Will Biden Build The Wall... to Part You From Your Money?

Hedge fund manager Hugh Hendry has an idea, and it’s terrifying!s [The Rude Awakening] May 05, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Will Biden Build The Wall… to Part You From Your Money? - Deposits are leaving the banking system at a breakneck pace. - This puts regional banks under severe pressure. - Will the USG prohibit you from instantly demanding and receiving your cash? [The Scariest Part About Biden’s 2024 Campaign…]( It’s not that he could raise our gas prices to $10 a gallon. It isn’t because he has America on the cusp of a nuclear World War III… And honestly, it’s not even his ridiculous, “woke” agendas… What scares me the most is… [Is this](. Are you prepared to lose thousands – or tens of thousands – of dollars per year due to his upcoming policies? If not… [Watch this video now](. [Click Here To Learn More]( [Sean Ring] SEAN RING Happy Friday from a sunny, temperate Asti. After joining today’s Rickards Uncensored session with Paradigm Press publisher Matt Insley and the hardest-working analyst in the business, Dan Amoss, I’ll head off with Pam and Micah for more festivities. We’ve got a big carnival in the main town parking lot tonight, and Dad must participate between Moretti pints. But the weather is perfect for it, and I’m famous for liking good parties. If you haven’t signed up for Rickards Uncensored, [head here]( to check it out. Today’s Rude is going to be like a maze. You’re going to have to trust me to lead you through it. Because the convoluted mess that’s the US banking system may have gotten much, much worse. Your Friends and M2 One of the mottos I live by is “Never be the smartest person in the room.” And I bet if I took a random handful of the nearly 100,000-strong Rude Remnant (thanks for being a part of it!), I’d still not be the most intelligent person in the room. So the people I read and listen to are top drawer. One of those people is [Thorsten Polleit]( a German Economist of the Austrian School. I met Thorsten in Bodrum many years ago, and we’ve become good friends. Click his name to follow him on Twitter, where his tweets are wholly educational and easy to understand. I’m reading Thorsten’s book [The Global Currency Plot]( which I’ll review in this newsletter as soon as I build Micah his cardboard candy vending machine (God help me!). Thorsten tweeted something yesterday, which I passed over, thinking nothing of it. And then, when I woke up this morning, my subconscious mind shouted, “Go back and look at that chart, you imbecile!” That leads me to another motto: “Never skip charts from your smart friends when the arrow points straight down.” Here it is: [SJN] Credit: [@ThorstenPolleit]( “There will be trouble.” Who doesn’t love a bit of German understatement? Before we go further, let’s define M2 (and, for foundation, M1). And then, we’ll show what this chart means. Succinctly, M1 and M2 are measures of the money supply in an economy. M1 refers to the narrowest definition of the money supply, which includes the most liquid forms of money, such as physical currency, demand deposits (checking accounts), and traveler's checks. These are the forms of money that can be easily and immediately used as a medium of exchange for goods and services. M2 is a broader measure of the money supply, including all the components of M1, plus additional forms of money that aren’t liquid. That includes savings deposits, time deposits (CDs), and money market funds. These forms of money aren’t readily available as a medium of exchange as the components of M1. But they can be easily converted into M1 components if needed. The theory was people were instantly withdrawing money from their checking accounts (demand deposits) and depositing that money into money market funds which yielded more. That’s true, according to the latest numbers. [SJN] Credit: [@zerohedge]( But year-on-year, the money supply is shrinking. This is most likely because the Fed is trying to shrink the money supply. And that usually precedes a stock market sell-off. So I thought I’d check margin debt, as well, to see how that was doing. [Over 62 And Collect Social Security? Take Action Immediately!]( [Click here for more...]