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The most deeply inverted part of the U.S. yield curve is one that hasn’t sent a false signal about the prospects of a U.S. recession in more than a half-century of research.
That’s the spread between 10-year and 3-month Treasury yields, the large difference between the two rates is pointing to the likelihood of a “deep recession,” according to Campbell Harvey.
The 10-year/3-month spread is further below zero than it was in the run-up to the 2007 -2008 financial crisis and in the late 1980s, when the Federal Reserve pushed interest rates back above 8% to 9%.

The most deeply inverted part of the U.S. yield curve is one that hasn’t sent a false signal about the prospects of a U.S. recession in more than a half-century of research.

That’s the spread between 10-year and 3-month Treasury yields, which was 157.5 basis points below zero on Thursday — reflecting a 3-month T-bill rate TMUBMUSD03M, 4.866% that’s trading well above its 10-year counterpart TMUBMUSD10Y, 3.305%. The large difference between the two rates is pointing to the likelihood of a “deep recession,” according to Campbell Harvey, the Duke University professor who pioneered the use of the spread as an indicator of future economic growth.

Recession fears are back in focus after this week’s data provided fresh evidence that the Federal Reserve’s yearlong rate-hike cycle is finally having an impact on the labor market. With bond-market volatility picking up during the first week of April, liquidity problems and concerns about a potential U.S. debt-ceiling crisis continue to plague Treasuries and exacerbate the market’s moves, according to Tom di Galoma, managing director and co-head of rates trading for financial services firm BTIG. The 10-year/3-month spread is further below zero than it was in the run-up to the 2007 -2008 financial crisis and in the late 1980s, when the Federal Reserve pushed interest rates back above 8% to 9%.

The size of the current 10-year/3-month inversion relative to where yields currently stand “is striking and amounts to a big, serious inversion,” Harvey said via phone on Wednesday. “The magnitude of the inversion can be directly linked to a large slowdown in economic growth, and the model is predicting a deep recession.”

Harvey wrote a 1986 dissertation on the topic of whether interest-rate structures could be used to forecast economic growth and looked at data going back to 1900. He uses 1968 as the starting point for determining the accuracy of the 10y/3m spread’s predictive powers because that was when Treasurys became a highly liquid market.

The 10y/3m spread — which typically provides advance warning of a recession of anywhere from six to 18 months — first fell below zero in October. Initially, Harvey held out hope that the U.S. could avoid a downturn. Last December, he told MarketWatch that the gauge — which hadn’t been inverted long enough at the time to send a definitive statement — might be sending a “false signal” and that the probability of a soft landing was more likely.

That was before the Federal Reserve hiked rates again in February and March, and the banking system increasingly became the channel by which the Treasury-curve inversion played out in public. Now policy makers have “gone too far and are playing with fire,” Harvey said.

The curve is a line that plots the differences in yields across all debt maturities. It typically slopes upward, with investors demanding a premium to compensate for risks that can develop over time. A flatter curve can signal concerns about the economic outlook. An inverted curve, in which short-dated yields rise above longer-dated yields, is a warning sign.

The inversion of the Treasury curve matters for a number of reasons. One of them is that it’s upended the business model used by banks, which make money by lending at higher rates over the longer term than they pay borrowers for their deposits. Analysts said that an inverted yield curve appeared to play a role in the demise of California’s Silicon Valley Bank in March, for example. “I have no idea how many more banks the Fed has put at risk, but I certainly hope they [policy makers] do,” Harvey said.

On Thursday, Treasury yields finished mostly higher as traders await Friday’s nonfarm payrolls report for March. All three major U.S. stock indexes DJIA, 0.01% SPX, 0.36% COMP, 0.76% also ended up.

At Academy Securities in San Diego, David Gagnon, managing director and head of U.S. Treasury trading, said the financial market appears to be weighing two sets of “extreme scenarios.”

“For bonds, there’s a risk that the economy gets caught in a recession,” Gagnon said via phone. “Stocks are not too worried about the Fed having to reverse course in a recession and are instead worried that the economy doesn’t go into recession,” leaving policy makers to keep hiking rates.

A small portion of the inversion in the 10-year/3-month spread is due to technical factors relating to supply imbalances, illiquidity, and worries about the debt ceiling, he said. The rest has to do with the bond market “pricing in the risks of a hard landing and the Fed having to respond aggressively.”

Story by Vivien Lou Chen - Updated: 4/6/2023, First Published: 4/5/2023 Redacted shorter to keep to important points and bullet points added by HGG. https://www.marketwatch.com/story/bond-markets-most-deeply-inverted-gauge-is-pointing-to-large-slowdown-in-economic-growth-and-deep-recession-3c1d21e1

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The U.S. dollar’s dominance is being challenged on several fronts simultaneously — from countries choosing to conduct trade in local currencies to BRICS developing its own currency. And gold is paying attention.
This was topped by Russia’s State Duma Deputy Chairman Alexander Babakov confirming that BRICS — Brazil, Russia, India, China, and South Africa — are working on creating their own common currency. Babakov suggested that the new currency could be backed by a basket of commodities, including gold and other rare-earth elements.
If there is a swing in the public perception of what's happening with the dollar and the U.S. economy, that will shift sentiment very quickly, and gold is usually the first asset to react to that, he added.
After buying a record amount of gold in 2022, central banks are not letting up, with 2023 seeing the strongest start to the year in more than a decade, according to the World Gold Council (WGC).

The U.S. dollar's dominance is being challenged on several fronts simultaneously — from countries choosing to conduct trade in local currencies to BRICS developing its own currency. And gold is paying attention.

China and Russia, in particular, stepped up their efforts to ditch the U.S. dollar. Russia has been moving away from the greenback for some time, but efforts accelerated after Western sanctions were introduced following the invasion of Ukraine.

