Banking Crisis Confusion Grows. Yellen U-turn?

 Baltic Dry Index. 1484  +28          Brent Crude 75.85

Spot Gold 1989                 US 2 Year Yield 3.76 -0.20

Coronavirus Cases 01/04/20 World 1,000,000

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Deaths 6,824,170

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

“But it [the boom] could not last forever even if inflation and credit expansion were to go on endlessly. It would then encounter the barriers which prevent the boundless expansion of circulation credit. It would lead to the crack-up boom and the breakdown of the whole monetary system.”

Ludwig von Mises

Did the US Treasury Secretary just U-turn on guaranteeing all US bank deposits?  No one knows of course because US bank rescue policy changes by the day and ineptly just sows confusion.

Meanwhile bank deposits flee regional and community banks.

Nothing about the US banking crisis suggests a good ending.

How could the US Treasury and Fed guarantee multi trillions of US bank deposits without destroying the value of the US dollar.  Overnight the dollar would become the old defunct Italian lira.  Outside of the USA almost no one would want to hold US dollars.

Under the Biden team we now have a crisis to equal August 1971 when Nixon abandoned the dollar gold link, setting off the great financialised gambling economy that seems to be collapsing in 2023.

In the stock casinos, puzzlement, apprehension and rising worry. Just how bad is the US bankster crisis and is there anyone competent in charge?

Who wants to have uninsured bank deposits in a regional or community US bank this weekend. For that matter, who wants deposits in any Swiss bank that isn’t UBS?

A dangerous weekend lies ahead, but hopefully the USA will finally get its act together and start speaking with one voice and start rebuilding confidence in the US dollar.

 

Asia markets mixed as investors weigh Yellen’s remarks on banks; Japan core inflation slows

UPDATED FRI, MAR 24 2023 12:47 AM EDT

Asia-Pacific markets were mixed on Friday, as investors weigh remarks from U.S. Treasury Secretary Janet Yellen, who said federal emergency actions to back up failed regional banks could be used again if necessary.

This conveyed a different message compared to Yellen’s comments a day earlier, when she told senators that the Treasury was not considering any plans to insure all U.S. bank deposits without congressional approval.

In Japan, the Nikkei 225 was down 0.28%, and the Topix saw a loss of 0.16% as the country saw its core inflation come in at 3.1% for February, marking the first time in 14 months that the pace of inflation has slowed.

The Hang Seng index was down 0.21%, but the Hang Seng Tech index was 1.29% up.

In mainland China, the Shanghai Composite lost 0.54% and the Shenzhen Component was 0.19% up.

South Korea’s Kospi shed 0.68%, but the Kosdaq bucked the trend and traded higher more than 1%.

Australia’s S&P/ASX 200 was 0.2% lower.

Overnight in the US, stocks ended higher on Thursday after a volatile trading session. The tech-heavy Nasdaq Composite led gains and climbed 1%, while the S&P 500 closed 0.29% higher and the Dow Jones Industrial Average rose 73.66 points.

Asia markets mostly down as investors weigh Yellen remarks on banks (cnbc.com)

To no one’s surprise, the Bank of England raised its key interest rate for a 9^th time, by 25 points to 4.25 percent. With UK inflation running at 10.4 percent, the BOE is still over 6 percent behind inflation.

Remember when all central banksters said inflation was temporary and transitory. Were they just lying back then or actually as dumb as they now look?

Nothing good lies ahead as rising global interest rates sink bond and mortgage-backed security values. Who has already gone bust but is hiding it?

 

Bank of England hikes interest rates by 25 basis points after inflation surprises

PUBLISHED THU, MAR 23 2023 8:02 AM EDT

LONDON — The Bank of England on Thursday hiked interest rates by 25 basis point as it grapples with persistent high inflation against the backdrop of concerns over the banking system.

The Monetary Policy Committee voted 7-2 in favor of raising the Bank rate to 4.25%, in a widely anticipated move after official data on Wednesday showed that U.K. inflation unexpectedly jumped to an annual 10.4% in February.

In its summary, the MPC highlighted that global growth is expected to be stronger than projected in its February Monetary Policy Report, while core consumer price inflation — which excludes volatile food and energy prices — has remained elevated.

