Original Title: This Is Worse Than Lehman; Banking Crisis Worsens

Publish Date: March 22, 2023

Record Date: March 21, 2023

The global banking system is fragile and potentially destabilizing, with Credit Suisse in Switzerland being a recent example of a failing bank. The U.S. Federal Reserve and Treasury have been injecting liquidity into foreign banks to prevent a collapse of the global systemically important banks (GSIBs). However, this could be highly inflationary and favor the markets at the expense of the currency. Recent emergency actions and meetings to rescue failing banks suggest the banking system is unsound and at risk due to the end of an interest rate driven bubble.

Major US banks, along with the Federal Reserve, recently bailed out a regional bank, causing concern about the soundness of the US banking system. The banking crisis is linked to an interest rate-driven bubble and the consequences of falling bond prices. Global Systemically Important Banks (GSIBs) are particularly vulnerable due to their high levels of gearing, as well as the unrecorded foreign exchange liabilities in the derivatives market. With the system so interconnected, it is unclear where a safe place to hide during a crisis might be. However, Central Banks cannot allow failures, and thus are committed to protecting the whole system even at the cost of destroying purchasing power.

The interconnectedness of the financial system means there is no safe place to hide when it collapses. Central banks cannot permit any banks to fail, except for the tiniest and most dishonest ones. The only way to protect oneself is to hoard real money, which is gold and silver coin and bullion. Fiat currency is at risk of dwindling to nothing in terms of purchasing power, so it is important to get out of the fiat currency system and into real money. The banking system needs to change and go back to free markets. It is unclear if governments will go back to a gold standard, but it is possible that regimes in Asia will protect themselves from self-induced collapse and force other countries to do the same. The current system might not prioritize truth and principles but going back to sound money is still the healthy and correct model. However, the transition might not be smooth and there is a risk of harsh treatment from a cornered animal.