Russian President Vladimir Putin said he supports using the Chinese yuan for trade settlements between Russia, Asia, Africa, and Latin America.

The yuan is already the most traded currency in Russia, according to data compiled by Bloomberg. This happened only in February after the yuan surpassed the dollar in monthly trading volume for the first time.

This was topped by Russia's State Duma Deputy Chairman Alexander Babakov confirming that BRICS — Brazil, Russia, India, China and South Africa — are working on creating their own common currency. Babakov suggested that the new currency could be backed by a basket of commodities, including gold and other rare-earth elements.

Last week, Former Goldman Sachs chief economist Jim O'Neill called on the BRICS bloc to expand and challenge the dominance of the U.S. dollar.

O'Neill argued that the dollar's dominance destabilizes other nations' monetary policies, which is why BRICS should counter it.

"The U.S. dollar plays a far too dominant role in global finance," he wrote in a paper published in the Global Policy journal. "Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequences on the value of the dollar and the knock-on effects have been dramatic."

Former President Donald Trump commented on the global de-dollarization trend when speaking to his supporters Tuesday. The U.S. dollar "is crashing and will no longer be the world standard, which will be our greatest defeat, frankly, in 200 years," Trump said after pleading not guilty in a Manhattan court to 34 felony counts of falsifying business records.

In recent developments, Saudi Arabia has approved joining a China-led Shanghai Cooperation Organization (SCO) as a dialogue partner. The SCO is a political, security and trade alliance created in 2001 to counter Western influence. Its members include China, Russia, India, Pakistan, and four central Asian countries.

Another historic move by China was the completion of the first yuan-settled LNG trade, which was done between the Chinese national oil company and France's TotalEnergies through the Shanghai Petroleum and Natural Gas Exchange.

In response to higher demand for the yuan, Chicago's CME Group opened options trading for Chinese yuan futures this week. "Many traders no longer view CNH as an emerging market currency like it was ten years ago," said Chris Povey, CME Group's executive director of FX products.

This week, China and Malaysia announced that they were open to discussing the creation of an Asian Monetary Fund to reduce reliance on the U.S. dollar. Malaysia's central bank is also working on a trade settlement mechanism in local currencies.

India and Malaysia announced over the weekend that they abandoned trading in U.S. dollars and can now settle in Indian Rupees. India also said it would offer up its currency as an alternative to U.S. dollars for countries struggling with USD shortages.

Gold is Paying Attention

This de-dollarization trend can directly impact the gold market, especially regarding sentiment, said Gainesville Coins precious metals expert Everett Millman.

"There is definitely a lot of discourse about the dollar losing its reserve currency status. Where that conversation goes is going to be very important for gold," Millman told Kitco News. "The idea that the dollar is going to imminently collapse is very overhyped. But it affects people's perception and sentiment in the gold market.

If there is a swing in the public perception of what's happening with the dollar and the U.S. economy, that will shift sentiment very quickly, and gold is usually the first asset to react to that, he added.

Wednesday, the gold market continued to trade solidly above $2,000 an ounce, with June Comex gold futures last at $2,039.20, flat on the day.

After buying a record amount of gold in 2022, central banks are not letting up, with 2023 seeing the strongest start to the year in more than a decade, according to the World Gold Council (WGC).

Global gold reserves increased by 52 tonnes in February, rising for the 11th month in a row, the WGC said Tuesday. In January, central banks bought 74 tonnes of gold.

Year-to-date, central banks' net purchases stand at 125 tonnes. "This is the strongest start to a year back to at least 2010 – when central banks became net buyers on an annual basis," said WGC's senior analyst Krishan Gopaul.

The biggest purchaser in February was the People's Bank of China, with 25 tonnes bought. This was the fourth monthly increase for China, during which the PBOC added 102 tonnes of gold.

Story by Anna Golubova 4/5/2023 Redacted shorter to keep to important points and bullet points added by HGG. https://www.kitco.com/news/2023-04-05/De-dollarization-train-is-moving-at-full-speed-and-gold-is-the-first-to-react.html

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Bank-sector stress makes a stagflationary debt crisis more likely and potentially more severe.
Higher inflation would lead to higher bond yields, which in turn would hurt stocks as the discount factor for dividends rose. But, at the same time, higher yields on “safe” bonds would imply a fall in their price, too, owing to the inverse relationship between yields and bond prices.
U.S. banks’ unrealized losses actually amount to $1.75 trillion, or 80% of their capital. The “unrealized” nature of these losses is merely an artifact of the current regulatory regime, which allows banks to value securities and loans at their face value rather than at their true market value.
The economy is falling into a “debt trap,” with high public deficits and debt causing “fiscal dominance” over monetary and regulatory authorities.
Since liquidity support cannot prevent this systemic doom loop, everyone should be preparing for the coming stagflationary debt crisis.

In January 2022, when yields on U.S. 10-year Treasury bonds TMUBMUSD10Y, 3.423% were still roughly 1% and those on German Bunds were -05%, I warned that inflation would be bad for both stocks and bonds.

Higher inflation would lead to higher bond yields, which in turn would hurt stocks as the discount factor for dividends rose. But, at the same time, higher yields on “safe” bonds would imply a fall in their price, too, owing to the inverse relationship between yields and bond prices.

This basic principle — known as “duration risk” — seems to have been lost on many bankers, fixed-income investors, and bank regulators. As rising inflation in 2022 led to higher bond yields, 10-year Treasurys lost more value (-20%) than the S&P 500 SPX, 0.39% (-15%), and anyone with long-duration fixed-income assets denominated in U.S. dollars DX00, -0.03% or euros USDEUR, -0.60% was left holding the bag.

The consequences for these investors have been severe. By the end of 2022, U.S. banks’ unrealized losses on securities had reached $620 billion, about 28% of their total capital ($2.2 trillion).

