “This chapter primarily examines crypto assets, whose proponents have been relearning the lessons from previous financial crises the hard way.” This suggests that the authors of the Report are convinced that the world of Crypto represents a risk of financial crisis to the well-established, conventional financial system.

The recent failure last November of the FTX Crypto exchange and the events of the last two weeks appear to have been much more consequential to the financial system than is generally recognised.

The report also says –“crypto assets to date do not appear to offer investments with any fundamental value, nor do they act as an effective alternative to fiat money, improve financial inclusion, or make payments more efficient; instead, their innovation has been mostly about creating artificial scarcity in order to support crypto assets’ prices—and many of them have no fundamental value. This raises the question of the role of regulation in protecting consumers, investors, and the rest of the financial system from panics, crashes, and fraud related to crypto assets”.

This statement concerning no fundamental value and protecting the financial system is a strong one and it is safe to assume that this is the position of the US Government.

Further, this statement underlines that position. “Although the underlying technologies are a clever solution for the problem of how to execute transactions without a trusted authority, crypto assets currently do not offer widespread economic benefits,” and “They are largely speculative investment vehicles and are not an effective alternative to fiat currency. Also, they are too risky at present to function as payment instruments or to expand financial inclusion.”

The risks presented by crypto assets stem from excessive speculation, high leverage, run risk, environmental harm from crypto asset mining, and fraudulent activities that harm retail investors and corporations”. And “much of the activity in the Crypto asset space is covered by existing regulations and regulators are expanding their capabilities to bring a large number of new entities under compliance”.

It looks like the heavy hand of US government oversight and regulation is about to get much heavier in regard to the world of Crypto. Take note Crypto enthusiasts. Last week’s BOOM editorial accurately stated “BOOM expects the Fed to take a very hard look at how the Stablecoin market operates (or is supposed to operate) and at how the more general Crypto market operates, especially in regard to any associated derivative risks which may cause systemic risk to the entire Crypto market.”

Strangely, a diagram is presented titled “A Taxonomy of Digital Assets and Central Bank Money” which presents CBDC’s (Central Bank Digital Currencies) as if they already exist when they don’t (except in China, the Bahamas, Jamaica and Nigeria).

It also presents Cash as being contained within another concept labelled “Central Bank Money”. BOOM suspects that they are referring to Central Bank Reserves here but cannot understand why Cash is encircled within it in the diagram. And the diagram represents “Crypto Assets” as containing NFT’s (Non Fungible Tokens) and Cryptocurrencies when the report seems at pains to explain that those digital assets are certainly not currencies. Then there is another category of “Stablecoins” which strangely overlaps between “Crypto Assets and Cryptocurrencies”.

BOOM understands that this diagram has been included to help poorly informed readers. However, the diagram is potentially confusing and terminology used suggests that the authors are struggling to understand the subject matter themselves.

Much discussion follows. However, these bold headline statements appear to clarify — Cryptocurrencies Generally Do Not Perform All the Functions of Money as Effectively as Sovereign Money, such as the U.S. Dollar

And There Have Been Limited Economic Benefits from DLT Technology.

Further sections deal with The FedNow Instant Payment System where this rather strange statement appears — “a larger, more fast-paced economy is starting to arise”. BOOM cannot understand this at all. Quite frankly, what the hell are they talking about?  It suggests a hidden agenda. However, there is a clarifying statement — “FedNow is not a digital asset

Under Central Bank Digital Currencies section, they state “11 countries have launched CBDCs “and then link to an Atlantic Council global map that strongly suggests that CBDC’s are currently launched in 11 nations. However, a close examination of the detail only reveals 4 – Nigeria, the Bahamas, Jamaica, and Eastern Caribbean.

Strangely it leaves out China where the e-Yuan has been in trials for some years and is effectively “launched”.

The map also has other categories Pilot (18), Development (32), Research (39), Inactive (15) and Cancelled (2). The map therefore suggests strongly that CBDC’s are inevitable in 89 nations.

BOOM suspects that this is the hidden agenda being brought forward by the Report – “CBDC’s are inevitable so roll over and accept them”.

But this sentence begs doubt — “a potential US CBDC could help ensure that such payment systems are aligned with the principles of human rights, democratic values, and privacy”. A cynic, such as BOOM, would suggest that the words “could help” should have read “will help”. But, BOOM is always suspicious of politicians making promises that they can’t keep.

BOOM is keenly aware that Electronic Cash may be inevitable in a world of falling working age populations. However, BOOM would expect it to be non-programmable, anonymous, and issued by the Treasury – not by the Central Banks.

Please note that the words “programmable” and “anonymous” do not appear anywhere in the entire report; a strange omission perhaps when discussing CBDC’s?

