Become Your Own Bank

It seems that traditional banking is on life support. This article looks at the recent update in support of this premise and explores how to become your own bank in light of our crumbling banking system.

Current Reality | Traditional Banking

You will already be aware of the collapse of Silvergate Capital, Silicon Valley Bank, and Signature Bank, and many are predicting that this is only the beginning of a domino effect. If you live outside America, you may be concerned about where your bank now stands. 

You could check in with your bank to see whether they conducted a recent stress test and, if so, how they fared. A stress test looks at a bank’s financial capacity to tolerate sharp economic downturns.

The problem with relying on this feedback is that banks do not wish to cause panic because this would result in a bank run. So it may be wise to hold that data on a loose palm, so to speak.

Bear in mind that when you deposit money into the banks, it does not stay in your account. The banks trade deposits for profits without your permission and keep any profits while continuing to charge you for custody of your money. 

Since the stock market is also collapsing, if a bank run were to occur, there would not be enough money for everyone to access their accounts.

With the implosion of the markets surpassing that of 2008 while economic depression looking likely to overtake the Great Depression of the 1930s, the signs are that traditional banking is coming to an end.

Image source: Wikimedia Commons

There is a growing concern that the bank collapse is entirely orchestrated to bring down cryptocurrency, remove cash from our society and usher in the Central Bank Digital Currency. (CBDC) In other words, any competitor to the CBDC is being removed by fair or foul means.

If you still think this is not imminent, take a look at this latest CBDC chart of which stage countries are at with the adoption of the CBDC. You can see the reality playing out, which lends credence to the theory of orchestration.

Image source: Atlantic Council

There is no democratic process about this either. In Nigeria, for example, they started to bring in their digital currency, the eNaira, which very few people wanted. 

The government declared cash as no longer valid or legal, then charged citizens as much as 20% for withdrawing cash. Riots and violence broke out in the wake of this. Through lack of cash, more than half of their population has reportedly been forced to adopt the eNaira.

Europe is following closely behind, with Christine Lagarde imposing a $1000 spending cash limit with the threat of imprisonment if you do otherwise! With each passing conversation, CBDCs are revealing themselves to be about surveillance and control and not about enjoying the fruits of your labor.

America seems to be about to do something of a segway to a CBDC via their FedNow instant payment service, which is due to launch this summer of 2023. It doesn’t look good for the world in general. If this plays out to the mapped agenda above, then cash and traditional banking have their days numbered.

Also, be mindful that there is a move to depart from the dollar as the world's default currency. This is true of the BRICS countries, who are discussing their own digital currency, possibly backed by precious metals such as gold.

The Alternative | Become Your Own Bank

The question arises as to what you can do about it and how you can protect your personal assets as well as your business concerns. Some consider we have no choice but to accept the new global agenda, but that depends on how much we care about people and democracy. We have been here before in 2008 on a smaller scale, so we have an opportunity to learn from the lessons this imparted.

While nothing is guaranteed in life, what is certain is that if you do not prioritize finding an alternative safeguard that protects your interest against this draconian agenda, it will be dictated to you and not for your benefit.

So what does it mean to become your own bank? Since banking is supposed to be about the safe custody and access to your funds, it is about how you can replicate that for yourself in a decentralized manner. 

When Richard Werner carried out his 15-year study about banks and the double-entry bookkeeping that takes place to give the illusion of money, he also concluded that we need more community banks that will support local businesses. You may want to listen to his thoughts here.

You may wish to research community banks in the quest to find a safer haven for your business and personal affairs.

In a recent Markethive webinar, our CEO Thomas Prendergast pointed out another option in America that is open to businesses worldwide and is both decentralized and supportive of cryptocurrency.

He demonstrated how to set up a Wyoming Corporation first of all, even if you do not live in the USA. Here is a document you can download that walks you through the particulars of setting up your Wyoming company.

This is an important first step to acquiring banking through a fintech company called Mercury which facilitates banking services through its partners with decentralization at its core and solid insurance cover.