Making matters worse, higher interest rates have reduced the market value of banks’ other assets as well. If you make a 10-year bank loan when long-term interest rates are 1%, and those rates then rise to 3.5%, the true value of that loan (what someone else in the market would pay you for it) will fall. Accounting for this implies that U.S. banks’ unrealized losses actually amount to $1.75 trillion, or 80% of their capital.

The “unrealized” nature of these losses is merely an artifact of the current regulatory regime, which allows banks to value securities and loans at their face value rather than at their true market value.

In fact, judging by the quality of their capital, most U.S. banks are technically near insolvency, and hundreds are already fully insolvent.

To be sure, rising inflation reduces the true value of banks’ liabilities (deposits) by increasing their “deposit franchise,” an asset that is not on their balance sheet. Since banks still pay near 0% on most of their deposits, even though overnight rates have risen to 4% or more, this asset’s value rises when interest rates are higher. Indeed, some estimates suggest that rising interest rates have increased U.S. banks’ total deposit-franchise value by about $1.75 trillion.

If depositors flee, the deposit franchise evaporates, and the unrealized losses on securities become realized. Bankruptcy then becomes unavoidable.

But this asset exists only if deposits remain with banks as rates rise, and we now know from Silicon Valley Bank and the experience of other U.S. regional banks that such stickiness is far from assured. If depositors flee, the deposit franchise evaporates, and the unrealized losses on securities become realized as banks sell them to meet withdrawal demands. Bankruptcy then becomes unavoidable.

Moreover, the “deposit-franchise” argument assumes that most depositors are dumb and will keep their money in accounts bearing near 0% interest when they could be earning 4% or more in totally safe money-market funds that invest in short-term Treasurys. But, again, we now know that depositors are not so complacent. The current, apparently persistent flight of uninsured — and even insured — deposits are probably being driven as much by depositors’ pursuit of higher returns as by their concerns about the safety of their deposits.

In short, after being a non-factor for the past 15 years — ever since policy and short-term interest rates fell to near-zero following the 2008 global financial crisis — the interest-rate sensitivity of deposits has returned to the fore. Banks assumed a highly foreseeable duration risk because they wanted to fatten their net-interest margins. They seized on the fact that while capital charges on government-bond and mortgage-backed securities were zero, the losses on such assets did not have to be marked to market. To add insult to injury, regulators did not even subject banks to stress tests to see how they would fare in a scenario of sharply rising interest rates.

The economy is falling into a ‘debt trap.’

Now this house of cards is collapsing. The credit crunch caused by today’s banking stress will create a harder landing for the U.S. economy, owing to the key role that regional banks play in financing small- and medium-size enterprises and households.

Central banks therefore face not just a dilemma but a trilemma. Owing to recent negative aggregate supply shocks — including the COVID pandemic and the war in Ukraine — achieving price stability through interest-rate hikes was bound to raise the risk of a hard landing (a recession and higher unemployment). But, as I have been arguing for over a year, this vexing tradeoff also features the additional risk of severe financial instability.

Borrowers are facing rising rates — and thus much higher capital costs — on new borrowing and on existing liabilities that have matured and need to be rolled over. But the increase in long-term rates is also leading to massive losses for creditors holding long-duration assets. As a result, the economy is falling into a “debt trap,” with high public deficits and debt causing “fiscal dominance” over monetary policy, and high private debts causing “financial dominance” over monetary and regulatory authorities.

As I have long warned, central banks confronting this trilemma will likely wimp out (by curtailing monetary-policy normalization) to avoid a self-reinforcing economic and financial meltdown, and the stage will be set for a de-anchoring of inflation expectations over time. Central banks must not delude themselves into thinking they can still achieve both price and financial stability through some kind of separation principle (raising rates to fight inflation while also using liquidity support to maintain financial stability). In a debt trap, higher policy rates will fuel systemic debt crises that liquidity support will be insufficient to resolve.

Central banks also must not assume that the coming credit crunch will kill inflation by reining in aggregate demand. After all, the negative aggregate supply shocks are persisting, and labor markets remain too tight. A severe recession is the only thing that can temper price and wage inflation, but it will make the debt crisis more severe, and that in turn will feed back into an even deeper economic downturn. Since liquidity support cannot prevent this systemic doom loop, everyone should be preparing for the coming stagflationary debt crisis.

Nouriel Roubini, Professor Emeritus of Economics at New York University’s Stern School of Business, is chief economist at Atlas Capital Team and the author of MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them (Little, Brown and Company, 2022).

Investors would be wise to buy gold and silver as the Fed and FDIC signal more money printing.

Story by Nouriel Roubini Last Updated: 4/1/2023, ETFirst Published: 3/31/2023 Redacted shorter to keep to important points and bullet points added by HGG. https://www.marketwatch.com/story/most-u-s-banks-are-technically-near-insolvency-and-hundreds-are-already-fully-insolvent-roubini-says-18b89f92

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Robert Kiyosaki also warned China is 'coming after' the US in a currency war.
Robert Kiyosaki predicts the Bank of Japan is next to collapse.
The derivatives market in the world today, financed by the Bank of Japan, is a quadrillion [dollars]." That's 1000 trillion!
Federal Reserve Chair] Powell has raised interest rates faster than any time in history.
This idea of don't fight the Fed and all that, I think that's old advice. I would stay with gold and silver.
"Jim Rickards said it best. He calls it a currency war…so that's why I'm very concerned," Kiyosaki told host Neil Cavuto. "China is coming after us," he added.
"The problem with Americans, we live in a fishbowl. We can't see how everybody can see. And right now, the BRICS, Brazil, Russia, India, China, South Africa, and Saudi Arabia, they're going to shift to the Chinese gold yuan, and that's going to send trillions of [U.S. dollars] back to us," Kiyosaki said.