( [If you’re over the age of 62 and currently collect Social Security, you need to prepare now](. Because Biden has given our country the worst inflation in decades – and many warn things will only get worse from here. Worse yet, the Social Security check you receive now may not keep pace with inflation… [Which is why, if you don’t act now, you could fall behind in the months ahead](. Is your retirement at immediate risk? [Click here now to get the simple, step-by-step actions to survive inflation](. [Click Here To Learn More]( Margin Debt Margin debt is the money investors have borrowed from their brokers to purchase securities, using them as collateral. It’s a form of leverage that allows investors to increase their potential returns on investments, but it also carries higher risk since losses can exceed the investor's initial investment. I was curious about this because of my private banking background. During the late bull market, high net-worth individuals (HWNIs) pledged their assets as collateral and then took the cash from their bankers and put it into stocks, bonds, commodities, and Bitcoin. Those types of loans are called Lombard or margin loans. (They’re called Lombard loans in the old world because they originated in Lombardy, Italy.) Here’s the latest FINRA margin debt chart: [SJN] Credit: [Advisor Perspectives]( Notice the remarkable correlation between margin debt and SPX. (To paraphrase Francis Urquhart, from the original UK version of House of Cards, “You may very well think it’s causation, I couldn’t possibly comment.) Since the market top at the end of 2021, margin debt has fallen off a cliff. But the market held up a bit better than many, including me, would have expected. But there’s more room for the SPX to fall. Now why would margin debt collapse? Could be any number of reasons, such as margin interest getting expensive, investors turning bearish, or positions being upside down and having to get liquidated. But it always comes back to one thing. Fed Hiked Too Quickly and Too Much Again, we’ve said this from Day One. - The Fed should’ve started to hike rates in early 2021. - The Fed would’ve been able to hike more slowly had they started sooner. - Hence, they were late and too fast in their hiking process. Now that the upper bound on the Fed Funds rate is 5.25%, you can keep $100,000 and make $5,250 doing absolutely nothing. Rates are over 5%, just like when I was a kid. But you need to withdraw money from your checking account (demand it, as it’s a demand deposit) and then deposit that money into a money market fund. And that’s what it seems like people are doing. Deposits Leave the Banking System This takes us back to Thorsten’s M2 chart. Because the Fed has hiked too much too soon, depositors aren’t leaving their money in the banks. They’re withdrawing. Why on earth would that happen? Two reasons: Banks haven’t raised rates to keep pace with the higher Fed Funds rate. And as we said recently, there’s a trust issue with the non-Big Four banks, including all the regional banks. JP Morgan, Bank of America, Citibank, and Wells Fargo are fine because they’ve got friends in Washington who’ll never let them fail. (Morgan Stanley and Goldman Sachs are also safe, but are mainly investment banks.) Bloomberg’s latest headline is “[Nearly Half of Americans Worry Their Bank Deposits Aren’t Safe]( The mathematics proves our thesis. But that’s not good for the USG or the banking system, so… What Can The USG Do About It? Founder of the macro hedge fund Eclectica and walking midlife crisis Hugh Hendry appeared on Bloomberg TV. [SJN] Credit: [@hendry_hugh]( He utterly castigated the Fed for exacerbating the existing problem by hiking another 25 basis points this week. And Hendry theorizes that the USG may build a wall around your bank deposits to keep you from starting a little bank run of your own. In the world of hedge funds, these aren’t called “walls” but gate provisions. Gate provisions are contractual terms restricting investors from withdrawing their investments from a hedge fund within a specified period or under certain circumstances. The term "gate" refers to a barrier that limits the outflow of capital from the fund. Getting your money out of a hedge fund can take up to two years. Now imagine Bumbling Biden instructs Useless Yellen to stem the tide of withdrawals from our banking system. Then you can’t put your money into a money market mutual fund to take advantage of the higher rates. In fact, you can’t “demand” your deposits at all. Yikes! This is one way to do to keep the banking system afloat. Wrap Up To summarize, M2 is collapsing because the Fed hiked too quickly, endangering the banking system by guaranteeing the safety of a few banks but not others. Now, a famous hedge fund manager thinks the government may introduce gate provisions to stem the tide of withdrawals. Margin debt has remained steady lately, signaling that wealthy speculators are holding steady. But another drop will pull down the SPX with it. Your move, Jay Powell. Have a great weekend! