Ripped From The Headlines, March 31, 2023
Dr. Doom: "Most Banks Are Insolvent," Social Security Out of $$ By 2034, Next Bank Run Looming - Read, Share, & Subscribe - SherlocExposes.com
We Are The Watchmen On The Wall
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“The consequences for 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.
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-sized 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.
Nouriel Roubini (nicknamed "Dr. Doom"; born March 29, 1958) is a Turkish-born Iranian-American economic consultant, economist, and writer. He is a Professor Emeritus since 2021 at the Stern School of Business of New York University.
“An economic slowdown, persistent inflation and weaker productivity growth will hurt Social Security’s finances, draining its reserves one year earlier than previously estimated, the government said Friday.
Social Security won’t have enough money to pay all beneficiaries the amount they are entitled to starting in 2034, according to the latest report by the program’s trustees. Unless Congress takes action to shore up the program, beneficiaries would receive about 80% of their scheduled benefits after that point.
Lower birthrates over the past few decades combined with a wave of retiring baby boomers have challenged the long-term solvency of Social Security, which pays benefits to retirees, their survivors and people with disabilities.
In 2021, Social Security began paying more in benefits than it was receiving through payroll taxes and interest on the specially issued Treasury securities it holds in reserve. That has reduced the size of its trust fund to $2.8 trillion in 2022 from $2.9 trillion in 2020.
The trust fund will continue to shrink until 2034, when it will run out of money, the report said. After that, benefits will have to be cut to account for lower revenues.
“After a month of uncertainty, Barclays warned that a ‘second wave’ of deposit outflows is increasingly likely, a sign that the latest banking crisis is far from over.
The collapse of Silicon Valley Bank (SVB) and Signature Bank forced federal regulators to rush to backstop the banking system, which calmed market fears in the short term after many customers pulled billions out of their deposits.
Meanwhile, another wave of bank runs is expected to hit the system, as ‘sleepy’ customers begin to wake up to the existence of higher interest rates available to them in money-market funds, according to Barclays strategist Joseph Abate.
‘While market psychology is still fragile, our sense is that deposit outflows from small to large banks will fade as depositors recognize they can access and transfer their balances without any hitches,’ Abate wrote.
‘Until this week, depositors appear to have paid little attention to the unsecured risk they faced with balances above the insurance cap. And they seem to have largely ignored the low-interest rate paid on their deposits.’
“It’s A Bumpy Ride” Friday, Ripped From The Headlines. Things To Ponder:
“The Law, Of Unrealized Losses…”
Nouriel Roubini has an interesting outlook on economics…
You don’t earn the nickname “Dr. Doom” for nothing…
What’s interesting is he called out what you’ve been hearing in Ripped From The Headlines for months now…
Most banks are insolvent…
And this banking crisis is making front-page news for everybody.
In case you’re not up to speed on what’s happening, and what’s coming, these links will get you up to speed:
Bank for International Settlements Tells Us $65 (Now $80) Trillion Dollars Is Missing From Balances Sheets Around The World… And They Have NO IDEA Where It Is:
Here’s our co-publisher, RC Williams, talking about the situation on March 13th:
And again, on The Carl Jackson Podcast That Thursday:
And, on The Officer Tatum Show on the Salem Radio Network That Friday:
Click Here to see our breaking news report from that Saturday, on the 200 mid-sized banks that asked for ALL of their deposits to be guaranteed.
And finally, click below to see our segment from that Sunday on the American Adversaries Radio Show, heard in Orlando and Atlanta (fast forward to the 30-minute mark):
Know. Your. Foe.
“We’re Out Of Money… But Don’t Worry… We Just Won’t Pay You!”
The US federal government is an amazing… mess.
So, now we understand that the government won’t be able to give you the money in full that you paid into the system your whole life…
They’ll just “give you 80 percent of it…”
Hmmmm… that sounds a lot like this:
We also found this interesting:
To keep the program solvent for the next 75 years, taxes would have to immediately rise 3.44 percentage points to 15.84%, split between employees and employers, the Social Security trustees’ report said. Right now, employees and employers both contribute 6.2% of payroll, for a combined 12.4% tax rate.
An immediate 21.3% cut in benefits would also put the program on sounder footing without raising taxes, the report said.
Just so you understand:
It’s proposed that you pay more, or the government pays people less, due to their bad fiscal management.
Yikes!
Here’s a peek at the future for you:
Yep, that’s no money left in 2034.
Brace. For. Impact.
“The Banking System Is Stable… Except, It Isn’t…”
So…
A Barclay’s strategist just showed us HOW MUCH OF A LIAR THE US TREASURY SECRETARY JANET YELLEN IS.
That guy knows the same thing we know…
The banking contagion is not done.
Oh, just in case you forgot, here’s what the Treasury Secretary of the UNITED STATES said yesterday:
“But the failures of two regional banks this month demonstrate that our business is unfinished,” Yellen said, adding that the financial system was significantly stronger than it was 15 years ago.
“This is perhaps best illustrated by the fact that we've seen relative stability in the overall banking sector this month, even as concerns grew about specific institutions,” she said.
It sure looks stable to us, Janet!
About as stable as a one-legged stool…
In a hurricane…
On the beach…
Any run on the local or regional banks or credit unions will serve the ultimate goal of getting everyone into the “kill box” of 5 or 6 big banks…
Then, you’ll have no other option, except to take whatever they give you…
Do you know what that’s going to be?
This:
Know. Your. Foe.
What Does This Mean?
Traditional things like retirements and “safe investments” take on a whole new meaning when you get a chance to look under the hood.
We’re really just scratching the surface of understanding the depth of the banking issues and the looming economic mess.
As it all comes out, brace for impact.
Why Should I Care?
There’s so much to unpack…
Your wealth…
Your legacy…
Anything you plan to leave for future generations…
Getting the basics to live…
All of these things are teetering on the edge.
You should REALLY care.
What should I do?
Take a moment… right now if you can… to take inventory of what you’re seeing in this newsletter each day.
Have you ever seen a time quite like this?
Ok good, you’re paying attention.
That’s the point.
If you’re not paying attention and trapped in the hustle and bustle of a busy world (with a ton of useless stuff, by the way), this stuff will come up on you like a thief in the night.
You need to take the time to prepare as best you can for a time when good supplies, strong communities, and strong connections are the difference between surviving and thriving or being in bad shape.
GET MOVING ASAP.
Also, please share what you get from this newsletter.
It’s OK if you don’t understand it all.
Tell them to ask us.
Your future, and theirs, depends on it.
James Wesley, Rawles, publisher of SurvivalBlog.com has put together a “bookshelf” list of key things you should have. CLICK HERE to access the list.
Plus a recap of the 50 things you should have handy to barter.
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