Last Friday saw the total failure of the Silicon Valley Bank, the 16th biggest bank in the United States. The biggest bank failure since the 2008 financial crisis
By Sunday, the Silvergate Bank and Signature Bank had joined SVB in full collapse. All three are now safely under Federal Deposit Insurance Corporation (FDIC) control.
The FDIC has taken the unusual step of fully guaranteeing all deposits kept with the SVB – meaning the federal government will give taxpayer money out to compensate every SVB customer.
But the damage didn’t stop there. Naturally, this put pressure on other regional banks, with two more – First Republic Bank and PacWest Bank – coming close to collapsing themselves, following mini-runs.
In short, the financial situation is teetering on the edge of a major crisis. But is it accidental? And if not, what is the agenda behind it?
Well, firstly, no it’s not accidental. Let’s get that out of the way.
Does that mean the collapses were planned and engineered to the last detail? Maybe, maybe not.
Certainly, there was at least some warning for people in the know.
That is despite the California Department of Financial Protection and Innovation finding that SVB was a “sound financial institution” as late as March 9th, and that it only entered insolvency after investors caused a run.
Obviously, that’s not proof of an intentional collapse, but it’s something to make a note of nonetheless.
Anybody with some kind of foreknowledge could have made a fortune in put options over the weekend. It will be interesting if any spike in such deals was recorded.
But all of that is irrelevant, really, because we know they have been deliberately tanking the economy for three years as a response to “the pandemic”.
They inflated the cost of food and energy and destroyed the value of our currency by “printing” billions upon billions of dollars, pounds and euros.
So, even if there was no specific micro-managed set-up with these specific banks, bank failures were the inevitable result of this economic vandalism – inevitable, and desired.
The more important questions are “why?” and ”what happens now?”
Well, one aspect will be tighter regulation – specifically of cryptocurrency. It’s likely no accident that two of the failed banks – Silvergate and Signature – are major investors in crypto, and SVB is known to have links to crypto too.
The narrative will likely come about that “unregulated crypto investment poses a danger to the financial system” or that “unregulated crypto is makes our financial institutes vulnerable to economic warfare” or something similar
The next phase will likely be arguing that small, regional, private banks cannot guarantee the security of their customer’s money, and it would be safer for individuals to bank with either giant international banks or directly with the central bank.
It’s already being reported that Bank of America has seen a huge boost in deposits since the SVB crash. This process of consolidation in the major banks is likely to continue.
Logically, there’s only one place this two-pronged propaganda is headed (for anyone who’s been paying even the smallest bit of attention): Central Bank Digital Currency.
The narrative fits too well for it to be anything else.
Going forward, CBDCs can be pitched as more secure than traditional banking, and more regulated than “traditional” crypto. Further, since the FDIC is now fully guaranteeing deposits in failed banks, you’re practically banking with the Fed anyway. Why not just cut out the middle man?
We know they’re going to make these arguments because they already started making them.
In January this year, the World Economic Forum published a paper titled:
Can central bank digital currencies help stabilize global financial markets?
It’s clear what the sales pitch is going to be.
But more than that, it’s possible bank runs will actually be encouraged in future, because they could increase the uptake of digital currency.
According to a report from the Bank of International Settlements [emphasis added]:
Another set of studies focus on the risk that a CBDC may increase depositors’ sensitivity to system-wide banking crises by facilitating the transfer of deposits. The availability of CBDC might not have a large impact on individual bank runs as it is already possible to digitally and instantly transfer money between a weak and a strong bank (Kumhof and Noone (2018) and Carstens (2019)).
However, during a systemic banking crisis, transfers from bank deposits into CBDC would face lower transaction costs than those associated with cash withdrawals (such as going to the ATM, waiting in line, etc.), and would provide a safe-haven destination in the form of the central bank.
The lower costs of running to CBDC compared to cash imply that more depositors would quickly withdraw at a lower perceived probability of a system-wide bank solvency crisis.
They argue that since any hypothetical CBDC will be more secure than traditional bank deposits, and easier to get than cash, people would opt to use it in the event of a run on the bank, and that bank runs would therefore be more likely and more common.
Do you see the implication here?
Once CBDCs are out there – optional at first, of course – the central banks could theoretically increase uptake by artificially engineering financial instability and causing regional banks to collapse.
They won’t make it mandatory, they’ll just make it “safe”.
Another report, published in 2022 by the UK’s House of Lords, described CBDCs as “A Solution in Search of a Problem”.
It looks like they just found their problem. And problems are just like everything else – the bests are the ones you make yourself.
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