DDP Newsletter Vol. XXXIX, No. 2
With the sudden collapse of the Silicon Valley Bank (SVB), recently rated very highly, people are understandably nervous. This was said to be the second largest bank failure in history. Will your bank be next?
SVB’s special features included administrators who were more concerned about being “woke” than about the financial stability of their bank. Most depositors (93%), including many venture capitalists, had accounts greatly in excess of the FDIC-insured amount of $250,000. Many are just very very important persons, such as Prince Harry or major donors to the Democratic Party—and major businesses linked to the Chinese Communist Party. Treasury Secretary Janet Yellen, after an initial denial, said that they would all be bailed out—at the expense of consumers who will have to pay increased fees that banks must assess to rebuild the Deposit Insurance Fund (tinyurl.com/y2uvak8z).
Yellen told Congress that depositors at other banks would be similarly protected only if “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences” (https://tinyurl.com/pv7cmh3a).
If fears sparked by recent bank runs continue, there could be a sharp drop in the velocity of money as people hoard cash, with sizable deflationary/depressionary effects, writes Richard Maybury. But he states that you need not fear a run on your bank like the one depicted in the 1946 movie It’s a Wonderful Life. He writes: “When the Twin Towers came down in 2001, a run on the banks began. Federal Reserve staff quickly contacted armored car companies to make sure any bank needing greenbacks could be speedily resupplied. The run was nipped in the bud, and you probably never heard about it.”
If he were in charge, he would have such a rescue plan ready. Depositors would get their money back. But what would it be worth (Early Warning Report April-May 2023)?
Like many, Maybury recommends owning some precious metals as a back-up. It might be too late—at this moment, platinum coins and small-denomination silver coins are unavailable. A few coins that you can carry might be lifesaving. Remember, however, that living in a rural area with a large stash of gold in a nonportable safe will not light your home, keep you warm, protect you from thugs or wild animals, or cure a bacterial infection. My grandfather’s 4 G’s were grub, gold, guns, and ground. Perhaps more important are 3 G’s: grub, guns, and gear—tools and useful items of all types.
Remember that bank depositors are unsecured creditors. Increasingly, banks are denying delaying access to deposits, or refusing credit cards if they “suspect” fraud.
Banks’ loss of depositors is an alarming trend. From a high of $18.15 trillion in April 2022 total deposits at all US commercial banks dropped to $17.3 trillion as of March 22, 2023, a loss of $850 billion of capital in the past 12 months. As the Fed hikes rates, deposits are withdrawn to seek a higher return (tinyurl.com/2zwxjyt5). Though having a large effect, the inflation-adjusted Fed funds rate is still -1.9%, meaning that the Federal Open Market Committee (FOMC) is “so far behind the inflation curve that they can barely see its tail lights,” writes David Stockman (https://tinyurl.com/bdhy8exj). Since March 2008, the Fed funds rate has been negative in real terms 96% of the time.
The contagion is not restricted to the U.S. The Swiss bailed out Credit Suisse, which Stockman describes as a “walking dumpster fire, which had fallen for nearly every fraudster on the planet.” Since 2016, it had booked $3.3 billion of cumulative losses even as it had paid out $4.9 billion in dividends and stock buybacks (ibid.).
SVB’s egregiously mismatched asset book still amounted to only 0.6% of the U.S. banking system, and Credit Suisse’s $718 billion of assets amounted to just 0.4% of the global banking system. The bailouts amount to a confession that “15 years of negative real interest rates have so thoroughly infected the banking system with gambling excesses that they dare not allow even the sub-1 percenters to face their just deserts.”
The Fed is an SDI (Systematically Dangerous Institution), Stockman states.
FINANCIAL MELTDOWN AND UKRAINE
The war in Ukraine is occurring as the states that are “at war with Russia” stand “at the edge of an economic precipice.” Living standards are collapsing, prices are spiraling, jobs are priced out by higher energy costs, shelves have empty spaces, and pockets of system dysfunctionality as in transport systems are confounding the smooth running of society, writes Alistair Crooke. The Europeans fear kinetic war in Europe, whereas the American faction is more fearful of the prospect of financial meltdown, should the war widen. The “Rockefeller-Davos prescription” of blowing a new financial bubble of “renewable tech” to keep the dollar-hegemony project afloat is running into difficulty as the world is moving toward decentralization and multipolarity (tinyurl.com/2rwxmn8b).
In response to U.S. sanctions disconnecting their banks from international financial services, Iran and Russia have integrated their interbank communication and transfer systems to help enhance trade and financial operations. The Russian Financial Message Transfer System “is immune to sanctions as it is based on the infrastructures of both countries,” according to Deputy Governor of the Central Bank of Iran Mohsen Karimi (https://tinyurl.com/53jdu7nn).
Countries that are dumping the dollar also include China, Brazil, Argentina, Saudi Arabia, United Arab Emirates, and India: the majority of the world economy.
41stANNUAL MEETING
DDP’s 41st annual meeting will be held in Tucson at the Doubletree Reid Park, July 7-9. The theme is: “Global Crises: Reawakening vs. ‘Reset’.” Developing crises include energy poverty, food shortages, the corruption of science and education, possible new pandemics, escalating war that could go nuclear, and economic decline.
Sadly, Jay Lehr, “the world’s most optimistic man,” died recently, so will not be with us. As Edward Teller said, “It is our duty to be optimistic, as otherwise we do nothing to change things.” Thus, the meeting will feature ways to counter alarmism and self-destructive policies; effective pandemic response; the promise of nuclear energy; therapeutic advances (photobiomodulation); and decontamination technology (ozone).
Civil defense will be highlighted by Stephen Jones, including breakthroughs in radiation monitoring. The mobile nuclear/biological/chemical shelter display that debuted at DDP in the 1980s will be back.
Banquet speaker Robert Zubrin, founder and president of Pioneer Energy, has authored more than 200 technical and non-technical publications in various areas of astronautical, aerospace, fossil fuel, and nuclear engineering, and 14 U.S. patents. He will be available to sign his latest book, The Case for Nukes.