Robert Kiyosaki also warned China is 'coming after' the US in a currency war.

In the aftermath of the Silicon Valley Bank collapse, finance expert Robert Kiyosaki cautioned the central bank of a global powerhouse may be the next to belly up.

"The biggest bank that's going to go down is Bank of Japan," Kiyosaki explained. "Because the Bank of Japan carried the interest rates at, what, zero or whatever they did, [and] financed the derivatives markets. And the derivatives market, as Warren Buffett said about derivatives, they're weapons of mass financial destruction and the derivatives market in the world today, financed by the Bank of Japan, is a quadrillion [dollars]."

The "Rich Dad, Poor Dad" author's comments come amid what some have optimistically labeled a market rally after stocks recorded another strong day and markets looked positive in March.

Kiyosaki, however, challenged the idea of a comeback, noting issues with the derivative markets. He also warned the Bank of Japan's heavy connection to derivative markets put it in a more vulnerable position and threaten greater effects on the global economy.

"The Bank of Japan has been financing derivatives. Derivatives are a quadrillion [dollars]. That's 1000 trillion," he explained on "Cavuto: Coast to Coast" Thursday. "So we haven't seen the crash coming yet."

In addition to the issue with derivative markets, the financial legend criticized money-printing habits along with the Federal Reserve's aggressive rate hike strategy.

"Since 2008, interest rates have been dropping, dropping, dropping, dropping. All of a sudden, the interest rates are going up. [Federal Reserve Chair] Powell has raised interest rates faster than any time in history. So somebody says, 'well, he's playing Volcker.' Well, [Former Fed Chair Paul] Volcker raised interest rates over years. Powell is doing it over months," Kiyosaki said.

"China is coming after us." - Robert Kiyosaki

Kiyosaki argued against age-old advice on the Fed given the rapid pace of rate hikes.

"This idea of don't fight the Fed and all that, I think that's old advice. I would stay with gold and silver…I've been Chicken Little or Paul Revere for all these years, but I'd still rather have gold than this stuff," Kiyosaki said in the Thursday segment, pointing to a piece of paper currency.

The industry expert did not stop with his warning about a coming bank collapse, adding the implications could give China another avenue for asserting global dominance.

"Jim Rickards said it best. He calls it a currency war…so that's why I'm very concerned," Kiyosaki told host Neil Cavuto.

"China is coming after us," he added.

BRAZIL, CHINA STRIKE TRADE DEAL AGREEMENT TO DITCH US DOLLAR

While the U.S. dollar was made the global reserve currency in the 1940s, China has taken aggressive steps to compete economically and replace the dollar with the yuan. Their growing influence through efforts like the Belt and Road Initiative has only garnered more support for the communist country.

"The problem with Americans, we live in a fishbowl. We can't see how everybody can see. And right now, the BRICS, Brazil, Russia, India, China, South Africa, and Saudi Arabia, they're going to shift to the Chinese gold yuan, and that's going to send trillions of [U.S. dollars] back to us," Kiyosaki said.

Likening the global economy to a fault line, Kiyosaki warned these factors are already causing tremors and that investors should be on guard.

"The San Andreas Fault still sits there, which will make California fall into the ocean if that happens," he said. "But I'd rather not live on the San Andreas fault right now. That's all I'm saying."

Story by Madeline Coggins 3/30/2023 Redacted shorter to keep to important points and bullet points added by HGG. https://www.foxbusiness.com/economy/financial-world-legend-sounds-alarm-over-biggest-bank-thats-going-down

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“Every rate hiking cycle of the last 70 years has ended in recession (c. 80% of the time) and/or a financial crisis...
His comments came after three U.S. banks have collapsed, as federal authorities organized major banks to deposit $30 billion into First Republic Bank FRC, +3.57% to stave off a fourth.
“At this stage, we think markets will run with the ‘guilty until proven innocent approach given:
1) The prospect of a material tightening in credit availability and lending standards from banks after recent events;
2) The deeply inverted yield curve going into recent events,” he said.

One of the mysteries for the first two months of the year was the fact that the U.S. economy was seemingly absorbing a wave of Federal Reserve interest-rate hike without a hiccup.

After the events of the last two weeks, that notion can be put to bed. “Every rate hiking cycle of the last 70 years has ended in recession (c. 80% of the time) and/or a financial crisis (in 1984 and 1994),” says Graham Secker, chief European equity strategist for Morgan Stanley in London.

“A week ago it was possible to argue that this observation was theoretical, now we know that it is not going to be different this time,” he added.

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His comments came after three U.S. banks have collapsed, as federal authorities organized major banks to deposit $30 billion into First Republic Bank FRC, +3.57% to stave off a fourth. Credit Suisse shares CSGN, -2.36% meanwhile have slumped 22% this week on worries for its survival. Secker did note that financial crises don’t always lead to economic recessions, as evidenced in 1984, 1987, 1994, and 1998. “However, at this stage, we think markets will run with the ‘guilty until proven innocent approach given: 1) the prospect of a material tightening in credit availability and lending standards from banks after recent events;2) the deeply inverted yield curve going into recent events,” he said.

European stocks’ strong performance of the year, before last week, was driven by financials and cyclicals. But now, he says, “We are confident that the economic outlook has deteriorated and that the window for ongoing good/improving macro data is beginning to close.” The firm upgraded the telecom sector to overweight, as it also recommended “re-engaging with quality and other long-duration ideas.”

