Andy Schectman, CEO and Founder of Miles Franklin Precious Metals, joins Daniela Cambone's Stansberry Research show to discuss the banking crisis and its potential influence on mid-sized institutions. Three regional banks have already failed, resulting in billions of dollars in losses for the Federal Deposit Insurance Corporation. Andy is concerned about the future of mid-sized banks, noting a legislative disagreement over deposit insurance and the risk of commercial real estate loans causing problems.
Andy shows a conversation between Janet Yellen and an Oklahoma representative about the failures of Silicon Valley Bank and Signature Bank. Yellen claims that if a regional bank collapses, not all constituents will be made whole because it would take the agreement of numerous groups to establish whether a bank is too systemic to fail. Customers who have trusted regional banks with their savings, small enterprises, and family investments are concerned by this declaration.
Andy also highlights the Federal Reserve's part in worsening the crisis. He notes that the current climate, which includes growing interest rates and the presence of the overnight reverse repo market, encourages individuals to withdraw monies from regional banks and deposit them in larger commercial banks that engage in the reverse repo market. This trend is aided by the Federal Reserve's operations, which, in Andy's opinion, may be interpreted as facilitating the departure from regional banks.
Daniela wonders why the Fed would want this to happen and what it means for the banking sector. Andy speculates that certain members of the government and the Federal Reserve may want to phase out regional banks in favour of a central bank digital currency (CBDC) system. He highlights Lael Brainard's ideas, who urge for the abolition of commercial banks and the establishment of a CBDC. Andy believes that if the CBDC deployment were limited to a few large banks rather than thousands of regional banks, it would be easier to implement and adopt.
Andy speculates that the administration is looking for a villain to blame for the economic difficulties, such as Putin, Xi Jinping, or OPEC. They might deflect responsibility for the country's large debt, which includes obligations for Social Security, Medicaid, Medicare, and military pensions, by shifting blame to external factors. He contends that mounting debt combined with rising interest rates offers no realistic options other than inflation or default.
In terms of the countries that are abandoning the US currency, Andy says that while each individual country's actions may appear inconsequential, together, they contribute to the destabilisation of the global financial system. He emphasises Saudi Arabia's importance in maintaining the dollar's status as the world's reserve currency by denominating oil transactions in dollars. He does, however, believe that the establishment of alliances and projects such as the BRICS, Shanghai Cooperation Organisation, and Belt Road Initiative, as well as Saudi Arabia's participation in these efforts, could challenge the dollar's hegemony.
In summation, Andy Schectman believes that the banking crisis, concerns about mid-sized banks, and a potential shift away from the US dollar are all interconnected and might have substantial ramifications for the banking system's and the global financial landscape's future.
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Source:
Stansberry Research, 19 May 2023, Why the Fed Secretly Wants the Banks to Implode,