You may also want to consider using physically allocated gold and silver to transact with. It used to be that you could only hold these as a long-term store of value. However, platforms like Kinesis and Glintpay now make it possible to digitize gold via a debit card so that you can transact accordingly.

There is much ambivalence about cryptocurrency, given the volatile nature of its market and the frequent rise of pump-and-dump schemes. However, bitcoin remains the longstanding cryptocurrency that continues to gather in adoption, so you can research businesses that accept bitcoin and do so yourself depending on the demand.

For example, PostFinance, a major government financial organization in Switzerland, has partnered with Sygnum to offer cryptocurrencies such as bitcoin to its customers. A more transitional approach may be to consider gold-backed cryptocurrencies such as Tether Gold or DigixGlobal.

Taxes

The other consideration around cryptocurrency is taxes, and this will vary from country to country. Here in the United Kingdom, the following needs to be factored into money management.

Starting in 2024/2025, the self-assessment form will have a place for capital assets to report gains and losses in cryptocurrency. Cryptocurrency will be subject to capital gains tax. In 2024 the capital gains tax-free allowance will be heavily reduced from the current 12, 300 ton 3,000.

Security

Security is essential when becoming your own bank, hence the layers of security that Markethive are building into their own wallet.  Security is often an afterthought for many delving into the world of cryptocurrency, but responsibility is a key part of any money management system, particularly a decentralized system.

The password concept with opening crypto wallets is different in that you are usually assigned a mnemonic of 12-24 words which act as your security password for that wallet. If you lose it, there is no calling upon a central authority to issue you with a new one, as in a password recovery. So the buck stops with you.

Therefore it is important to write your words down safely on paper rather than online, where you are open to being hacked, and then ideally to put them in a small fireproof safe.

Many decentralized platforms have two-factor authentication as part of their security setup. You must pass this security layer to access the platform in question. It can also be used to confirm transactions. You can learn more about how that works in this Markethive tutorial example.

While there are decentralized exchanges like Yobit and decentralized exchanges within wallets such as Atomic Wallet, it is also important to have a cold storage wallet. This is a physical wallet offline which enables safe custody of your assets.

Cold wallets like Ledger and Trezor are well-known options, but there are other alternatives, such as secure encrypted flash drives in which you can place your wallet. They do not involve KYC or ‘Know Your Customer,’ and you can boot off the stick itself rather than the hard drive using a Linux operating system.

Summary

It stands to reason that the long-term acceptance of any cryptocurrency or alternative currency will be determined by the combination of a growing community and the use value of its native cryptocurrency. 

This is where Markethive is innovating and leading the way to show that it is possible to establish an ecosystem outside of traditional banking and the proposed CBDC.

You can also appreciate why such innovation is so painstaking, particularly as Markethive is building the technology in such a way to be independent of third parties, who may become compromised by their government mandates and, therefore, negatively disrupt the ecosystem.

As Markethive nears launch, we now have the visible signs and tangible formation of what it is like to have an operational ecosystem that puts the destiny of entrepreneurs back in their hands. 

Entrepreneurs can now trade their products and services and transact with a native coin or token without the censorship or threats to privacy that are now commonplace online. 

With a growing community of beyond 200,000, this is what is possible when the entrepreneur arises and comes together in a community with like-minded entrepreneurs to solve real-world problems in service to humanity as a force for good.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
 

Also published @ BeforeIt’sNews.com;  Substack.com:

The Trust Crisis Of Banks Worsens Ensuing Initial Collapse Of SVB. A Plus for Crypto

The US banking sector is facing a crisis of trust following the collapse of Silicon Valley Bank, which has left many Americans, particularly those without insurance for their deposits, anxiously trying to determine if their money is safe. A recent report found that more the 186 banks, or 5% of all banks in the country, are in danger of failing. The article outlines the analysis, identifies the risk factors to watch out for, and explains why investing in cryptocurrency could be a genuine safe-haven option.

Source: SSRN Papers-Full Study

As the above screenshot shows, the study is titled ‘Monetary Tightening and US Bank Fragility in 2023; Mark-to-Market Losses and Uninsured Depositor Runs?’  It was written by four academics from distinguished universities in the United States on March 13th, 2023. 