Banks SX7E, +0.26% will be volatile, but the firm recommended selling into rallies while keeping an overweight on the sector. “It is impossible to determine how much of European Banks’ underperformance is down to concerns around changes to the net interest margin outlook versus contagion risks versus lower bond yields and rate expectations,” said Secker. “We think the latter factor has had a significant contribution and hence any rebound here could lead to some upward volatility in banks.” A popular European exchange-traded fund, the Vanguard FTSE Europe ETF VGK, +0.58%, has gained 5% this year, slightly outperforming the 3% rise for the S&P 500 SPX, +0.37%. Secker however says bank worries undermine the case for European stocks over U.S. ones. “While we still see merit in European equities versus global peers from a valuation and earnings standpoint, a rotation away from ‘cyclical value’ and back towards ‘defensive/quality growth’ would not be consistent with ongoing European outperformance,” he said

Story by Steve Goldstein Last Updated: 3/18/2023, First Published: 3/17/2023 Redacted shorter to keep to important points and bullet points added by HGG. https://www.marketwatch.com/story/every-hiking-cycle-over-the-last-70-years-ends-in-recession-or-a-financial-crisis-its-not-going-to-be-different-this-time-morgan-stanley-strategist-says-f5fddea2

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Ray Dalio says the Silicon Valley Nank failure is a “Canary in the Coal Mine” for what’s to come.
Dalio wrote Tuesday that this is part of the classic “bubble-bursting part” of the short-term debt cycle.
He explained how it fits into broader historical trends and debt cycles.

Billionaire investing veteran Ray Dalio said the Silicon Valley Bank failure marks a "canary in the coal mine" moment that will spark steep repercussions across the financial world.

In his newsletter Tuesday, the Bridgewater Associates founder called the bank turmoil a "very classic event in the very classic bubble-bursting part of the short-term debt cycle."

Regulators shut down Silicon Valley Bank on Friday, with Signature Bank closed down two days later.

The cycle lasts roughly seven years, Dalio explained. In the current phase, inflation and curtailed credit growth catalyze a debt contraction, according to Dalio, and that causes contagion until the Federal Reserve returns to a policy of easy money.

"Based on my understanding of this dynamic and what is now happening (which line up), this bank failure is a 'canary in the coal mine' early-sign dynamic that will have knock-on effects in the venture world and well beyond it," Dalio wrote

He said history illustrates that it's usually the case for lenders and banks to emerge from an extended period of low-interest rates and easy credit holding leveraged assets long, and then for those assets to lose value.

Given that the Fed has hiked interest rates more than 1,700% over the last year—and could continue to do so—more dominoes are poised to fall, in Dalio's view.

Citing previous trends, the hedge fund founder said it's likely that more firms will be forced to sell assets at low prices for big losses, and that will cause further decreases in lending volumes.

"Looking ahead, it's likely that it won't be long before the problems pick up, which will eventually lead the Fed and bank regulators to act in a protective way," Dalio maintained. "So I think we are approaching the turning point from the strong tightening phase into the contraction phase of the short-term credit/debt cycle."

In response to the fall of SVB, rating agency Moody's on Tuesday downgraded its outlook for the US banking system, citing the rapid deterioration of the conditions facing the sector.

"Pandemic-related fiscal stimulus along with more than a decade of ultralow interest rates and quantitative easing resulted in significant excess deposit creation in the US banking sector," Moody's strategists said. "This has given rise to asset-liability management challenges, with some banks having invested excess deposits in longer-dated fixed-income securities that have lost value during the rapid rise in US interest rates."

Story by Phil Rosen 3/14/2023 Redacted shorter to keep to important points and bullet points added by HGG. https://markets.businessinsider.com/news/stocks/ray-dalio-silicon-valley-bank-failure-markets-economy-fed-rates-2023-3

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Story by Harvard Gold Group, “Main Points” 3/13/2023, at 3:00 PM | Original article from Peter Schiff 3/13/2023

First Silicon Valley Bank (SVB), and now Signature Bank has collapsed. The Fed folded within 48 hours.
SVB didn’t collapse because of FTX contagion, or anything related to Crypto. It collapsed all on its own because it was the next step along the risk curve.
They buy longer-dated treasuries to get more yield. NOT Bitcoin, NOT high-risk stocks. They bought some of the safest securities you can buy… US Treasuries
Yields have been pushed higher by the Fed, and all those Treasuries have lost value. Forced to sell, SVB realizes huge losses, and poof… they are gone!
The stock was trading at $270 on March 8th and on March 10th it was worth exactly $0.
Powell just said everything looks fine on March 7th and 4 days later he is in emergency meetings trying to save the entire US Financial System.
Buy an insurance policy with no counterparty risk, that needs no bailout. Buy some physical gold and silver!

Over the past several months, Mike Maharrey and I have posted numerous articles that conclude the same way… the Fed is bluffing about and when something breaks, they will fold. On every podcast, Mike has walked through exactly why this is inevitable. Back in September, I laid out the math that showed why the Fed would fold and laid out a series of risks that may cause such an event. One of those risks was “What if the financial markets freeze because there is a credit event somewhere?”.

Well, that just happened. Silicon Valley Bank (SVB) and now Signature Bank has collapsed. Sure enough, the Fed folded within 48 hours. They stood with the Treasury and FDIC and explained how they are stepping in to prevent systemic risks from spreading. They have established a new Bank Term Funding Program (BTFB) to allow banks to borrow billions and blah blah… Sure, okay. Everything is now fine, right?

Nope, sorry, it’s not. SVB is just the latest domino. The dominos have been moving down the risk curve. It started in Crypto with Three Arrows Capital and Luna. Then FTX was exposed for being a fraud. We were told these issues were contained. And they were! SVB didn’t collapse because of FTX contagion or anything related to Crypto. It collapsed all on its own because it was the next step along the risk curve. Let’s do a quick replay…

SVB gets tons of cash and capital all through 2021. They have so much cash they don’t have anywhere to put it. They could go into Treasury Bills, but that was yielding 0.25%, so they decide to take a bit more risk. They buy longer-dated treasuries to get more yield. NOT Bitcoin, NOT high-risk stocks. They bought some of the safest securities you can buy… US Treasuries. The mistake they made was forgetting to hedge their interest rate exposure… whoopsie.

