It's been a while since bank failures hit our headlines before this past week. But the norm in America has been one financial crisis every decade or so. What's different this time is that it is happening when we have such a massive federal debt (almost $32 trillion of reported debt and climbing).
Here are some things to consider:
- We did an Economic War Room episode a year ago (March 2022) that warned about almost exactly what we are seeing now. This episode covered bank failures, CBDC, and the WEF plans to use a financial crisis to usher in the Great Reset. It also offered hope and a Game Plan. The Episode was titled, Are You Ready for the Next Crisis? You should watch it now and download the Economic Battle Plan™.
- I wrote an important report for the State of Utah in 2016. At the time, we had $18 trillion in reported Federal debt (and yes, I know that does not include unfunded liabilities…that's in the report. I also know that some of that debt is intragovernment. That's also explained in the report). You can read the full report here: ECONOMIC RISK ANALYSIS. Bottom line is that our debt is on an unsustainable path. It was then and our pandemic response made it worse. With higher interest rates, we face a real challenge.
- What will happen with Silicon Valley Bank? The government has already stepped in and says it will cover 100% of deposits. There already is a #2 bank, NY's Signature, but it will also be covered. Can the Fed cover everybody? No but hopefully by containing the contagion they won't have to. Hopefully confidence can be restored. But in our view, these are birth pangs and things will be challenged down the road. Remember that in 2008, Bear Stearns was "bailed out" in March but Lehman still failed in October.
- Readers of this blog know that there were foreign financial terrorism attacks in the meantime. With the prospect of war with China looming, can we rule out the risks of a cyber attack on our financial system?
- What are the risks going forward? We know that the government has stepped in to make whole depositors in the two failed banks. If they chose to not do that at some point (for whatever reason), they would have to adopt a "bail in" approach. That's where the depositors fund the bailout in whole or in part. The government might have to use this approach if bailouts became excessive and threatened the dollar's global status.
- Is there any good news? Yes! Two heroic Texas legislators just introduced companion bills (one in House and one in Senate) that advance something we have been working on for 15 years. Here is a previous POST we wrote on this. Here is an episode we did on it more recently on Economic War Room® titled A Gold Bullet for the Central Bank Digital Currency. Read the bills. Watch the show. This is a game changer.
The bottom line is that the risks are growing. But the solution being offered is powerful if Texas (and the rest of America) is wise enough to adopt it. Stay tuned.