The Bank of England estimates that additional fiscal support announced in Finance Minister Jeremy Hunt’s Spring Budget last week will increase the level of the U.K. GDP by around 0.3% over the coming years.

“GDP is still likely to have been broadly flat around the turn of the year, but is now expected to increase slightly in the second quarter, compared with the 0.4% decline anticipated in the February Report,” the MPC said in its report.

“As the Government’s Energy Price Guarantee (EPG) will be maintained at £2,500 for three further months from April, real household disposable income could remain broadly flat in the near term, rather than falling significantly.”

More

Bank of England hikes interest rates by 25 basis points after inflation surprises (cnbc.com)

Swiss central bank hikes interest rates by 50 basis points despite Credit Suisse turmoil

PUBLISHED THU, MAR 23 2023 4:32 AM EDT

The Swiss National Bank raised its benchmark interest rate by 50 basis points Thursday, taking it to 1.5%.

The rate is the fourth consecutive hike and the change in policy rate is in line with analyst expectations.

The additional monetary tightening has been put in place to counter “the renewed increase in inflationary pressure,” the bank said in a press release.

It also said further rises “cannot be ruled out ... to ensure price stability over the medium term.”

Average annual inflation will average 2.6% in 2023 and 2% in 2024 and 2025, according to a new forecast by the Swiss National Bank, with inflation expected to stand at 2.1% by the end of 2025.

The latest rate hike comes as domestic inflation remains well above the Swiss National Bank’s target of between 0% and 2%.

Swiss inflation rose to 3.4% in February year-on-year, exceeding analyst expectations, although consumer prices are just a fraction of the soaring rates of the country’s European neighbors.

More

Swiss central bank hikes interest rates by 50 basis points despite Credit Suisse turmoil (cnbc.com)

Banks Are Still Drawing on the Fed for $164 Billion of Emergency Cash

Thu, March 23, 2023 at 9:27 PM GMT

(Bloomberg) -- Banks reduced their borrowings only slightly from two Federal Reserve backstop facilities in the most recent week, a sign that institutions are taking advantage of the central bank’s liquidity in the wake of turmoil.

US institutions had a combined $163.9 billion in outstanding borrowings in the week through March 22, compared with $164.8 billion the previous week, according to Fed data Thursday.

Data showed $110.2 billion in borrowing from the Fed’s traditional backstop lending program known as the discount window compared with a record $152.9 billion in outstanding credit the previous week. The loans can be extended for up to 90 days and the window accepts a broad range of collateral.

Outstanding borrowings from the Bank Term Funding Program stood at $53.7 billion, compared with $11.9 billion the previous week. The BTFP was opened March 12 after the Fed declared emergency conditions following the collapse of California’s Silicon Valley Bank and New York’s Signature Bank.

Credit can be extended one year under the program and collateral guidelines are tighter.

Fed loans to bridge banks established by the Federal Deposit Insurance Corp. to resolve SVB and Signature Bank rose to $179.8 billion from $142.8 billion the previous week.

“There’s nothing here, which suggests things aren’t spreading,” said Blake Gwin, head of US interest rates strategy at RBC Capital Markets.

More

Banks Are Still Drawing on the Fed for $164 Billion of Emergency Cash (yahoo.com)

Moody’s sees risk that U.S. banking ‘turmoil’ can’t be contained

Last Updated: March 23, 2023 at 4:12 p.m. ET

Despite quick action by regulators and policy makers, there’s a rising risk that banking-system stress will spill over into other sectors and the U.S. economy, “unleashing greater financial and economic damage than we anticipated,” said Moody’s Investors Service, one of the Big Three credit-ratings firms.

Simply put, the risk is that officials “will be unable to curtail the current turmoil without longer-lasting and potentially severe repercussions within and beyond the banking sector,” Atsi Sheth, Moody’s managing director of credit strategy, and others wrote in a note distributed on Thursday. Still, the agency’s baseline view is that U.S. officials will “broadly succeed.”

Moody’s warning came as Treasury Secretary Janet Yellen indicated that the U.S. could take additional actions if needed to stabilize the banking system, and after Federal Reserve Chairman Jerome Powell assured Americans on Wednesday that the central bank would use its tools to protect depositors.

