Posted on 03/25/2023 4:47:43 AM PDT by FarCenter
NEW YORK – The US banking system is broken. That doesn’t portend more high-profile failures like Credit Suisse. The central banks will keep moribund institutions on life support.
But the era of dollar-based reserves and floating exchange rates that began on August 15, 1971, when the US severed the link between the dollar and gold, is coming to an end. The pain will be transferred from the banks to the real economy, which will starve for credit.
And the geopolitical consequences will be enormous. The seize-up of dollar credit will accelerate the shift to a multipolar reserve system, with advantage to China’s RMB as a competitor to the dollar.
Gold, the “barbarous relic” abhorred by John Maynard Keynes, will play a bigger role because the dollar banking system is dysfunctional, and no other currency—surely not the tightly-controlled RMB—can replace it. Now at an all-time record price of US$2,000 an ounce, gold is likely to rise further.
The greatest danger to dollar hegemony and the strategic power that it imparts to Washington is not China’s ambition to expand the international role of the RMB. The danger comes from the exhaustion of the financial mechanism that made it possible for the US to run up a negative $18 trillion net foreign asset position during the past 30 years.
Germany’s flagship institution, Deutsche Bank, hit an all-time low of 8 euros on the morning of March 24, before recovering to 8.69 euros at the end of that day’s trading, and its credit default swap premium—the cost of insurance on its subordinated debt—spiked to about 380 basis points above LIBOR, or 3.8%.
That’s as much as during the 2008 banking crisis and the 2015 European financial crisis, although not quite as much as during the March 2020 Covid lockdown, when the premium exceeded 5%. Deutsche Bank won’t fail, but it may need official support. It may have received such support already.
This crisis is utterly unlike 2008, when banks levered up trillions of dollars of dodgy assets based on “liar’s loans” to homeowners. Fifteen years ago, the credit quality of the banking system was rotten and leverage was out of control. Bank credit quality today is the best in a generation. The crisis stems from the now-impossible task of financing America’s ever-expanding foreign debt.
physical precious metals may soon become the only refuge for the average man.“
Put some beer in the garage fridge, open the garage door, meat on the grill and find the warriors on your street.
That’s only one of many reasons why the knuckleheads are rioting—mostly, because they chose poorly.
That's .also true in many cases. Young adults who got into tens of thousands of dollars in debt for their degrees in "homosexuality in homo sapiens studies" get little sympathy from me.
Has to be the right hand
Or the forehead
/just joking (I hope)
Actually it’s a word for “tattoo”
No we owe way more than the value of our production as a deficit by a orders of magnitude. the economies been dead for quite sometime they’ve been printing money to keep it alive or at least keep it looking like it was alive
George Soros had nothing to do with the fiscal mismanagement in the U.S. over the last 50+ years.
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Why not say last 100 years? The US shouldn’t have entered and spent money on the first world war.
Funny how this was all ok under trump and now its not
If President Trump had been allowed to do his job instead of battling one fake scandal after another curtesy of the left and the backstabbing RINOs, he may have been able to fix a lot of this.
And....... there is continuously more and more to come
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