Bannon, Navaro, and Cortes are once again trying to provoke their believers by misinforming them about the current banking crisis. They want to drum up fear and trepidation over the predictable and easily addressed liquidity disruption in the Federal banking system that resulted from the increases in the Fed funds rate over the last year.
Banks are regulated and must maintain a sufficient margin of cash reserves to ensure depositors can withdraw their funds at any time under normal circumstances. When interest rates go up, people withdraw cash and purchase higher earning alternatives like CDs, bonds, and money market mutual funds. When the cash reserves of the banks fall below the required level they usually can borrow from other banks at the “overnight rate” to top off the levels. When many banks are having excessive withdrawals as well, this source of lending declines and the banks must go to the Fed’s discount window to maintain the required levels instead. That’s all that is happening. There’s nothing scary or unusual about this process which is largely an accounting adjustment in the Fed’s computers.
What is a problem is when people like Bannon try to fuel fear and drive more people to buy gold (Birch gold is a sponsor) or take money out of banks and put it under their mattress.
I realize that the Biden administration is illegitimate and incompetent and should never have been installed in power, but panicking people with baseless conspiracy theories regarding the banking system is not helping.
False. As Steve and guests noted, banks normally need to hold sufficient high valued assets to borrow at the discount window and the Fed does not provide 100% of stated assets, far below that. Currently, banks are taking a lot more money than usual - and the underlying problem is the devalued long term bonds some banks had previously purchased.