The banking crisis is getting worse and It is triggering a global dollar Shortage now the contagion has spread Beyond the United States and we have Banks in Europe feeling the pain they Know that if another bank run happens More Banks be on Credit Suisse could be In deep trouble and to preempt this Central banks they are dumping di us Bonds to excess dollar liquidity they Need cash on hands central banks today Have shared their treasury Holdings in The largest weekly decline since 2014 The foreign official holding is fell by 76 billion dollars in a week bringing The total down to just 2.86 trillion but That's not all central banks are also Using the feds foreign repo facility to Access 60 billion dollars and we can see A huge Spike here that dwarfs the 2020 Borrowing peak of only 1.4 billion and This tells us that banks are getting Nervous they are dumping U.S bonds Because they need liquidity fast and are In a mad Scramble for cash and this is Where the dollar strikes back again Because the euro dollar market is just So big foreign Banks outside of the United States conduct a huge amount of Business in the reserve currency in fact It is estimated that foreign Banks Actually hold up to 65 trillion dollars In unrecorded dollar debt and that is The bubble just waiting to be popped
Especially if a dollar shortage kids Worse and this is the shadow banking System that everyone is terrified of an Implosion happening and across the world Over 60 percent of global debt is issued In dollars as well so Banks need to hold A huge pile of greenbacks because their Depositors transcend dollars they borrow And landed dollars not just their local Currency and we know what happened back In 2022 as interest rates rules the Reserve currency actually strengthened And this caused a global dollar shortage As investors ran towards dollar assets To chase you but another daily shortage Is building and it's thanks to the Banking crisis that's going International there's headline after Headline line of the dangers of hidden Leverage that was built up during the Era of low interest rates and just so we Know how big this bubble is according to Bloomberg the assets held by non-banking Financial institutions are reaching 250 Trillion dollars and that is the Disaster just waiting to happen and we Could have realized that this making Crisis is likely more severe than what The people at the FED of the treasury Are telling us and we can see the feds Balance sheet increasing by over 400 Billion dollars telling us just how much Money they have pumped me to the banks To keep them afloat just look at the
Bank term funding program more banks are Beginning to get desperate and they have Accelerated they are landing from the Emergency backstop it went from just 12 Billion dollars to over 54 billion in Just a week but things are getting from Bad to worse because this fear is Spreading to the point where foreign Holders of treasuries are dumping it for Cash and knocking at the Federal Reserves door for a loan not only are Banks dumping treasuries at eating a Loss one mystery Central Bank which is Likely European made a bad Scramble for Dollars they went to the vets FEMA Facility to borrow money now FEMA which Is the foreign repo facility acts just Like a glorified pawn shop it is the Federal reserve's International Borrowing window basically a foreign Central Bank would pledge Dr U.S Treasuries to the Federal Reserve in Order to borrow U.S dollars and this is A temporary measure to get access to Liquidity because they need to shore up Their balance sheet A Bank Run is always Around the corner but this facility Isn't free you still need to pay Interest on the loan and this was at 4.75 before the FED did their quarter Point rate hike a week ago so it's Probably around five percent or more Today and we have a central bank Somewhere in the world holding US
Dollars because they are afraid of Liquidity crisis back home it could have Been a Swiss National Bank or maybe it's The ECB as well preparing for the worst Just in New Europe and after the Deutsche Bank sell-off last week with a 14 drop something could be shaky in the European backing system and here's the Interesting thing the FED essentially is Becoming the lender of Last Resort to This central banks because the dollar Crisis might be silently building and Only the Federal Reserve can bring Dollars from thin air but understand the Desperation that's going on here central Banks they are caught between a rock and Hard place they need dollars but if they Outright sell their treasuries they will Book a loss and countries like China They are getting rid of their U.S bonds But it's mainly due to the risk of Sanctions and they're the door Rising so Taking a hit might be a necessary evil But for countries like Switzerland There's very little incentive to book at Outright laws on U.S bonds it's better To hold the pawns to maturity so they Pledge their treasuries to the fed and Exchange for 60 billion dollars worth of Loans and guess what the US government Is more than happy to give than the loan If a central bank was to down U.S bonds Or the open market this would cause Yields to spike higher and bond values
To crash even further and that itself Could trigger another bank implosion From Bad treasury bets and they Definitely don't want that the biggest Problem Banks face is that they are Cheaper source of funding is literally Running away depositors are the cheapest Source of money and that means you and Let's recap banking 101 when you deposit Money to a bank account they give you a Low interest rate by half a percent or So they then lend out your cash or Invest it for higher yield and pocket The difference and even today interest Rates around four percent Banks and that Is still considered cheap money a Discounted source of funding and why is That because the banks can just take Your money and throw it into the Federal Reserves reverse repo facility that pays Them 4.8 percent so essentially you are Funding the bank with cheap money but Now depositors they are freaking out About keeping too much money money in a Bank everyone in the world has heard of The U.S Bank runs and they know their Options what is the point of putting my Money in a savings account when I can Simply shift my cash into a money market Account there's no point keeping Anything above the deposit Insurance Limit right and according to the Financial times money market funds have Swell up by more than 286 billion
