Do US Bankers want to own assets whose value the US Governments can't manipulate?
Last week the US Congress sends US President BIden a proposed law allowing Banks to buy, hold and custody
Bitcoin, which Bidens vetos.
- This attempt to make Banks into Bitcoiners is a historic monent for Bitcoin and suggestion of a crack in the historic relationship between US Government and US Banks?
- It looks like US Banks are becoming like Bitcoiners and looking for assets whose value the US Government can't manipulate ???
Let us start at the beginning...
Last Year 2023
A record number of US Banks were declared insolvent, bankrupt, closed and their leadership fired and had their carreers ruined.
It was a huge scandal, with the bank presidents of these failed institutions being heavily criticized for investing in risky investments, which lost value and saw the banks become insolvent.
These bank presidents were fired, careers ruined, and the nation doubted the safety of it's banking system.
What risky investment were all these banks invested in??? United States Treasury Bonds.
You are probably scratching your head in disbelief right now, and so were those bank presidents who lost their jobs.
Background
- It is an unwritten agreement between the banks and the government, that banks take in cash in the form of deposits from their customers, the American Workers, and then loan that money to the US Government by buying the US Government Bonds, which the US Government needs to sell to keep paying on the National Debt, now 34 Trillion dollars.
- The US Government then pays the banks market rate interest on the loaned money.
- This is a win for the US Government and a Win for the Banks.
- Or it was until last year the US Government raised the interest rate it pays on U.S. Treasuries faster then any other time in recorded history last years.
- This rapid interest rate rise created a scenario where thousands of US Banks were left holding millions of dollars of US Treasury Bonds paying far less then the new market rates. This caused the value of those low interest rate Treasury Bonds to fall far below what the banks paid for them. This was all depositors money, and the bank had lost it investing in US Government Treasury Bonds. This led to the failure of several banks and the ruin of several careers.
- This was textbook definition manipulation of the financial markets and the money supply. And those banks were the victims.
- WOW!
- This was widely viewed as a government created crisis. The betrayal of the US Banks, by the US Government,
Now go forward in time
- Bitcoin is outperforming all assets for the last ten years and everyone wants to be able to buy Bitcoin, large corporations like Microstrategies are buying it and holding it on their balance sheets to balance their investment portfolios and the SEC approves Eight Bitcoin Spot ETFs . It seems like everyone wants to invest in Bitcoin.
- NOW...
- The US Congress and Senate passed a Bill or Proposed New Law, which would have allowed US banks to buy and hold cryptocurrency on their balance sheets, and to act as custodians for their customers.
- This proposed law was a historic event for many reasons, but I will focus on just two:
First, banks being allowed to buy and hold Bitcooin on their balance sheets and suddenly an estimated 1000 Banks a with billions of dollars available to buy Bitcoin would suddenly entering the market.
Second, it means banks could diversify their investment portfolio away from US Treasuries, and into Bitcoin. This is very important to think about because the main buyer of US Government issued Treausry Bonds, are banks. The US Government then pays the banks market rate interest on the loaned money. This is a win for the US Government and a Win for the Banks. Or it was until the US Government raised the interest rate it pays on U.S. Treasuries faster then any other time in recorded history last years, which created a scenario where thousands of US Banks were left holding millions of dollars of US Treasury Bonds paying far less then the new market rates, which caused the value of those bonds to plummeted, and directly or indirectly resulted in several bank failures.
If you were a banker and just watched the carreers of 8 very prominent bankers get ruined, all because of the US Government manipulating the value of US Treasury Biods, the main asset US Banks invest in today, what would you do?
The logical answer is to find an asset to invest in which the US Government can't manipulate.
And many people feel that asset is Bitcoin.
Do you see the Bankers with Laser Bitcoin Eyes now??
If I was a conspiracy theorist. I would suggest that the 2023 betrayal of the US Banks, by the US Government, set the stage for banks to lobby their Congressional Representatives to allow the banks to hold Bitcoin on their balance sheets, potentially as an alternative to US Treasuries. All because Bitcoin is an asset which the US Government can't manipulate, and it was sudden much more attractive then US Treasuries.
Ironically US Banks may now be thinking like Bitcoiners about the ability of the US Government to manipulate the US Money Supply now when it affects them.
This means that in return for the US Government betrayal of the banks, the banks were planning to diversify their risk and choose another investment for some of their investment capitol.
Plus banks would create a new stream of income custodying Bitcoin for their customers.
US President Biden put a stop to all this potential activity by vetoing the bill.
Three Dimensional Chess Game here.
- These are high stakes chess moves by the banks and now we see them blocked by the US Government, for now. In the USA when the US President vetoes a bill, it can't become law, unless the US House musters enough votes to over-ride his veto with a 2/3 Majority and then the bill to become law.
So that brings you to the point wher we are now.
The banks were betrayed by the US Government, some of them failed, bankers lost their jobs, their careers were ruined, and the other bankers have got to be looking at this and wondering who next ?
There is something about having your own butt on the line which makes you rethink everything, including Bitcoin.
Banks trying to get the law changed so they can buy and hold Bitcoin on their balance sheet.
We live in exciting times and I am so glad that I found cryptocurrency six years ago, so I have the background to appreciate what is happening.
Amazing.
