Bank Collapse and Bailouts

This article is republished from Manward Financial

It’s a chaotic time for the banking sector. The world is witnessing more bank collapses and, subsequently, bailout talks are on the rise. President Biden’s budget proposal has added to the tension, with its potentially disastrous borrowing-and-spending tactics that could lead the country to further financial turmoil.

With banks failing and bailout talks intensifying, it’s a grim look into the economic future. President Biden’s plan to take $5 trillion from the rich and cut the deficit by $3 trillion, while raising the national debt to $51 trillion within a decade, is nothing short of lunacy.

The banking world reflects this chaos, with borrowing rates being nearly 40% higher than the interest rates on 30-year bonds. The recent collapse of Silicon Valley Bank and the resulting stock market plunge have added to the turmoil, leaving the banking world in an unsettling state.

Off Balance – Bankruptcies and Stock collapse

Shares of bank stocks have plummeted, with Silicon Valley Bank’s failure leading to a 60% dip in its shares. The fallout has spread to other banks, causing the KBW Nasdaq Bank Index (BKX) to plunge over 15% and major U.S. banks losing over $50 billion in market share. The situation is real, and banks are compelled to balance their books in response to the ongoing crisis.

The heightened financial pressure is forcing people to move their money out of banks, highlighting the volatile state of the traditional banking sector. Amidst all this, the federal government’s ongoing borrowing and spending spree is only aggravating the scenario.

Upside-Down – Why are the banks collapsing?

As discussed in our exclusive newsletter, it’s now possible to get 5% on your cash. This is driving more investors to pull their cash out of traditional banking institutions, forcing banks to sell their assets at diminished values. The yield curve inversion is further compounding their troubles, leaving the system in disarray.

The underlying issue is that the government’s unsustainable spending habits and printing of trillions of dollars are casting a shadow on the entire banking industry. It’s a risky and uncertain time for everyone, and a bumpy ride lies ahead. Bank failures rarely portend good times.