Beneath the surface, though, is lingering worry. Hedge-fund manager Bill Ackman, for example, is warning of an acceleration of deposit outflows from banks and the latest global fund manager survey from Bank of America BAC, -2.42% found that 31% of 212 managers polled regard a systemic credit crunch as the biggest threat to markets.

Of the three ways in which banking-system troubles could spill over more broadly, one of them is potentially the “most potent,” according to Moody’s: That is a general aversion to risk by financial-market players and a decision by banks to retrench from providing credit. Such a scenario could lead to the “crystallization of risk in multiple pockets simultaneously,” the ratings agency said.

“Over the course of 2023, as financial conditions remain tight and growth slows, a range of sectors and entities with existing credit challenges will face risks to their credit profiles,” the Moody’s team wrote. Banks are not the only type of players with exposure to interest-rate shocks, and “market scrutiny will focus on those entities that are exposed to similar risks as the troubled banks.”

More

Moody's sees risk U.S. banking turmoil can't be contained - MarketWatch

In other news, big trouble brewing in US Commercial real estate. More IT layoffs.

Remote-work trend creates mortgage-backed securities default risk, Moody's warns

U.S. office space revenue falling on record vacancy rates

Published Mar 22, 2023 

The popularity of working from home in the U.S. is cutting into office tower revenue to the point that it is putting some commercial mortgage-backed securities at risk of default, according to a new report from the credit rating agency Moody’s.

“Lenders’ anticipation of lower office revenue is creating refinancing difficulty for office loans with low debt yields and loans with significant lease maturities in the next 36 months,” the March 20 report said.

In the past, commercial mortgage backed securities, which draw on the flows from a number of commercial mortgages, have proven beneficial to investors because they generate reliable cash flow at a fixed interest rate and come with prepayment penalties that discourage borrowers from making early payments — ensuring that the cash flow continues throughout the loan period.

However, as companies shed office space, lease rates from commercial real estate are falling, reducing overall cash flow to office towers and potentially weakening the ability of borrowers to pay back their debt.

According to Moody’s, office revenue has already fallen roughly 10 per cent below where it should be given the robust employment levels across the U.S.

“Revenue will remain particularly stressed in markets with (1) a large concentration of industries, such as technology, that have adopted high levels of hybrid work and (2) difficult commutes,” the report said.

Decreased office use has led to record office vacancy rates in some U.S. cities. And based on commercial real estate firm CBRE’s forecast, the increase in vacancies is expected to continue into 2024.

CompStak, an American lease data provider cited in the report, indicates that the average office lease still has 5.1 years remaining on it. In other words, the higher market vacancy rates and lower rents will not be reflected in specific office cash flows for some time.

More

Work-from-home creates mortgage-backed securities default risk | Financial Post

 

Accenture cuts jobs, trims forecasts on worries of lower IT spending

March 23, 2023 11:26 AM GMT

March 23 (Reuters) - Accenture Plc on Thursday lowered its annual revenue and profit forecasts and said it would cut about 2.5% of workforce, or 19,000 jobs, the latest sign that the worsening global economic outlook was sapping corporate spending on IT services.

More than half of the layoffs will affect staff at its non-billable corporate functions, the company said, sending its shares up more than 4% before the bell.

Accenture now expects annual revenue growth to be between 8% and 10% compared to the previous projection of 8% to 11% increase.

Last month, rival Cognizant Technology Solutions (CTSH.O) pointed to "muted" growth in bookings, or the deals IT services firms have in the pipeline, in 2022 after its first-quarter revenue forecast came in below market expectations.

Accenture said it now expects earnings per share to be in the range of $10.84 to $11.06 compared to $11.20 to $11.52 previously.

Accenture cuts jobs, trims forecasts on worries of lower IT spending | Reuters

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

That Chinese economic slowdown again. Approx. 15 minutes.

Massive Empty Containers & Layoffs, China's Exports & Consumption Slump. The Digital Economy Rescue?

Massive Empty Containers & Layoffs, China's Exports & Consumption Slump. The Digital Economy Rescue? - YouTube

Credit card debt is at record high as Fed raises rates again

March 22, 2023

NEW YORK (AP) — As the Federal Reserve raises interest rates again, credit card debt is already at a record high, and more people are carrying debt month to month.