Dollars as investors pull away their Deposits from Banks then this is only Going to get worse we have Goldman Sachs Forecasting an insane 1.1 trillion Dollar dump in stocks with the cash Moving to money market funds as well the Incentive is just too great and this is Going to keep the banks in crisis mode Now money market funds typically invest In shorter term treasury bonds and Because we have a yield curve inversion Thanks to recession coming that yields On the three to six month treasuries are Phenomenal at nearly five percent and That is a risk-free rate and that's why We are seeing so much money leaving the Banks it's not just because of the Deposit panic but also because the banks Themselves can't compete and give a Better rate than the U.S treasury and if You shift attention back to the US this Cash shortage is just as severe for American Banks as well now the Federal Reserve is considering expanding the Emergency landing facility to give Banks More support and this lets us know the True magnitude of the banking crisis Shares of First Republic Jump by almost 12 percent and the rest of the Regionals Have also recovered because shareholders Realize that hey the U.S treasury isn't Going to let any banks fall now even First Republic might have become too big To fail and remember when we say Janet
Yellen is trapped after saving both svb And signature depositors she has almost No choice but to save everyone now and That means loaning even more cash to the Banks Yellen she is scared of a credit Crunch because if it happens it will Slow down the entire economy and prices Are going to crash across the board and When companies can't borrow and expand Daily of workers when people are too Scared to sign a mortgage housing prices Also collapse the entire system is Dependent on credit flowing it is the Lifeblood of the economy and according To the fed this banking crisis is Bringing the United States closer Towards a full-blown recession in the Face the Nation interview Kashkari from The FED made a shocking admission that a Credit crunch is already developing we Have seen the capital markets have Largely been closed for the past two Weeks if those Capital markets remain Closed because borrowers and lenders Remain nervous then that would tell me This is probably going to have a bigger Imprint on the economy and we are now Facing an economic reality if the banks Aren't lending money this means the Money supply isn't expanding it's Actually Contracting existing money is Being used to pay off existing debt Obligations and it's going to lead to a Collapse in the economy because now
Money is not flowing around anymore this Is going to cost even more demand Destruction which is exactly what the Federal Reserve wants Kashkari added how The banking crisis could actually help The fat control inflation on one hand Such strains could then bring down Inflation so we have to do less work With the federal funds rate to bring the Economy into balance so yes he is Pointing out the obvious that if a Banking collapse happens then the system Freezes up and inflation should come Crashing down but it's not just the US That's on a credit crunch watch Europe Is also afraid of one the ECB has Effectively gone from negative interest Rates to three percent so the borrowing Costs there have increased by a bigger Margin as well and if a credit crisis Comes the Federal Reserve might have to Revisit the 08 plan and inject Capital Directly into the markets and this will Trap us further into an inflationary Health and this brings us to the big Vulnerability that the U.S banking Sector has which is the bond market we Have seen the destruction higher yields Are causing to overall addicted to low Interest rates and who has the leverage Doing this banking crisis weirdly enough It is actually China unless have a Flashback to 2008 during the housing Crisis according to Hank Paulson Russia
Approached China to coordinate a dump of Mortgage-backed Securities back then They wanted to check the U.S capital Markets and force an emergency bailout To weaken the U.S dollar further the Chinese they refused to do it so the American Mortgage crisis didn't get Worse and don't get me wrong oh it was Bad but I could have gotten much darker If the Chinese dumped their bonds then But the relationship between the U.S and China isn't as rosy as before Biden is Downplaying deepening Russia China ties But we all know what's going on Putin And she they are moving towards a closer Economic Alliance and it definitely Isn't good news for the backing crisis If a sudden treasury dump happens now China has already been unwinding their U.S Bond Holdings month after month Going below 860 billion dollars they are Now back to the 2009 levels and they Probably won't be buying more anytime Soon and recall the plan that Putin Himself has committed he is moving to Switch to the Chinese yuan in foreign Trade in other words he's helping China To internationalize the Yuan especially If he starts pricing Russian energy in The currency there are fewer incentives Of China to hang on to their dollar Assets and even if they don't dump it All at once a gradually leveraging is Going to keep born use higher back in
The US which is terrible for the banking Crisis which is on the brink so the Situation of this backing crisis isn't Good the deposits held by small U.S Banks have dropped by a record 119 Billion down to just 5.46 trillion now That's just a two percent Capital flight Away from the banks but what if that Number jumps to three percent or even Five percent will it trigger yet another Bank failure because if that happens the U.S government is going to step in again And save the banking system as we have Said before in previous videos it Probably won't be a cash injection to Prop up each individual institution Unless of course it is a too big to fail Bank it will be assisting a banking Consolidation or take over like what Happened between UBS and Credit Suisse And what do you know svb is finally sold To First Citizen but only because Janet Yellen is providing a backstop and how Much money was this assistant we are Talking about 20 billion dollars from The FDIC to cover the uninsured deposits So it's going to be backstop of the Backstop bailout of the bailout because The U.S government can't afford to let The U.S banking sector fail it has to be A controlled demolition but if foreign Holders of Treasury start to dump more U.S bonds because of a dollar shortage This isn't going to be good all it takes
Is for another bank to fail and we could Enter a crisis of confidence when more Bank runs happen triggering a credit Crunch then this is the interesting Thing we already have hedge funds Sending off their oil related Futures And options contracts because they are Preempting a recession they foresee a Credit crisis that will slow down the U.S economy and if a recession happens And money stops flowing then oil can Consumption should crash as well so if The big money is anticipating a credit Crisis we have to pay attention to this But let me know what you think in the Comments below is a credit Crisis coming Are more central banks gonna dump Treasuries to raise cash let me know in The comments below stay safe be sure to Smash the like button and subscribe as We navigate through these crazy times