Fast forward 12 months… yields have been pushed higher by the Fed, and all those Treasuries have lost value. Forced to sell, SVB realizes huge losses, and poof… they gone! Were they surprised? Was the Fed surprised? Because anyone with a calculator wasn’t surprised. This was going to happen; it was just about when. If it wasn’t SVB, it would be someone else. This is what happens when the tide goes out, you see who has been swimming naked.

I think Mike and I are pretty good analysts, but we don’t have PhDs in Economics and our primary job is not about trying to protect the economy from systemic risks. How did we see this coming and the Fed, FDIC, and Treasury all missed it? No doubt I was early, I thought this would have happened months ago… but it was always going to happen!

What did the regulators just do?

The Fed has come out and said that anyone with “high quality” debt like Treasuries can pledge it as collateral and get back par value for up to a year. So, you bought a Treasury Note for $100 in 2021, it’s now worth $95. Whatever you do… DO NOT SELL IT. Come to the Fed and they will give you $100 for the debt. Treasuries don’t get dumped on the market and everyone is made whole. BOOM, everyone wins and problem solved, right? Sure, for now.

But let’s think through a couple of things:

First, SVB was not the first domino to fall, and it won’t be the last. The Fed just set up a program for a very specific issue. The next domino will likely be another issue. What then? Another emergency measure? If it doesn’t pose systemic risks then maybe the domino will be allowed to fall. Where does the Fed draw the line? What is systemic?

Second, what if you are an unsecured bond holder or stock holder in a smaller regional bank? Well, the government just said you are getting zero if your bank collapses. So, do you really want to be a stock or bond holder in a small regional bank? Probably not. What does that mean?

Third, the FDIC just raised its insurance from $250k to basically infinity… overnight! I mean, that’s like every insurance company dropping premiums to zero and saying that all claims will be paid in full without question. Sounds like a party at first, but the hangover could be deadly. The moral hazard here is undeniable.

Fourth, the Fed just guaranteed all US Debt at 100% of par value. What are the implications of this incredible Put in the market? If the market decides to test the Fed, they may end up printing boat loads of money.

What’s next?

The Fed, Treasury, and FDIC just stood together and backed the entire US financial system. But really, this amounts to another big fat Band-Aid. The Fed also officially pivoted, as has been obvious for months. Sure, they may hike rates in 10 days, but that would just be to save face. Powell cannot come out, put a 50-point hike back on the table, and say “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated” … and then two weeks later not raise rates. That’s not how you bluff! Then again Goldman is already saying hikes are off the table, so we shall see.

SVB was not FTX. SVB was a well-established and respected institution. Everyone can look in the rear-view mirror and understand why SVB collapsed, but it doesn’t seem obvious until it happens. And wow! It happened really fast! The stock was trading at $270 on March 8th and on March 10th it was worth exactly $0. Holy smokes! Powell just said everything looks fine on March 7th and 4 days later he is in emergency meetings trying to save the entire US Financial System. That’s not such a good look.

In the end, the Fed has bought itself time, but it also likely just damaged its reputation and announced to everyone that they can talk tough but can’t act tough. So, how much time did they buy? Is it more than a week? Probably. But we have seen this show before. Bear Stearns collapsed on March 14th, 2008. It wasn’t until 6 months later that the Global Financial Crisis started with the collapse of Lehman on September 15th, 2008.

The Fed brokered the sale of Bear Stearns to JPM and bought itself 6 months. This time around, did the Fed buy 1 month, 6 months, a year? Impossible to know. But if I was a betting man, I wouldn’t bet on more than 6 months. That means you still have time to protect yourself from the obvious outcome that lies ahead. Buy an insurance policy with no counterparty and that needs no bailout. Buy some physical gold and silver!

Story by Harvard Gold Group, “Main Points” 3/13/2023, at 3:00 PM | Original article from Peter Schiff 3/13/2023 https://www.zerohedge.com/markets/schiff-and-then-something-broke

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Investors would be wise to buy gold and silver as the Fed and FDIC signal more money printing.
Robert Kiyosaki warns bond market is crashing
The problem is the bond market, and my prediction, I called Lehman Brothers years ago, and I think the next bank to go is Credit Suisse.
He further expressed concern over pension plans and individual retirement accounts (IRAs) in the current market environment, adding the American taxpayer will be hit hardest by bank bailouts.
Amid hyperinflation and printing more money, Kiyosaki advised exploring or buying into silver and gold during a volatile market.
The Fed and the FDIC are signaling hyperinflation, which makes gold and silver even better because this thing here (the Dollar) is trash.

The Rich Dad Company co-founder Robert Kiyosaki explains why investors would be wise to buy gold and silver as the Fed and FDIC signal more money printing on 'Cavuto: Coast to Coast.'

The Wall Street analyst and investor who called the 2008 Lehman Brothers’ collapse has revealed what bank he thinks will hit insolvency next amid Silicon Valley Bank (SVB) closure shockwaves.

"The problem is the bond market, and my prediction, I called Lehman Brothers years ago, and I think the next bank to go is Credit Suisse," the Rich Dad Company co-founder Robert Kiyosaki said on Cavuto: Coast to Coast Monday, "because the bond market is crashing."

Just days after SVB, the California-based bank primarily used by tech industry companies and startups, declared bankruptcy, New York-based Signature Bank announced it would be shutting down to protect consumers and the financial system.

Similar to SVB, Signature Bank was popular among crypto companies. The institution provided deposit services for its clients’ digital assets but did not make loans collateralized by them.

