As the current "old guard" members become monsters in their desperate attempt to salvage their disintegrating system along with their power and influence, a new group of monsters seek to take their place and run the show while the rest of us stand by hoping we don't become collateral damage.
Last week, we saw another episode of the kabuki theater being played out on Capitol Hill regarding the "debt ceiling" which has taken over most of the fake discussions on financial television. The discussion goes something like this:
"Our building is filling up with shit because the sewer is backed up so we desperately need to raise the roof otherwise we won't have enough room for any more shit."
This "problem" has an easy solution which would solve the impasse immediately, raise almost half a Trillion in funding with zero increase in debt. In fact, this was done in 1953 when they had this debt-ceiling "problem" for the first time and it worked spectacularly well!
"The Eisenhower administration was up against the debt ceiling. And Congress didn’t raise the debt ceiling in time. Eisenhower and his Treasury secretary realized they couldn’t pay the bills. What happened?
They turned to the weird gold trick to get the money. It turned out that the gold certificate the Treasury gave the Fed in 1934 did not account for all the gold the Treasury had. It did not account for all the gold in the Treasury’s possession.
The Treasury calculated the difference, sent the Fed a new certificate for the difference and said, “Fed, give me the money.” It did. So the government got the money it needed from the Treasury gold until Congress increased the debt ceiling."
"That ability exists today. In fact, it exists in a much, much larger form, and here’s why…"
"Marking Gold to Market
Right now, the Fed’s gold certificate values gold at $42.22 an ounce. That’s obviously not anywhere near the market price of gold, which, again, is about $2,042 an ounce.
Now, the Treasury could issue the Fed a new gold certificate valuing the 8,000 tons of Treasury gold at $2,042 an ounce. They could take today’s market price of $2,042, subtract the official $42.22 price and multiply the difference by 8,000 tons.
I’ve done the math, and that number exceeds $500 billion.
In other words,the Treasury could issue the Fed a gold certificate for the 8,000 tons in Fort Knox at $2,042 an ounce and tell the Fed, “Give us the difference over $42 an ounce.”
The Treasury would have over $500 billion out of thin air with no debt. It would not add to the debt because the Treasury already has the gold. It’s just taking an asset and marking it to market.
It’s not a fantasy. It was done twice."
Even a cursory glance at the decisions being made to deal with this slow-motion train wreck tell a tale of desperation and flailing efforts that seem ridiculous. It's not comforting to know that the people in charge aren't just clueless, they are mangling the controls like the scene from "Wizard of Oz" where the great and powerful wizard is revealed to be an impotent old man pushing buttons and turning knobs.
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The fact is the whole system of finance is "shuddering" under the weight of decades of abuse. Bank are hemorrhaging deposits to the tune of Billions every week. Smaller regional banks whose share are traded on the stock market are particularly vulnerable to runs however big banks are shedding billions in deposits also as savers mover their money to higher returns.
"Another day, another bank collapsing. Yes that is $4.73/share. Can't buy a Starbucks latte for that. Look at the volume of sell orders. What tangible assets do banks have any more to be able to make loans against or to raise money when they are collapsing? Not commercial real estate declining in value. Not low interest bonds. Not gold that they don't have. Is a tsunami coming to America's economy? Only dark clouds ahead. Are you preparing? Will the Fed replace the dollar with a digital currency as the crisis deepens?"
Right now, cash can receive 4-5% risk-free interest in short term Treasuries and money market funds. What is the incentive to keep it at CHASE who pays just 0.1%??
As the spinning plates start to drop one by one and media talking heads dance around the broader issues and rush to tell everyone "Nothing to see here", the consumer upon whose back all the entire system depends is folding fast:
The lending industry is facing an existential crisis; If interest rates stay elevated much longer the changes will be profound and generational in nature. There isn't much anyone can do other than recognize the problems we face, take whatever measures seem reasonable in order to survive and pray for mercy.