The report begins with a brief explanation of why so many US banks are at risk of going under and pertains to all the assets banks hold on their balance sheets. These are US bonds (US government debt) and mortgage-backed securities (MBS) (bundles of mortgages). US Bonds and MBSs are the safest assets a bank can hold, at least according to regulators, and why banks tend to invest most of their customers' deposits in US bonds and MBSs.

Images sourced at Investopedia.com

These assets earn interest for the banks and thus make it possible for them to offer services with low or no fees. However, when interest rates rise, the value of US bonds and MBSs decreases. The reasons for this are many, but the main takeaway here is that higher interest rates result in US bonds and MBSs crashing. If the value of these assets falls too much, banks can become temporarily insolvent. 

This insolvency is temporary because when US bonds and MBSs mature, meaning the loan terms end, the bank receives the total value of the underlying asset. Again, the mechanics of this are many, but just know that US bonds and MBSs don't lose money if they are held to maturity, and why banks don't report the losses on US bonds and MBSs when interest rates rise. 

Most information about losses on debt securities held by banks is immersed in the glossaries in their SEC filings. It is not considered a significant problem until that bank has major liquidity issues. It’s because it's not a loss until they sell, and in the case of US bonds and MBSs, they won't lose anything if they hold them to maturity. 

This accounting practice is arguably controversial. These so-called unrealized losses are acceptable if the bank isn't forced to sell any of these assets at a loss, specifically customer withdrawals.  It’s what happened to SVB and why it sank. However, there is one crucial detail to keep in mind. 92.5% of SVB's deposits were uninsured by the Federal Deposit Insurance Corporation (FDIC). 

For context, the FDIC only ensures bank deposits up to $250,000 per account. Any amount above that is considered uninsured. SVB experienced a bank run because its uninsured depositors could see that it had many unrealized losses. This led to speculation that SVB didn't have enough money to honor all withdrawals. 

As such, this bank run may not have happened if most deposits were insured, i.e., under $250K per account. SVB had so many uninsured deposits because the bank provided accounts and banking services primarily to small and medium-sized businesses, startups, and entrepreneurs in Silicon Valley. These clients typically require lots of cash liquidity to pay their employees, make acquisitions, etc. 

Around $9 trillion of bank deposits in the United States are uninsured, roughly 50% of all bank deposits. Banks have been happily investing these uninsured deposits into US bonds and MBSs. The problem is that interest rates have risen, and their unrealized losses have proliferated. At the end of 2022, US banks collectively had unrealized losses totaling more than $600 billion. Interest rates have risen more since then, so these losses are likely even more prominent now.

In short, US Banks have lots of unrealized losses and also lots of uninsured depositors who are concerned that banks can't honor withdrawals because of these unrealized losses. The authors examined over 4,000 banks in the study to see which ones were most at risk and why. 

Unrealized Losses

First, the study highlighted that 42% of all bank deposits had been invested into regular MBSs, with another 24% invested in commercial MBSs, i.e., commercial real estate loans, US bonds, and other asset-backed securities (ABS). The authors then tried to calculate the unrealized losses on these assets. After crunching the numbers, the authors found the following, 

“The median value of banks' unrealized losses is around 9% after marking to market. The 5% of banks with worse unrealized losses experience asset decline of around 20%.” 

Note that ‘marked to market’ means ‘assuming sold today.’ In lay terms, the average American Bank has unrealized losses of around 10%, and 5% of the most vulnerable banks have unrealized losses of 20%. 

So if depositors were to rush and withdraw from these banks, they would get 90% of their money back at the average bank and 80% back at a vulnerable bank. Not surprisingly, these unrealized losses were the smallest for Global Systemically Important Banks (GSIB), including JPMorgan and Bank of America. GSIBs have less than 5% of unrealized losses. The average non-GSIB has 10% unrealized losses, and SVB wasn't even the worst. 

The authors found that more than 11% of US banks had larger unrealized losses than SVB when it collapsed. They estimate that as many as 500 other banks could have failed based purely on unrealized losses. The reason why only SVB went down was because of the high number of uninsured deposits. The authors then provide a series of scenarios to showcase how uninsured depositors could react to rising interest rates.

