Panic in Washington, New York and San Francisco

Week ended March 25, 2023, interesting news items to look at this week were:

1. Panic in Washington, New York and San Francisco: My January 28 2023 Blog was titled “Huge Margin Call on the Anglo American Empire and NATO”. That margin call was not met and now creditors are demanding satisfaction. First Yellen called for an unscheduled meeting of the Financial Stability Oversight Council (FSOC) on Friday, whilst putting on a happy face parroting the US Banking System is sound. Please note the council members are the key administrators and regulators of finances in the US and no member can afford to waist their time with idle talks (Fig. 1).

Then a “Nothingburger” statement was issued. (Fig. 2).

The market conclusion is "Capital markets stop panicking when officials start panicking"  Remember on June 27, 2017 when Janet Yellen was chairman of the Federal Reserve she said “she does not believe there will be another financial crisis for as least as long as she lives” (Fig. 3).

Allow me to adapt from a Persian Proverb, there are 4 kinds of fools , one who is insincere but ignorant, one who is knowledgeable but insincere, then there are ignorant and insincere but the most sickening are those who are insincere and do not know they are ignorant but think everyone else are ignorant. It seems Washington is full of the fourth kind. (Fig. 4)

(i) FDIC out of funds: As at the end of 2022, the FDIC “Deposit Insurance Funds” has $128 billion against banking deposit of 17 trillion ($10 trillion within insured amount and $7 trillion large uninsured deposits). To bail out SVB, FDIC had to borrow $143 billion in newly printed money from the Federal Reserve. (Fig. 5).

Since the creation of the Federal Reserve in 1913 US had maintained a facade to the world that the Federal Reserve is independent to the White House because the Fed do not lend directly to the US Government and do not participate directly in Treasury Auctions. This thin veil is now torn because Treasury could not borrow anymore on account of the Debt Ceiling Limit and cash balances of the Treasury is down to below $200 billion. (Fig. 6).

This is chump change when one’s liability amounts to $31 trillion. Remember Yellen forecast Treasury could last until June before Congress passes a new debt ceiling. (Fig. 7).

It looks if the Administration can survive April it would be considered as a real accomplishment. A CFO who is incapable to make predictions that last 60 days is only useful as a contrarian indicator .

 (ii) The Federal Reserve Machine is running on petrol fume: The Federal Reserve is insolvent with a negative networth of $1 trillion and weekly losses of $42 billion and losses are rising in increasing speed. (Fig. 8).

On strict financial terms, SVB has a liquidity problem but the Federal Reserve has both a solvency and liquidity issues. The auction off of SVB has been delayed by the FDIC without further explanation. (Fig. 9).

A former Fed Advisor Danielle Martino Booth said the GSIB are still soaring from the 2008 bail out of troubled financial institutions, none is therefore stepping forward to take over yet another round of lemons. (Fig. 10).

Unconfirmed Intel Briefing said about 40 African countries are in closed session discussion on a repudiation of USD as a reserve currency.

(iii) The Entire US Banking System is approaching Insolvency: Fortune Magazine reported a research showed the current status of US Banks have in aggregate unrealized losses similar to SVB of $1.7 trillion. In the context of the entire Depository Institutions in US only have equity of $2 trillion and that JP Morgan, the consummate insider, already sold its entire US Treasury Portfolio and shorted some more since August 2022. We can deduce all other banks combined with the exception of JP Morgan would have their entire equity wiped out in the current crisis. JP Morgan alone alone has equity of $292 billion (Fig. 11).

There are 4,236 commercial banking institutions in the US under FDIC, when the media reported 186 would be in trouble, in my opinion, that is already a gross understatement.   

 (iv) Hong Kong & Singapore major financial beneficiary: Unofficial news purportedly from Christopher Hui, Secretary for Financial Services and Treasury of Hong Kong SAR, overseas Chinese flight capital from US and Europe have been redirected to Hong Kong to the tune of US$236 billion. Singapore also is having a similar experience. Having read the summary of US Treasury cash holdings above, Hong Kong has now a lethal weapon against the dollar hegemony or a time bomb for Hong Kong’s destruction. All depends upon how Hong Kong would deploy these resources. I call upon my fellow Christians to pray for wisdom for our Hong Kong SAR administrators to walk cautiously and humbly before God.

 (v) Margin Call on Weapons Unfulfilled: Just one month ago, the Czechs showed unwavering support to arm Ukraine. (Fig. 12)

This week “How could - already helped” Fig. 13

 (Vi) What would the Anglo American Empire Do: The Anglo American Empire has run out of options and if history is a good guide, kinetic wars would escalate in Europe, Syria and the Taiwan Strait to generate instability in the Atlantic, Pacific and Indian Oceans. The intention is to herd capital back to US. From UK sending depleted Uranium shells to Ukraine, to renewed bombing of Syria, to legislating a confiscation of ethnic Chinese personal assets in America via Taiwan Conflict Deterrence Act of 2023, the writings are all on the wall.

We have talked ad nauseam since 2018 on events that have progressively developed to the critical juncture this week. The $64 question is have you taken evasive actions.

