Another major bank just failed: First Republic. There are two ways to look at the current crop of bank failures. One way is to look at the number of banks that have fallen this year. If that’s your only metric it’s not really too far out of line for a normal year. The issue, however, isn’t the number of banks. The big problem is the size of the banks. These aren’t little Podunk banks suffering from a local downturn. The banks that have collapsed were all heavy hitters with lots of funds in play.
This might be the early days of a much broader collapse. Okay, most likely we will have a major collapse. So far it’s been weird. Unemployment is low. House and car prices are still very high. Even used car prices haven’t come down much. When times are tough a paid off car is an asset that can be turned into cash. Not too many appear to be doing that.
Maybe the used car market isn’t that great an indicator anymore. When your average regular new car goes for around $40,000 there’s incentive to hang onto your old car. With dealerships adding on all kinds of extra fees new cars are even less attractive.
So how do you weather the banking storm? Everyone’s situation is different. At the very minimum keeping accounts below the Federally insured amount is a no brainer. Then you have to look at your banking situation. Having accounts at more than one bank makes sense. Set up your accounts so you can more funds electronically. Only losers wait in line to take cash out like during the Great Depression.
Investments, your employment situation, bills -all these things should be examined. Day to day most people run their lives on autopilot. It would serve you well to stay alert and get a jump on problems. Keeping some actual physical cash on hand is never a bad idea.
Of course we must always be prepared if everything grinds to a halt. Eventually a new normal will be established, but you don’t want to be caught out lacking the basics like food, water, and shelter until it does. Preps are always in order.
-Sixbears
And at least a years supply of critical meds.
ReplyDeleteNo matter even if you must bend rules to get them !
Good advice Spud. The bending can get tricky.
DeleteThese big banks are holding the world economy together. They are like the hubs of a huge spider web all connected electronically transferring capital from one hub to the next to keep the whole web in balance. When nasty things happen, like a presumably unexpected aggressive oligarchy. War breaks a hub and swings the web out of balance, causing the whole world economy to swing out of balance. Each one of these Big banks is connected to the others through this web.., and the dominos come down.
ReplyDeleteIt's interesting to see what happened to Russia as it's been pretty much cut out of the financial web. They've been reduced to flying gold bars to other countries to pay bills.
DeleteActually 6 bears while the US Dollar is steadily losing its world reserve status the Russian Ruble and the Chinese Yuan Renminbi are gaining ground as a replacement.
ReplyDeleteI've found no accounts that Russia nor China has been paying their bills with gold.
But then again Russian Gold deposits are inventoried quarterly.
The last inventory of Fort Knox and such was in the mid 1950's before I was born.
I wonder how much is really in there as they REFUSED Senator Rand Paul's MANY requests to see the American Gold Reserves.
So far the Russian debt to GDP ratio:
Russia Government debt accounted for 13.4 % of the country's Nominal GDP in Sep 2022, compared with the ratio of 13.8 % in the previous quarter.
American debt to GDP ratio
United States Total Debt accounted for 764.7 % of the country's GDP in 2022, compared with the ratio of 772.1 % in the previous quarter.
Some argue the off the book's debt is far higher, just like official inflation numbers is manipulated heavily (aka faked).
As Papa Hemmingway said in "The sun also rises"
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
“What brought it on?”
“Friends,” said Mike. “I had a lot of friends. False friends. Then I had creditors, too. Probably had more creditors than anybody in England.”
Treasury bills are debt. I googled who owns our debt.
Foreign countries control only about 30% of the entire national debt. American investors, the Federal Reserve and other parts of the U.S. government own the rest.
"Investers" Like SVD Bank, First Republic Bank and in fact most of the Banks hold them as a major part of their required by Fed Rules "reserves".
Our Retirement accounts are required by law to hold some of them. Yep, 401K's own governmental debt.
When the US Treasury looks like it's failing the RUSH to CASH them in will be epic.
As in Wiemer Germany Hyperinflationary epic.
Google it's a useful tool if you ask the question correctly.
ReplyDeleteBTW I'd be grateful if your herbal wife might share some good for NH herbal books titles.
ReplyDeleteLooks like we're going to NEED them, since over 90% of our medical supplies come from India and China.
I seriously doubt that Russian or Chinese currency will replace the dollar. Both countries are in deeper trouble than the US is. Chinese banks don't even work very well in Russia, never mind the rest of the world.
DeleteThe BRICS experiment as an alternative to the dollar isn't going very well either.
Even when the banks fail there will still be demand for US dollars. They will be the best of a bad bunch.
My info about the gold shipments from Russia comes from Peter Zeihan.
I'll have to get back to you on those herbal books. My lovely wife is away for the day. I know one of her favorites is currently out of print. Go figure.
6 bears, I'm pretty sure that the once Great Britian also were quite sure the Pound Sterling would remain the worlds reserve currency.
ReplyDeleteAs did I suspect the Romans with their ever-depreciating Drachma.
Some other "Money" or a basket of monies will replace the dollar.
But one could hope that constant depreciation of the value of the dollar keeps the dollar THE World Reserve Currency".
How many rubber checks can you and I print before they don't get accepted?
Or as Wimpy said "I'll gladly pay you Tuesday for a hamburger today".