FIRST REPUBLIC SHARES PLUNGE ON S.V.B. CONTAGION FEARS

The closure announcement came in a joint statement from the U.S. Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC). The regulators said SVB clients will have access to their money starting Monday, at no expense to the American taxpayer. Similar recourse will soon be provided to Signature Bank clients, regulators also claimed.

Kiyosaki further explained how the bond market – the economy’s "biggest problem" – will put the U.S. in "serious trouble" as he expects the American dollar to weaken."The U.S. dollar is losing its hegemony in the world right now. So they're going to print more and more and more of this," the expert said while holding up a dollar bill, "trying to keep this thing from sinking."He further expressed concern over pension plans and individual retirement accounts (IRAs) in the current market environment, adding the American taxpayer will be hit hardest by bank bailouts.

Stablecoins are cryptocurrencies that source their value from an asset like the US dollar or gold, which are less volatile in price than digital assets. That protects investors against wild swings in the wider crypto market.

In recent months, Russia and Iran have accelerated their push to "de-dollarize" — to move away from using the greenback in commerce — think tank the Jamestown Foundation has said. They aim to increase their volume of trade to $10 billion per year via moves such as developing an alternative international payments system to SWIFT, which they are banned from.

"My generation, the boomers, we're trying to retire. So this is the perfect storm in many ways," Kiyosaki said. "Like I said, again, I think the Fed and the FDIC signaled they're going to print again, which makes stocks good. But this little silver coin here is still the best, it's 35 bucks, so I reckon anybody can afford $35, and I'm concerned about Credit Suisse."

Amid hyperinflation and printing more money, Kiyosaki advised exploring or buying into silver and gold investments during a volatile market.

"The Fed and the FDIC is signaling hyperinflation, which makes gold and silver even better because this thing here is trash. They're going to spread more and more of this fake money, and that's what the Fed and the FDIC is signaling: we're going to print as much of this as possible to keep the crash from accelerating. But they're the guys who are causing it," the market expert said.

On "Mornings with Maria," best-selling author and The Bear Traps Report founder Larry McDonald warned of similarities between the SVB collapse and Lehman Brothers, which Kiyosaki originally forecasted.

"And what I saw inside of Lehman and what we just learned over the weekend as to the way this bank was managing itself," the expert continued, "it's just bloodcurdling irresponsibility and the Fed enabled it. And then when they juiced rates up higher, they're essentially just blowing up these bad actors.

FOX Business’ Bradford Betz contributed to this report.

Story by Kristen Altus FOXBusiness 3/13/2023 Redacted shorter to keep to important points and bullet points added by HGG. https://www.foxbusiness.com/markets/investor-called-lehman-collapse-predicts-next-big-us-bank-failure

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Digital dollars could let the Fed monitor or even control how you spend your money.!
CBDCs are different. They are programmable, traceable, trackable, and taxable.
Literally all transactions can be surveilled, recorded, or even reversed by a bureaucrat’s push of a button.
The government can easily dictate which dollars of your income go to buying food (and what kind of food), for instance.
Conversely, some dollars may not work at certain businesses, like a gas station, if the government wants to discourage a product or service.
What does a CBDC represent? In a word, control.

Imagine if a bureaucrat had the power to limit your savings or place a "shelf-life" on the money you earn. Sound farfetched? Ideas like this are already being floated in the United Kingdom as the Bank of England — the model for the Federal Reserve — barrels headlong toward a digital currency. Americans should be concerned because the Fed looks to be following in its parent’s footsteps.

The digital dollar being advocated by members of the Treasury and Federal Reserve is an example of a central bank digital currency (CBDC). At first blush, our currency already appears to be digitized. Many people no longer carry physical cash and instead use digital payment methods like a chipped credit card or their smartphones. Likewise, direct deposit has become the standard method of payment for labor. Dollars are transferred in a stream of ones and zeros, not paper bills and metal coins.

But those dollars are inherently fungible. It’s irrelevant if you accept or pay with any particular dollar because each one functions exactly the same way as any other. CBDCs are different. They are programmable, traceable, trackable, and taxable.

CBDCs are entirely under bureaucratic control because every digital dollar has a unique fingerprint. Literally, all transactions can be surveilled, recorded, or even reversed by a bureaucrat’s push of a button. Not only can the government tell how much you’re spending or saving, but what you’re spending those dollars on and where you’re parking your savings.

CBDC’s can be earmarked for certain purchases and forbidden from others. The government can easily dictate which dollars of your income go to buying food (and what kind of food), for instance. That’s particularly alarming in an era when the elites lecture about climate change and push for people to eat less beef and more bugs.

Web capture_31-5-2023_134814_www.foxnews.com

Imagine the government creating dollars that can only be used for food, thereby dictating to you how much of your income can be spent that way. That is basically what happens with food stamps, which can only be used at certain establishments and only on certain items.

Likewise, imagine the government dictating which dollars you can use to heat or cool your home. Sound implausible? There are already multiple instances of governments taking control of families’ digital thermostats — without their knowledge, let alone their permission — to dictate what temperature their homes would be.

With a CBDC, the central bank can also effectively force spending and prevent saving by imposing maximum savings levels and preventing "hoarding" by confiscating unspent digital dollars; people with no savings are more reliant on the government in "emergencies." If you’re unable to save for a rainy day, you’re at the whim of a bureaucrat holding the purse strings of your life.

That same level of surveillance extends to every transaction, no matter how small, like paying a babysitter or borrowing money from a friend. And a traced transaction can also be taxed.

Lest you think the government would not bother with such transfers, consider that the IRS is seeking to implement a reporting program to tax the tips of bartenders and waitresses. This follows a warning to report any transfers via apps of $600 or more — so much for going after billionaires.

CBDCs also allow for an unparalleled level of collusion between big business and big government. Businesses can be given preferred status, whereas certain digital dollars may only be spent with those establishments.