The Fed’s interest rate increases are meant to fight inflation, but they’ve also led to higher annual percentage rates (APRs) for people with credit card debt, which means they pay more in interest. The Fed announced Wednesday that it would increase rates another quarter of a point.

With inflation still high, people are leaning on their credit cards more for everyday purchases.

“It’s the economy, inflation, gas prices, and food costs,” said Lance DeJesus, 46, kitchen manager at the Golden Corral in York, Pennsylvania. “A year ago, you could go to the grocery store with a hundred bucks and come out with a bunch of bags. Now, I come out with just one bag.”

DeJesus said he carries a credit card balance of roughly $2,600 from month to month over several cards, which have interest rates from 16.99% to 21.99%.

----He’s not alone: 46% of people are carrying debt from month to month, up from 39% a year ago, according to Bankrate.com, an online financial information site.

Bankrate says the average credit card interest rate, or annual percentage rate, has reached 20.4% — the highest since their tracking began in the mid-1980s.

A new poll by The Associated Press-NORC Center for Public Affairs Research finds 35% of U.S. adults report that their household debt is higher than it was a year ago. Just 17% say it has decreased.

More

Credit card debt is at record high as Fed raises rates again | AP News

Covid-19 Corner

This section will continue until it becomes unneeded.

That Norwegian vaccine to excess deaths correlation study again, because it’s so important. Did covid vaccines cause all the current excess deaths? Approx. 15 minutes.

Correlation study

Correlation study - YouTube

Some other useful Covid links.

Johns Hopkins Coronavirus resource centre

https://coronavirus.jhu.edu/map.html

Centers for Disease Control Coronavirus

https://www.cdc.gov/coronavirus/2019-ncov/index.html

The Spectator Covid-19 data tracker (UK)

https://data.spectator.co.uk/city/national

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Today, something to celebrate or not?

German monks create world's first powdered beer

By Loz Blain  March 22, 2023

A monastic brewery near Munich says it's created the first powdered beer. Just add water, and it'll froth up, complete with a foamy head and full flavor. The result promises massive savings on transport, because it can be shipped at 10% of the weight.

Klosterbrauerei Neuzelle worked together with "technology partners" and used funding from BMWi to create its first powdered product, a dextrin-rich zero-alcohol beer which has been brewed using conventional methods, then "processed and prepared into a water-soluble beer powder/granulate."

It's testing this powder on the market in small quantities until mid-2023, but the plan is to start making alcoholic beers soon, and scale things up – so long as people go for it. And the team believes there's a chance to ditch traditional brewing techniques as well, compressing the process to minimize the use of raw materials, labor and energy.

"The time is ripe to put classic beer production and logistics to the test in view of the way we treat our environment," says major Neuzelle shareholder Helmut Fritsche. “Billions of liters of water are transported to consumers worldwide, because beer consists of up to 90% water. From an environmental point of view, we are already saving on transport, but not yet on the use of resources and the costs of production.”

"We know that classic pilsner drinkers and all craft beer enthusiasts, especially in Germany, will be skeptical about our product at first,” adds managing director Stefan Fritsche. "It's not just about bringing a new product onto the market, but about disrupting the beer business model. Therefore, we do not see our core target group as primarily the classic German end consumer, but global resellers, who don't necessarily have to have brewing knowledge, but who can make the granules suitable for the end consumer's application."

Indeed, the brewery will start targeting these powders first at far-flung markets like Asia and Africa, where transport costs are the highest, and presumably beer snobbery is less of an issue than at home.

We imagine there are plenty of people putting their hands up to try the powders out. If they do what they say on the tin, and deliver a great drinking experience without needing to shift water and bottles, this could absolutely become a disruptive and revolutionary advance.

Source: Klosterbrauerei Neuzelle

German monks create world's first powdered beer (newatlas.com)

Another weekend and how many more US or Swiss banks are in trouble and might fail this weekend?  Next weekend? Next month? This summer?

In tomorrow’s LIR update, a 10 year old girl wows the Hungarian audience with her performance from memory of a long forgotten English composer’s concerto for recorder No. 2 in C major.  Enjoy a rare genius performance.

Have a great weekend everyone.

I was borrowing money from 30 leading banks. How could they all be wrong? I’m only a simple businessman.

Sir Freddie Laker, after the Laker airline went bust.