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening In Case You Missed It… America Can’t Be the Peace Broker [Sean Ring] SEAN RING Good Morning Reader, Good morning from Northern Italy, where it’s all play and no work. This week is the local holiday of Festa di San Secondo, which celebrates our patron saint. San Secondo was a 2nd-century Christian martyr who was beheaded under the Roman emperor Hadrian for refusing to abandon his faith. We’ve eaten, drunk and been merry from last Friday night to yesterday. Luckily, the town has opened today, so I can drink my favorite Lavazza Reserva di Tierra from my friend Fabrizio’s café. While we’ve kept to ourselves here in Il Piemonte, peace seems to be breaking out in the Middle East, heaven forfend! Saudi Arabia and Iran kiss and make up? Syria may be readmitted to the Arab League? What new devilry is this? The romantic in me would like to think the CIA has taken a permanent vacation. But the realist in me knows Chinese diplomats have done yeoman’s work in a region the USG has all but abandoned as a partner. In fact, the U.S. is now a strategic competitor to Saudi Arabia, thanks to its shale industry. And that’s put Russia and China in the driver’s seat. After their tiff drove oil negative in 2020, Saudi will never mess with the Russians again. And China buys more oil from Saudi Arabia than anyone else. That’s right; the petrodollar is already on life support. [New LIVE Demo Video STUNS Crypto Investors]( In [this short 3:28 video…]( Crypto genius James Altucher reveals his most shocking crypto secret yet… A little-known secret that’s delivered over $1,170 in FREE crypto income per month. If you AREN’T using this affordable little device… You’re missing one of the best, easiest ways to earn real cash with cryptos. [Click here to watch this short 3:28 video NOW.]( [Click Here To Learn More]( The truth is, Saudi Arabia doesn't need America anymore. Chinese purchases easily replaced Uncle Sam’s old haul. And the plus in OPEC+ is Russia, thanks to Saudi insistence. That all makes sense, no matter how shocking it is. But what’s truly astounding is how Iran has worked its way back into the fold without an American diplomat within 10,000 km. And Europe? It’s an afterthought. The Chinese government richly deserves credit for bringing Saudi Arabia and Iran together. Of course, they didn’t do it for the good of humanity. And quite frankly, who cares? No, they want that New Silk Road built. And for it to work, they need Iran in the game. [SJN] Credit: [U.S. Global Investors]( Now that Iran is onside, it seems the Arab League will let Syria back in. The Arab League is a regional organization of Arab countries in and around North Africa and the Middle East. It was established in 1945 to promote economic, cultural, and political cooperation among its member states. As of 2023, the Arab League has 22 members. Syria was suspended from the Arab League in November 2011 in response to its government's violent crackdown on anti-government protests that had erupted earlier that year. Forgiveness for Syria? Or taking advantage of having a dribbling dementia patient in the Oval Office? The United Arab Emirates (UAE) may have even achieved peace with Iran before too long. And this would affect what’s happening in Yemen. Wow, maybe they all don’t hate each other over there. Because of all this progress, China has been called a fair and impartial mediator. This isn’t merely stepping on America’s toes. It’s slipping into its shoes and doing a better job! I asked myself, “Why hasn’t America done a better job over there?” And I came up with three answers. 1. America’s Various Diasporas Prevent It The USG can’t possibly do a good job when hyphenated Americans always go to bat for their ancestral homelands. Can you imagine the Jewish-American lobby allowing the USG to sanction Israel? Of course not. Same as Italian-Americans vis-à-vis Italy, Indian-Americans with respect to India, and so on. The USG can never be fair and impartial. To throw this point into sharp relief, let me tell you a story about how a group of hyphenated Americans inadvertently brought a new financial instrument into being in the 1950s. In 1954, the USG established the "Food for Peace" program to provide surplus agricultural commodities to countries in need, including the Soviet Union. According to the United States Department of Agriculture, between 1954 and 1960, the Soviet Union received 4.1 million metric tons of food under the program. This included wheat, corn, soybeans, and other commodities. However, following the Soviet invasion of Hungary in November 1956, the US government suspended the "Food for Peace" program to the Soviet Union. The