Geopolitical Update : Banking Crisis is not an accident – The biggest risk is external
By Christian Takushi, Macro Economist, Switzerland – 23 March 2023 (public release truncated and delayed 4 days)
Kindly allow me to elaborate a bit more on things I wrote in recent weeks: Policy Makers are trying to slow down credit and inflation with a Banking Crisis (Credit slow down).
After the comments by the US Treasury and the FED yesterday, many experts are talking about policy chaos between FED and Treasury. I disagree.
Meanwhile we are closely monitoring …
- Israel – multiple challenges
- India – fastest rising global geopolitical power
- China – Ready for assertive policy moves
- Poland – redefining NATO and the EU
- Argentina-Brazil – Brasilia has the initiative
- Egypt, Qatar and Saudi Arabia ready to shift
- ASEAN nations – readying commerce ex USD
- 14 nations want to join the rising BRICS
- Gold – the West’s no 1 threat?
.. , because they will interconnect at one point
The banking crisis is the result of an intentional policy move
The current Banking Crisis has been engineered by the FED with implicit albeit reticent support of the Treasury and Congress. It is NOT an accident or policy mistake. It was a necessary move for financial and price stability given the circumstances. The Treasury is currently financing the US government to avert a default.
It is a risky move, but all other options entail bigger risks at the moment. It was and is the fastest way to squeeze credit and neutralise the “reaccelerating inflation” of last month.
Thus the banking crisis helps Policy Makers achieve three objects: Keep rates from being hiked too much, fight inflation with a sudden shortage of credit supply, and accelerating banking consolidation.
In America it will allow FED and Congress to increase regulation of smaller banks.
Sure we are in this situation, because of so many years of massive monetary expansions. In that sense the banking crisis is part of a policy failure and excess, but my perspective is that within this paradigm, the timing of current events is intentional.
FED trying to shrink our massive asset bubble somewhat before China-Russia trigger it
The FED had to use a banking crisis, because other policy tools are committed and it cannot fight inflation with policy rates, nor can it cut rates! it is trying to keep the USD as stable as possible until the BRICS + Summit in August.
The Rest of the World wants to challenge the USD and our banking system there. Washington is worried about what BRICS, Saudi Arabia and Indonesia + ASEAN etc. will do in the coming months. Bringing the weakest banks to fall now, on our terms, made sense. It also sends a message “don’t try”. Reducing the bubble is the best way to discourage Russia and China to time disruptive moves. But of course even that is hotly contested in ..
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By Christian Takushi, Macro Economist, Switzerland – 23 March 2023 (public release truncated and delayed 4 days)
Geopolitical and economic conditions need close monitoring, because they can change suddenly.
No part of this analysis should be taken or construed as an investment recommendation.
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