Discover more from Bonner Private Research
From bank runs to CBDCs and the controlled demolition of American finance...
Joel Bowman, checking in today from Buenos Aires, Argentina...
“Does the Fed’s bailout of Silicon Valley Bank bring us closer to a Central Bank Digital Currency?”
It’s a subject we’ve covered before in these weekend pages... and one BPR macro analyst, Dan Denning, posed in last night’s research note to paying members. We’ll get to that, and what it might mean for your money, below. But first, a quick look at the markets...
Let’s start with the bad news... and work our way back into the light.
Concerns over systemic risk in the banking sector had traders on edge this week and sent stocks into the red in Friday’s session. The Dow Jones Industrial Average fell by more than 400 points during the day to finally end the session down 384 points, or 1.2%. The S&P 500 and the Nasdaq closed lower by 1.1% and 0.7% respectively.
For the week, the three major indices were mixed. The Dow finished slightly lower, -0.2%, while the S&P 500 ended higher by 1.4%. The Nasdaq, meanwhile, put in its strongest weekly performance since early January with a 4.4% rally.
For the year, the big three are as follows: Dow -3.85%, S&P 500 +2.4% and Nasdaq +12%.
Meanwhile gold, that go-nowhere, do-nothing, barbarous relic, had a decidedly go-somewhere, do-something kind of week. The Midas Metal popped $60/oz in Friday’s trading alone to break through the psychological $2,000/oz threshold. It was last seen trading right around the $2,010/oz mark, up around $150/oz, or 8.9% for the year.
Gold also took out fresh all time highs in Aussie dollars (AUD$2,965/oz) and pound sterling (£1,570/oz).
Impressive as that looks, it’s nothing compared to the runs posted over in the crypto world. Top dog, Bitcoin, stacked on a massive $4,600 this week. At BTC $26,800, it’s up a whopping 60% year to date. At least, it was last we looked. It could be anywhere by the time you read this. One recalls the great Friedrich Hayek’s prophetic words from an interview he gave at the University of Freiburg back in (wait for it...) 1984.
“I don’t believe we shall ever have good money again before we take it out of the hands of government,” he told the interviewer. “But we can’t take it violently out of the hands of government. All we can do is by some sly, roundabout way introduce something they can’t stop.”
Of course, there’s a world of difference between a free market digital money – which lives and dies to the extent that it prioritizes and meets real world demands like privacy and security – and a government issued Fed Coin, which is little more than a tool of direct state oppression and control in the hands of financial assassins.
Yellen at Banks
Which brings us back to the question of what our mate up in Laramie has called the “controlled demolition” of the financial system... and the CBDC “solutions” proposed by Big Gov.
Here’s Dan with some context...
[Silicon Valley Bank and Signature Bank] became the second and third-largest bank failures in American history in a matter of days. SVB had assets of $209 billion at the time. Signature Bank had assets of $118 billion. The largest bank failure in American history was Washington Mutual in 2008 at $307 billion (it would be around $386 billion in today’s money, adjusted for inflation).
The bad news is that there is a lot more fake wealth to be destroyed. And you’ll only be protected if you’re part of the too-big-to-fail Washington/Wall Street/Silicon Valley class. Treasury Secretary Janet Yellen made that clear earlier this week when she testified in front of Congress that depositors in community banks would not be bailed out or ‘made whole’ with government guarantees because those banks are not ‘too big to fail.’
For reference, here’s Senator James Lankford from Oklahoma, pressing Ms. Yellen on why the Federal government is incentivizing large depositors to move their funds away from community banks and into the concentrated hands of “approved players.”
Tools and Puppets
At this point, a cynic (that’s us) might be tempted to think that the system is being intentionally stressed to the point of collapse, such that wealth drains into fewer and fewer hands… hands that are more (shall we posit?) amenable to the kind of “guidance” that an all-knowing, all-seeing, top-down government is wont to provide.
Tools, in other words. Quasi-state actors. Puppets. Financial overlords hired to implement the kind of Great Reset that has been proposed, openly, by the goons at the World Economic Forum.
Which brings us back to Dan’s question: Does all this move us closer to a CBDC?
Yes. In one simple way. If government policy favors big banks over small banks, depositors will move money out of small banks into big banks (Bank of America, JP Morgan, Chase, Wells Fargo).
Over time, there will be fewer banks and less competition. The nation’s savings will be concentrated in a handful of large institutions. That makes it easier to force savers into a CBDC when the time comes. And remember, the Fed is owned and controlled by the Big Banks.
Coincidentally, on Wednesday the Fed announced it would launch its FedNow service in July. It’s not a CBDC (yet). But it’s a necessary precursor to one. According to the announcement:
Through financial institutions participating in the FedNow Service, businesses and individuals will be able to send and receive instant payments at any time of day, and recipients will have full access to funds immediately, giving them greater flexibility to manage their money and make time-sensitive payments.
Opening the Fed’s payments system to more institutions–and through them to the general public–is one way to get more people into those institutions. And to the extent that wiring money is cheaper and faster, it’s a win for consumers. It’s also a mouse trap with easy cheese.
Once you’re in the system, then comes the digital currency, the CBDC. And that, as we’ve written about before, is nothing more than permission based money that gives the Feds the power to control how and when you spend money or receive government benefits.
If this is the direction we’re heading... and all road signs indicate there’s danger ahead... the question becomes, what does one do about it? How do you keep your hard-earned out of harm’s way?
Here’s BPR’s investment director, Tom Dyson, with a familiar refrain...
Protecting yourself is simple. You either want to own real wealth (like gold and silver)… or the very safest wealth claims (like short term T-bills or the undervalued stocks of real businesses). Avoid everything else.
We continue to recommend holding lots of physical gold and T-bills. As an extra precaution, I’m no longer going to suggest FDIC-insured bank CDs as an alternative to Treasury bills.
Other than a small float for paying bills, Kate and I don’t keep any capital in the banking system, and we haven’t for years. We keep our savings in physical gold, at Treasury Direct and in whole life insurance policies. It takes ten minutes to open an account with Treasury Direct and link it to your bank account.
Once you’re up and running, you can move dollars between your Treasury Direct account and your bank checking account with a couple of clicks of the mouse. And of course, you can buy T-bills through Fidelity, Schwab or any other major broker. There’s really no need to keep any excess capital in a bank these days. The banks don’t pay as well, either.
The best time to begin protecting your savings was yesterday. The next best: today. If you’re not already following along with Dan and Tom’s “Maximum Safety Mode” strategy, find a membership that works for you below and get on board today. You’ll be glad you did.
And now for Bill Bonner’s missives from the past week...
And that will do it for today’s Weekend Wrap. Your young-at-heart editor is off to relive the glory days of his misspent youth by attending the Lollapalooza festival here in Buenos Aires this afternoon.
Just because we don’t recognize any of the acts on the bill... and just because we don’t have any facial tattoos or body piercings... and just because the headliners go on after our bedtime...
... doesn’t mean we can’t still rock out… from the safe distance and relative comfort of the VIP drinks tent, of course. (A friend of a friend... don’t ask.) With a bit of luck, we’ll be back tomorrow with your regular Sunday Session.