The markets were on the edge of their seats all week awaiting today's decision from the FOMC meeting. The FED raised rates as expected by 25 basis points although there were polls suggesting 85% of participants expected a pause while the remaining 15% expected a cut. I don't know why they were expecting such results when FED Chair Jerome Powell said himself rates were going up two more times in a prank call he believed was with Ukraine's Zelensky just last week.
On Monday, we got word that First Republic Bank was dissolved and mostly absorbed by JP Morgan Chase Bank. The rest was absorbed by taxpayers, apparently. That bank, combined with Silvergate, Silicon Valley, Signature and Credit Suisse adds up to five bank collapses in just under two months. Mike Maloney of GoldSilver.com shows a chart in his latest video that the collapse of SVB, Signature and now First Republic slightly surpass the losses of '08. This doesn't include Silvergate or Credit Suisse which proves we are now entering the worst financial crisis in history.
Commercial real estate (CRE) was devastated by the Covid lockdowns and now the piper comes a calling as some buildings in certain areas might see a drop in value by as much as 80%. This is taking a toll on those who borrowed for these properties, in turn taking its toll on the lenders. According to Jamie Dimon, CEO at JP Morgan Chase, the banking system is very, very solid.
Surprisingly, real rates have just turned positive after the latest rate hike, meaning the FED funds rate is at or just above the inflation rate. Another thing that's been cooling inflation is bank lending, which has decreased significantly and could be seen as a form of quantitative tightening which might actually convince the FED to not raise at their next meeting in June. Yet, they are suggesting that present rates will hold and for a much longer period. However, all this money contraction is the biggest since the 1930s. It leaves me guessing at what comes next.
The USD Index is down about half a point for the day to 101.377 at time of writing. Gold, on the other hand is reacting positively.
While silver remains range bound just above $25.
Bitcoin ain't doing much and is at $28, 457 but oil is taking a dive. WTI is down 4.87% ($68.17) while Brent Crude also down by 4.47% to $71.95. Are we to see a break at the pumps this weekend? Let's enjoy it while we can. It might only be temporary.
On a personal note, It's kind of obvious things are going from bad to worse. A lot of regional banks are trapped holding HTM or Hold To Maturity securities at near zero rates while treasuries have risen in value. Add to that the CRE BOMB and these banks are left with high rise office towers that are worth a fraction of their original cost. A lot of developers are faced with even higher borrowing costs when renewal time comes. That, along with decreased revenue from office rentals, will likely lead to commercial bankruptcies.
Also, it's no secret we're headed for a recession. I hope it's not worse than that. Although, to be prepared in case of an emergency certainly isn't a bad idea. Setting a bit of money aside, outside the banking system might not be such a bad idea right about now.
Take care fellow PubOxers!
Peace and love to everyone!
P.S. New 2023 Royal Canadian Mint Silver Maples are now listed with low, low ship costs on Ebay. Send me a quick note letting me know you saw this post on PublishOx and get 20% off already low ship fee of just $5 within Canada and just $6 to USA and $9 International. Click the image below to view the listing. I have other silver bars and coins listed so be sure to browse my other listings as well and add me as a favorite. Thank you for your support!
New 2023 Royal Canadian Mint Silver Maple
I'm now also on Substack where I will soon begin new podcasts as well as post extra material.
Previous Posts:
One of the 'Big Five' Canadian banks in big trouble?
M2 money contraction + rate hike double lag effect
Silver's massive 237 million ounce deficit
Liquidity Crunch! M2 money supply at minus 7.9
Silver correction - I knew this would happen!
USD Index down 10% in 6 months.
Silver posts 25% gain since March 10 low.
Never before seen divergence between silver and gold.
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