The entire report is 513 pages long with the section on Digital Assets being 35 pages long. It is a daunting task, but readers who are interested in the future of money should certainly try to read it to see what hidden messages and hidden agendas are being considered by the present US Government.  Reference: https://www.whitehouse.gov/wp-content/uploads/2023/03/ERP-2023.pdf

US CELEBRITIES CHARGED BY SEC:  There have been reports that a number of US celebrities have been charged by the SEC (Securities and Exchange Commission) for misrepresenting Cryptos. Everyone with the exception of two has reportedly agreed to a collective $400,000 payment in disgorgement, interest and penalties to settle the charges, which were not an admittance or denial of guilt.

In one report, Gary Gensler, the Chairman of the SEC is quoted as saying “This case demonstrates again the high risk investors face when crypto asset securities are offered and sold without proper disclosure“.

https://www.zerohedge.com/political/sec-hits-lindsay-lohan-jake-paul-soulja-boy-and-others-crypto-fraud-charges

YELLEN WARNS RUSSIA AND CHINA ON DOLLAR:  America seems to love warning and threatening other nations as if it has the moral right to do so. Janet Yellen, the US Secretary of the Treasury, said this last week at the House of Representatives Appropriations Subcommittee.I certainly want to see the dollar remain as the world’s reserve currency, and there is a motivation that Russia and China have to try to develop another system that avoids the use of the dollar.”

This is America’s long term foreign policy goal and the reason for its hundreds of military bases scattered around the globe – as they say, straight from the horse’s mouth.

The exorbitant privilege of issuing the world’s so-called “reserve currency” is one that allows America to create dollars from thin air and then pay for imported goods and services provided by other nations, insisting that they take only US Dollars as settlement.

The US also insists that its exports to other nations (especially weapons) are paid for with US dollars. Offshore tax haven banks are therefore incentivised to create loans to large corporations principally denominated in US Dollars  (as long as the US economy remains the largest national economy on Earth).

Russia and China are seeking to minimise the use of the US Dollar and thus, they are strongly denounced as a “threat” to “democracy” – not to the exorbitant privilege. Words are carefully chosen by the actors on the world stage.

China has committed the unforgivable sin of expanding the size of its economy to rival that of the US. Until now, they have been willing to accept US Dollars as settlement for the vast majority of its trades. However, that is rapidly changing.

And that is why we have so much Geopolitical tension at present as the US seeks to maintain its dominance. However, it is a battle that the US will inevitably lose as many billions of people in many disparate nations move steadily towards a multi-polar world of trade and capital settlements where the Chinese Yuan, the Russian Rouble and the Indian Rupee rise in offshore volumes, triggered by demand.

This transition will be many decades in its evolution. BOOM suspects 50 – 100 years before a multi-polar world of currencies is accepted. But it may be much shorter if the US continues to threaten other nations and isolate itself.

QB Explained: https://boomfinanceandeconomics.wordpress.com/2019/12/15/boom-as-at-15th-december-2019/  and

BOOM’s Perfect Economy: https://boomfinanceandeconomics.wordpress.com/2020/01/18/boom-as-at-19th-january-2020/

In economics, things work until they don’t.  Until next week.  Make your own conclusions, do your own research.  BOOM does not offer investment advice.

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BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY: LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans). https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how global banking systems really work.

AND Watch for 4 minutes, this Bank of England explanation: Money is essential to the workings of a modern economy, but its nature has varied substantially over time. This video describes what money is today.

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.  EMAIL: gerry{at}boomfinanceandeconomics.com

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Author: Austrian Peter

Peter J. Underwood is a retired international accountant and qualified humanistic counsellor living in Bruton, UK, with his wife, Yvonne. He pursued a career as an entrepreneur and business consultant, having founded several successful businesses in the UK and South Africa His latest Substack blog describes the African concept of Ubuntu - a system of localised community support using a gift economy model.

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23 Comments
Mary Christine
Mary Christine
March 28, 2023 8:50 am

and many of them have no fundamental value.

Neither does the dollar and it would be hard for it to lose any more value than it already has since 1913.

I don’t think it’s going to take 50-100 years for a multi-polar world to appear. I think it’s already here and it will become much more apparent in the next year or two.

LoneStar42
LoneStar42
  Mary Christine
March 28, 2023 9:58 am

Concur. Fiat currency cannot be supported or replaced by another fiat currency. When gold and silver backed currency were replaced with ‘notes’ published by the “Federal Reserve” there was nothing to back the notes except by threat: take it or leave it. And no reserve or backup. Interest rates “controlled” inflation, not markets, and that control is by the fed instead of trade value, or barter. Saving was no longer a means of protection or safety.
Our banks rely on granted loans and can last only by further loans with no base for saving or investment.
God help us.

B_MC
B_MC
  Mary Christine
March 28, 2023 5:15 pm

I don’t think it’s going to take 50-100 years for a multi-polar world to appear.