Uninsured Depositors Waking Up

The first scenario assumes that the uninsured depositors stick around and wait. The other three scenarios surmise they withdraw and invest in other assets, which provides a higher interest rate than a savings account. Understand that insolvency fears related to unrealized losses aren't the only reason why uninsured depositors withdraw money from a bank. 

The primary reason why they would do this is that they want to earn a high-interest rate on their large deposits. This desire for yield increases as interest rates rise. Unfortunately for the banks, it's hard for them to provide competitive interest rates on savings accounts without losing lots of money. This is why many US banks haven't increased their interest rates on savings accounts, despite interest rates increasing. They’re making lots of money off their depositors. However, if they were to raise interest rates on savings accounts, they wouldn't make nearly as much money. 

In the study, the authors assume that most uninsured depositors are sleepy, meaning they aren't rushing to withdraw to earn a higher interest rate elsewhere. However, this is starting to change; besides the banking crisis, the high-interest rates that are still rising in other regions tempt those sleepy uninsured depositors into waking up and moving their money elsewhere. If they do this, banks with large, unrealized losses will start going under as they won't be able to honor all withdrawals. 

How Many Banks At Risk?

Naturally, the authors assess whether banks have enough assets to honor these upcoming withdrawals from uninsured depositors. They assume that the FDIC doesn't close down banks that come under stress, which is significant because the FDIC is likely to do this if banks start getting squeezed. 

The good news is that all bar two American banks have enough assets to honor withdrawals from uninsured depositors. The bad news is that the authors don't specify which two banks are at risk, but they conclude that this little risk means additional bank runs are unlikely for the time being. 

For Good Measure

As an extra, the authors analyzed the possibility of what would happen if uninsured depositors ran. They did a number of simulations of bank runs, from 10% to 100% of uninsured depositors withdrawing their assets. 

Source: SSRN Papers-Full Study

What's concerning is that the ten banks most at risk of experiencing a bank run are large. As the authors cite in the study, 

 “The risk of run does not only apply to smaller banks. Out of the 10 largest insolvent banks, 1 has assets above $1 Trillion, 3 have assets above $200 Billion (but less than $1 Trillion), 3 have assets above $100 Billion (but less than $200 Billion), and the remaining 3 have assets greater than $50 Billion (but less than $100 Billion).” 

Unfortunately, the authors don't specify which banks these are but reveal how sensitive US banks are to bank runs. They concluded that even if just 10% of uninsured depositors withdrew their money from banks, 66 banks would go under. If 30% of uninsured depositors withdrew their money, 106 banks would go under. If half of all uninsured depositors ran, 186 banks would fail. This underscores that at least a few dozen banks are at risk of going under over the coming months. 

This is ultimately due to the fatal combination of significant unrealized losses due to rising interest rates and withdrawals from uninsured depositors seeking higher yields from these rates. The final simulation was if 100% of uninsured deposits withdrew all their assets from US banks. They insisted that this simulation is worth doing to assess the state of the US banking sector. Surprisingly only about half of US banks would go under. 

The authors then conclude by highlighting that the value of assets held by US banks is more than $2 trillion lower than what's being reported, thanks to unrealized losses-based accounting. They reiterate that hundreds of banks are at risk of going under if uninsured depositors withdraw. They warned that even small numbers of withdrawals from uninsured depositors could lead to unrealized losses being realized. This would lead to more bank runs, evolving into an even bigger banking crisis than we've seen. They go as far as to suggest regulations to address this. 

For starters, banks should start changing how they report their unrealized losses so that bank depositors have a better sense of how underwater their banks are. Because of the lack of transparency, the authors manually calculated these unrealized losses using complex maths. The authors acknowledge that this won't solve the insolvency risks many banks face, so they recommend that banks be forced to increase their capital requirements. 