 Hosea 4:6 My people are destroyed for lack of knowledge: because thou hast rejected knowledge, I will also reject thee, that thou shalt be no priest to me               

 

Peace to Stop Confusion

I must first apologize for the recent irregularity in my weekly report posting. I am right now typing up this week’s report in the North Malaysian city of Alor Star, my wife’s home town. My routines would be a bit choppy because the past two months and the next two months I am in the midst of relocating my residence from Hong Kong to Brisbane. Hong Kong is a quick tempo financial centre, taxes are low, people are friendly and amazingly convenient and efficient. The draw back, very crowded and expensive. Brisbane is much more laid back and cost of living is 24% lower than Hong Kong. This morning I posted the following picture and comments to my chat groups. (Fig. 1)

 Yes, other than a sparkling new mall, more high rises, a new airport terminal building and some new roads, the streetscape and neighbourhood hardly changed for 45 years. Oh, I forgot Foodpanda is in town and everyone has their cell phones glued to their hands and eyes. One noticeable change though, my nephew’s 4 children are either in Kuala Lumpur or Singapore. Then, it suddenly dawn on me why the West development model failed and China succeeded. In US the concentration is in San Francisco and New York, in UK, London and in France, Paris. The concentration of development effort and money in a few centres at the expense of the rest means a degradation to the whole. In China, the national effort to eliminate poverty throughout means every municipality would get a shot at a better future. The financialization of everything based on USD as the only reserve currency has its advantages and disadvantages. In a real economy, a farmer harvest a his crop ones a year and counted one time into GDP. In a financial economy, a wheat contract trades in nano seconds and is counted multiple times in a GDP calculation. G7 all had high GDP but that is not real economic strength. Russia has a much lower GDP than UK but Russia’s has an arms industry larger than all NATO nations combined including USA. US only produces very expensive toys for the benefit of the MIC. It only looks good in dollar value but not real combat capability.       

 Coming back to recent geopolitical news. The US Government has made her choice to bail out crony banks and retreat from the fight with inflation. Many in Wall Street breathe a sigh of relief because the majority of traders are too young or too remote to understand what hyperinflation is really like.

 I like to quote from John Maynard Keynes, the father of Western Governmental Economics: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” (Fig. 2).

Sadly most people do not understand currencies are just promises, it is a promise that the currency can be used to settle a debt in the same currency in the juristic where the currency is issued. Outside the jurisdiction, it basically has no value unless the transaction parties believes and agreed that it has value. In the famous words of JP Morgan “Only Gold is money. Everything else is credit”. (Fig. 3)

The word Credit comes from the Latin word Credo meaning “I believe”. So be careful what you choose to believe.   

Reading beyond the reassuring babble of Biden and Yellen, the cold hard facts facing every American and Western bank other than are;

(i) Flight of large depositors from community banks to the Global Systemic Important Banks (“GSIB”), At the Senate Finance Committee hearing, Janet Yellow was forced to admit that depositors other than SVB, Silvergate and Signature will not be fully backstopped. (see Video Clip)

(ii) The $30 billion funds from big Wall Street Banks was in reality a high interest rate loan to facilitate large deposit withdrawal from First Republic and recycle to the GSIB. In Chinese it is “飲鳩止渴”  Drinking poison to quench a thirst.

(iii) The Corporate Bond market are down grading bonds issued by many banks from IG (Investment Grade) to High Yield (Junk status). That literally mean many banks cannot refinance themselves and will be forced to liquidate their loan or bond portfolio when when that happens, a death spiral will result, just like SVB. Booking losses, further downgrades, more forced liquidation.

(iv) Quietly, the Fed, ECB, BOE, BOC, JCB and SNB has over the weekend announced joint daily coordinated enhancement of liquidity by SWAP lines. In layman terms, the seven Central Banks will jointly run their printing press hot until currencies are oozing out of every orifice of their bodies. (Fig. 4)

 (v) In the meantime, the Global South continued with their de-dollarization mission because when your capital is at risks, no sweet talk of higher yield will persuade investors to hold onto more junk papers. (Fig. 5).

 If all the above scheming has not confused you already, then may I congratulate you that you truly have a uniquely sound mind. This brings me back to the theme of the past few week’s blog. How to stand steady in a period of turbulence and chaos. We need Truth in the face of global deception. We need Righteousness to fight against condemnation, accusations and fabricated lies. We surely need Peace when confusion and chaos abound. Watch carefully what China is doing. China has not fought back evil with evil but just concentrate to do what is necessary and meaningful. Xi may not realized it but every step he is taking is biblically sound.

Ephesian 6:10  Finally, my brethren, be strong in the Lord and in the power of His might. 11  Put on the whole armor of God, that you may be able to stand against the wiles of the devil. 12  For we do not wrestle against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this age, against spiritual hosts of wickedness in the heavenly places. 13  Therefore take up the whole armor of God, that you may be able to withstand in the evil day, and having done all, to stand. 14  Stand therefore, having girded your waist with truth, having put on the breastplate of righteousness, 15  and having shod your feet with the preparation of the gospel of peace; 16  above all, taking the shield of faith with which you will be able to quench all the fiery darts of the wicked one. 17  And take the helmet of salvation, and the sword of the Spirit, which is the word of God; 18  praying always with all prayer and supplication in the Spirit, being watchful to this end with all perseverance and supplication for all the saints—