This would be the signal that the demise of the dollar is imminent….

m
m
March 28, 2023 9:38 am

I heard the 4 largest banks are fine 😀

Iska Waran
Iska Waran
March 28, 2023 9:50 am

I have no doubt the government would love to institute CBDC’s. I do doubt that they comprehend how hard the switchover would be. Progressives never understand unintended consequences. Even seemingly slight regulatory changes can make entire industries untenable. It seems to me that with CBDC’s, when you put all the banks out of business – absorbing them into The National Bank – every mortgage – commercial and residential, every revolving or installment debt, every student loan, every car loan, every business line of credit would also accrue to The National Bank. Unless they somehow nationalize all of the employees and branches of every small town credit union and command them to keep lending – and keep servicing existing loans, the whole shitteree will grind to a halt.

You can say “that’s what they want – total collapse”, and I’m sure there are some who do, thinking it’ll reduce the carbon footprint or something, but I don’t think they’d be able to re-start the economy.

Mary Christine
Mary Christine
  Austrian Peter
March 28, 2023 1:19 pm

All very good points, Peter. It sounds like you had been conversing with Fleabaggs.

Anonymous
Anonymous
March 28, 2023 1:44 pm

The rate of interest paid on all loans is at a 40 year low. That fact makes those loans (AKA Securities) a guaranteed loser for anyone holding them (banks) as rates rise. Time to re think about raising rates and destroying all the value underlying the assets of the entire system. BANKRUPTCY of a nation doesn’t look like the average bankruptcy. Look at everything from a different angle.

Jdog
Jdog
March 28, 2023 7:37 pm

That the market is going to crash is elementry. First, assets are overvalued, and must be revalued. Second, the world is turning away from the dollar and those dollars the world no longer need are going to flow back to the US creatiing massive inflation. To protect the dollar, all the Fed can do is enact policies that will destroy money. Money destruction is accomplished by devaluing assets and loan defaults. Historically, the 2 ways to save the dollar have been economic depression, and world war. The US no longer has the military power to prevail in a world war, so the only option left is economic depression.

rhs jr
rhs jr
March 28, 2023 11:16 pm

We are both honorable men; saying I don’t make crap up was for people not sure who to trust these days. The banksters are lying Big Time to sneak past Laws and public condemnation, and are covering their tracks like common outlaws; they can easily be defeated by Tom Emmer’s US House Bill and Gov DeSantis’ Florida State Bill to ban Retail CBDCs. Grand Solar Minimums (GSMs) always cause famines and natural disasters; Operation Sandman has killed the Petro Dollar and the US will have hyperinflation; the World has past Peak Oil and Fertilizer, so millions of people in the Population Explosion riding free on the prosperity train will either get smart or perish IAW Darwin’s Reality of natural resource scarcity, and the Useless Idiots that get angry and destroy stuff will only hasten their own demise; the NeoCons and FJB Idiots have made enemies with almost every country on earth and are dragging the US into war with Russia and China; the US House Republicans are trying to look busy fighting cockroaches but Demons seized control in 2020, and RINOs couldn’t find a criminal in a Federal Prison. Useless Idiots will kill for non-existant government lifeboats when TSHTF soon; Watchmen on the Wall, blow your Trumpets for Christians , and fill the lamps.

rhs jr
rhs jr
  Austrian Peter
March 31, 2023 12:35 am

Some huge Natural Disaster could hit any minute in a GSM; the US Treasury issues FedCoins for general payments instead of Dollars; US gas stations and warehouses run out and we have to pay BRICS+ money other than Dollars; the US Recession becomes a 1929 like crash; excess deaths wake people up; the Ukraine War becomes a Saigon-Afghanistan type defeat and Southern Military men (almost 40% in uniform) get fed up with the Woke Military and quit. Plus the spoiled brainwashed communistic minority youth want the Dolce Vita now but it ain’t there to just hand out in 2023 like prior years; the natives are ignorant, lazy, restless & in a bad mood. Now some commie NYC DA arrests Trump (instead of Fauci, Blinken, Nuland, Hunter, Harpy, Pelosi, Austin, or the House Impeach Biden). Add some hornets & stir the pot.

rhs jr
rhs jr
  Austrian Peter
March 31, 2023 12:35 pm

I got a farm to run and it’s Spring, need the Synopsis when it’s done; sort of a 1984? The US Treasury plans to force FedCoins on US by sending US government paychecks, Social Security, Medicare, Medicare, Food Stamps, etc, in FedCoins ASAP. If Florida, Texas etc have banned them, then what? Federal troops and our liberation? I doubt the BRICS+ will take them; would be like accepting e-air for their goods (vs Yuan or Rubles backed by gold). FedCoin solves nothing but imposes tyrannical control over Americans. TV news propaganda is 24/7 about how Trump is toast facing a dozen other indictments to come. My guess is that DeSantis is next for political “assassination”.