Conversely, some dollars may not work at certain businesses, like a gas station, if the government wants to discourage a product or service. Goals that bureaucrats try to achieve through manipulation of the tax code, like subsidizing solar panels and taxing oil, could easily be forced on the public with a CBDC.

The government can easily dictate which dollars of your income go to buying food (and what kind of food), for instance. That’s particularly alarming in an era when the elites lecture about climate change and push for people to eat less beef and more bugs.

Equally worrisome would be the Fed’s ability to inflate and devalue the currency. CBDCs make this process effortless by removing private banks from the Fed’s methods of creating money — guaranteeing future inflation and runaway government spending. In fact, the Fed would not even need private banks with a CBDC; all borrowing by consumers could happen directly through the central bank.

This is another scary proposition since bureaucrats could turn down people for loans based upon things other than their likelihood of repaying. Are you not woke enough? Then no mortgage for you. A CBDC makes such dystopian scenarios possible, and perhaps inevitable.

What does a CBDC represent? In a word, control. Perhaps that is why Treasury Secretary Janet Yellen and President Joe Biden are so supportive of the idea. A digital dollar would give them and future administrations a level of power so unprecedented that Orwell could not have envisioned it. After the economic damage that federal intervention has caused, the last thing the government deserves is more power.

E. J. Antoni is a research fellow at The Heritage Foundation’s Center for Data Analysis and a senior fellow at Committee to Unleash Prosperity.
Story by E. J. Antoni 3/2/2023 https://www.foxnews.com/opinion/scary-fed-idea-turn-your-dollars-digital-power-grab

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The U.S. is studying options for adopting a retail or wholesale central bank digital currency, Under Secretary of Treasury Nellie Liang said in a speech Wednesday.
The U.S. is considering a CBDC as the Fed has indicated it expects to launch its 24-7, instantaneous payment service, dubbed FedNow, this spring or summer, using an existing form of central bank money — central bank reserves — as an interbank settlement asset.

The U.S. is studying options for adopting a retail or wholesale central bank digital currency, Under Secretary of Treasury Nellie Liang said in a speech Wednesday.

Liang said a consortium of government agencies will meet regularly in the coming months to discuss whether to adopt a central bank digital currency or CBDC.

"We are thinking about whether a U.S. CBDC, to the extent it has functionality that traditional forms of central bank money lack, could help to preserve the dollar's global role," Liang said in a speech at the Atlantic Council on Wednesday. "We are also thinking about whether a U.S. CBDC could help reduce undesirable frictions in cross-border payments or other activities."

The U.S. dollar is considered the world's "reserve currency," accounting for well over half of the world's central bank reserves and playing a key role in settling international transactions.

Liang's comments mark the most comprehensive insight and reveal the administration's latest thinking on a CBDC. The remarks also come at the one-year mark since President Biden issued an executive order directing agencies to study a central bank digital currency and come up with a government-wide approach to regulating digital assets.

U.S. policymakers are continuing to deliberate about whether to have a CBDC, and, if so, what form it would take.

According to Liang, a CBDC would be legal tender, convertible one-for-one into other forms of central bank money — reserve balances or paper currency — and would clear and settle nearly instantly. A U.S. CBDC would also need to both protect the privacy of users and minimize the risk of illicit financial transactions.

Liang said deliberations will take "some time to complete," but that a group of government agencies, including the Treasury, Fed, and White House offices will meet regularly in the coming months and offer interim updates to the public.

Public Support for Adoption of CBDC

The Federal Reserve has emphasized that it would only issue a CBDC with the support of the executive branch and Congress, and more broadly the public. Liang said interest and support from the public will be a key factor in deciding whether to adopt a CBDC.

"A digital dollar is just a digital form of a current central bank liability," Liang said. "It's just a different form of money. Some of the main reasons countries do implement one are if they feel like they need to have a connection with the public as they stop using cash regularly. In the U.S., it is not entirely clear that's needed and that's why this space is still open and the discussions are ongoing."

Liang said she didn’t think there was necessarily a first-mover advantage, as China has adopted a CBDC and the UK looks to adopt one.

The U.S. is considering a CBDC as the Fed has indicated it expects to launch its 24-7, instantaneous payment service, dubbed FedNow, this spring or summer, using an existing form of central bank money — central bank reserves — as an interbank settlement asset.

A CBDC would involve both a new form of central bank money and, potentially, a new set of payment rails.

Wholesale vs. Retail CBDC

Liang said the U.S. is also deciding whether to issue a wholesale CBDC, a retail CBDC, or both.

She said authorities are thinking about how each would differ through the lens of looking at central bank reserves and whether those differences would be technological in nature or access driven.

For a wholesale CBDC, Liang said the basic difference would relate to technology. Liang said a wholesale CBDC could be a tokenized central bank liability, which potentially could support around-the-clock payment activity and secure settlement of transactions.

Liang said a retail CBDC would complement, not replace, cash as a digital liability of the central bank that is accessible to the general public.

A wholesale CBDC could be accessible to financial institutions that are currently eligible for central bank accounts, or to a wider range of financial intermediaries.

"But while policymakers might consider granting access to a wholesale CBDC to institutions not currently eligible for central bank accounts, that decision would be an independent choice, rather than a necessary consequence of having a wholesale CBDC," said Liang.

Liang said a wholesale CBDC might also be used as a backing asset for stablecoins, which could make it easier to transfer value between stablecoins.

Story by Jennifer Schonberger 3/1/2023 https://www.msn.com/en-us/money/markets/us-explores-central-bank-digital-currency-to-preserve-dollar-s-reserve-status/ar-AA186KVe?cvid=df1ede2f0d0c492a9519c70281475c51&ocid=winp2fptaskbarhoverent&ei=6

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