USG decided in response to widespread public outrage over the Soviet action in Hungary and concerns about Soviet aggression more broadly. In short, Hungarian-Americans, along with a bunch of other do-gooders, made the USG stop sending food to starving Russians. Clearly, the Hungarian-Yanks didn’t turn the other cheek. Besides depriving the Soviet Union of food, the Soviets were worried that the US would freeze its assets held in American banks. (Sound familiar?) The question was, “How do you keep your USD without having it confiscated?” Luckily for the Russians, they owned a British-chartered bank called the Moscow Narodny Bank. The bank was founded in 1918 by Russian émigrés, and by the 1950s, it had become a major player in the London banking scene. One of its key figures was a banker named Andrei Kosygin. Kosygin was a Soviet who had been sent to London in the early 1950s to manage Soviet assets held in British banks. The MNB worked with Kosygin to create a system for holding Soviet assets in U.S. dollars outside the United States, primarily in London. Et voila! Now you have Eurodollars, which are USD held outside the USA. And since they’re outside the USA, they’re not subject to U.S. banking regulations and reserve requirements. Checkmate. Whenever someone says nothing can replace the USD as the world’s reserve currency, I think about how Hungarian-Americans inadvertently forced the Soviets to invent Eurodollars. “Nothing” just hasn’t been invented yet. 2. The Military-Industrial Complex Doesn’t Want Peace If you tell me nonsense like “peace requires strength,” I’ll laugh at you. Not because it isn’t true. But because of context. In matters of defense, strength certainly matters. But the USG has specialized in offense since the USS Arizona sank. (My great uncle was there and lived. Unfortunately, but understandably, he refused to talk about it.) I won’t belabor this section with anything other than a chart that says it all. [SJN] Since September 10, 2001, LMT is up 1,937.03%, NOC is up 1,733.19%, GD is up 757.60%, the Dow Jones US Aerospace/Defense Sector is up 657.63%, and Boeing is up 609.61%. The SPX pales in comparison, only up 277.06% over the same period. Marine Corps Major General Smedley Butler was correct when he wrote War is a Racket. But that racket makes some people very rich. And they usually have ties to Washington. In this sense, “America” isn’t one unit. Neocons and defense companies always want war because they profit by it. 3. The “Stick” Isn’t as Big as It Used to Be, and America Doesn’t Do Carrots The rest of the world is getting together under Chinese and Russian leadership to escape Dollar World. Many influential economists think this is impossible. But the difference this time is that the move isn’t organic or passive. The BRICS and the Global South are actively looking for alternatives. It’s the same spirit that created the Eurodollar. Just because we can’t see what that alternative will be doesn’t mean it won’t come into being. Most other countries know America can’t stomach a full-blown war. If it could, US troops would’ve been in Ukraine months ago. (Ok, but not clandestinely.) Not only that, but America can’t fight on two fronts anymore. It simply doesn’t have the same industrial capacity it used to have. So the world has become bolder and more brazen. It’s not nearly as afraid as it used to be. And what’s worse, when America comes up with a benign idea, most countries simply don’t believe it. America always has an ulterior motive. So a Russian/Chinese alternative is an excellent bet for these nations. Wrap Up China’s diplomats have embarrassed Foggy Bottom. Peace broke out in the Middle East, and America was caught on the back foot. But can America act as an impartial peace broker anyway? I don’t think so. Though the U.S. is technically at peace now, it’s been at war for [226 out of 246 years](. Twenty years of peace. Ever. There are too many factions inside the U.S. for “America” to act as one unit. And the warmongering factions are happy to send someone else’s sons to fight their war for them. Someone is always ready for battle, whether it’s defense contractors, neocons, or diasporas. So it’s no surprise that the U.S. isn’t viewed as a peace broker. Nor is it a surprise that it’s considered a warmonger. Have a lovely weekend! If this is the sort of thing you’d like to see more of, please let me know [here](mailto:feedback@dailyreckoning.com). Or if you have any suggestions for future topics, do let me know that as well. All the best, [Sean Ring] Sean Ring Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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