This coincides with what Michael Barr, the Fed’s Vice-chair for Supervision, has been busy doing. Michael had been examining capital requirements for banks before the banking crisis began. Maybe he saw the banking crisis coming or was preparing to take advantage of it to introduce regulations. Michael Bar’s anti-crypto speech indicates the second possibility is the most likely. Michael has been desperate to increase his powers, presumably to consolidate the banking sector to assist in the rollout of a central bank digital currency. 

Be Vigilant of The Risk Elements

Which risk factors should you be aware of when analyzing banks? I am not a financial adviser. Still, my research into this convoluted accounting system revealed that the two main risk factors are unrealized losses and uninsured deposits. It is at risk if your bank has many unrealized losses and uninsured deposits. The problem is that it takes work to estimate these unrealized losses. Moreover, not all uninsured deposits are prone to flight. Remember that most of them are required to pay employees at small companies. 

Also, as mentioned above, most banks with many uninsured deposits tend to be smaller, i.e., not GSIBs. In theory, this makes them inherently riskier than GSIBs. In practice, though, when a non-GSIB goes under, it gets acquired by a GSIB. This means your assets could be safer at a small bank. If you read the article about bank bail-ins, you'll know that GSIBs can be risky. 

If a non-GSIB goes under, it gets acquired by a big bank, and customer deposits are kept, but if a GSIB goes under, customer deposits are used to bail them out. As recently happened with Credit Suisse and its takeover by UBS. The arguably political deal required capital from somewhere to satisfy UBS. According to WSJ, the Swiss government was desperate to avoid the appearance that this was a taxpayer-funded bailout.

GSIBs are also more likely to comply with investment ideologies, like ESG. As discussed in this article, the Bank of America is one of the big institutions behind the ESG movement. Some of its affiliates are introducing individual ESG scores for their customers. 

Small banks may also have challenges because around 80% of commercial real estate loans come from small banks. In addition to being wrecked by higher interest rates, commercial real estate is struggling because people must return to the office. 50% of office spaces in the US are empty. This means that small banks are at a higher risk of sitting on larger unrealized losses, which is consistent with the findings of the study. 

If that weren't bad enough, these losses would likely increase as time passes, even if interest rates start coming down because work from home is probably here to stay. Even if uninsured depositors are less likely to withdraw from small banks due to the purpose of these deposits, just a small number of withdrawals could therefore cause severe issues for small banks. 

The findings of the study suggest this risk is already there. All it takes is 10% of uninsured deposits to move. In sum, small and big banks come with their own risks, and it's up to you to decide which risks you'd instead take. Diversifying your deposits is an option, but the fact that every bank operates using this fractional reserve model means your money will never be genuinely risk-free in their coffers. 

Image credit: Markethive.com

Cryptocurrency To The Rescue

This is where cryptocurrency comes in. Cryptocurrencies ostensibly have only one risk: their current price volatility. There are, of course, risks associated with things like improperly written code, but the largest and most established cryptocurrencies have been battle tested every day for over a decade. 

Aside from that, cryptocurrencies are one of the best hedges against the banking system. When you hold a cryptocurrency, there is no counterparty risk. That crypto is genuinely yours, and there isn't some greedy banker going and investing your crypto into a basket of risky, commercial real estate loans behind your back. 

This characteristic alone makes cryptocurrency valuable. Also, cryptocurrency lets you send a transaction to whoever you want, whenever you want, and for however much you want. This is the true definition of financial freedom, and its importance was fully displayed when Nasdaq halted the trading of bank stocks during the recent banking crisis. 

Nobody can turn off the decentralized cryptocurrency exchange and prevent people from trading. You will always be able to trade. Take a second to consider; that blocking transactions, halting trading, and freezing assets will only become more common as CBDCs are rolled out. This will make the financial freedom aspect of cryptocurrency ever more critical, along with the decentralization that underlies it. 

Without decentralization, crypto's value proposition quickly disappears. That's why instead of wasting time assessing the unrealized losses and uninsured deposits of banks, you should learn about what makes a cryptocurrency genuinely decentralized. After all, the days of commercial banks are numbered; the thousands of existing banks will inevitably consolidate into a handful of mega banks, and governments will nationalize these mega banks. 

Financial freedom in the traditional financial system will be gone when that happens. At the same time, economic freedom in the crypto ecosystem will only continue to grow. By the grace of God, it will rise to the point that it's capable of accommodating the billions of people who will pull out of the traditional financial system as it becomes ever more centralized and ideological. 

Both monetary mechanisms will take years to play out, but it's already clear that the global financial system is splitting into two structures: free and sovereign and one that is not. You now have the once-in-a-millennium opportunity to choose which system to participate in. It’s critical to make that decision before it's made for you. 

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Also published @ Substack.com

Understanding Your Options: Is Investing in Bitcoin or the Bank a Wise Financial Move?

Many people are concerned that the recent banking crisis may have precipitated a global financial crisis.

In fewer than a week, three banks have failed. In an effort to avert more panic, U.S. government authorities have stepped up to backstop losses. In addition to the possibility that other banks will fail, there are legitimate questions about whether it was the proper decision to bail out two poorly run institutions with serious irregularities while allowing the third to fail.

So, should you withdraw funds from your bank and hide them under your mattress or invest in cryptocurrency?

Crypto and traditional banking are two very different options for storing your money. While banks are a familiar and trusted option, crypto, such as bitcoin, is a decentralized and volatile digital currency. So, the question arises, should you keep your money in Bitcoin or a bank?

This article will help you consider the options of either keeping your savings balances in cryptocurrency or in the bank. We will start by looking at what Bitcoin is before moving on to why people choose to use it as an investment vehicle and how they can use it safely and securely.

Image source: https://bitcoinbriefly.com/21-million-bitcoin/

Why was Bitcoin Created?

As many have already stated, the early financial crisis of 2008, known as the great recession, gave rise to the creation of bitcoin. The very first block of the blockchain came with a message concerning bailouts for banks. In contrast to the tightly entwined public and private banking sectors, it was created to remove third parties as an intermediary from the internet money system by making users accountable for their own keys.

The 2008 financial crisis was a significant event that shook the global economy, causing widespread unemployment, foreclosures, and bank failures. It highlighted the shortcomings of the traditional financial system and the need for alternative systems that could provide excellent stability, security, and decentralization.

Bitcoin was created as a decentralized digital currency that operates outside the traditional financial system. Its underlying technology, blockchain, allows for peer-to-peer transactions without intermediaries like banks. This gives users more control over their money and eliminates many fees and delays associated with traditional banking.

While Bitcoin's creation was not a direct response to the financial crisis, it is often seen as a product of the growing dissatisfaction with the traditional financial system and the need for more transparent and secure alternatives. Bitcoin was initially created as a response to the flaws of the traditional financial system. Still, it has since grown into a global phenomenon with unique characteristics and potential benefits.

One of the key advantages of Bitcoin is its decentralized nature. Unlike traditional currencies, which governments and financial institutions control, Bitcoin is not controlled by any central authority. This makes it more resistant to government or institutional manipulation and potentially more secure from hacking or other types of cyber attacks.

Another advantage of Bitcoin is its potential for anonymity. While Bitcoin transactions are not completely anonymous, they offer privacy that is not always available with traditional banking. This can be particularly useful for individuals concerned about their financial privacy or living in countries with strict financial regulations, such as China or Russia.

Bitcoin's potential as a global currency has also been touted as a potential benefit. With Bitcoin, sending and receiving payments across borders is possible without currency conversions or other barriers. This could make it easier for people to conduct business internationally and help level the playing field for small businesses and individuals.

While Bitcoin was not explicitly created as a response to the 2008 financial crisis, it is viewed by many as a potential solution to some of the problems highlighted by the crisis. Its decentralized nature, the potential for anonymity, and global accessibility make it a unique and potentially valuable addition to the financial landscape.

Are We on the Verge of Another Global Financial Crisis?

A systemic banking crisis can be extremely damaging. They tend to push the affected economies into deep recessions and sharp current account reversals. Some situations were contagious and quickly spread to other countries with no apparent weaknesses.

The many causes of banking crises include unsustainable macroeconomic policies (including large current account deficits and unsustainable government debt), excessive credit booms, large capital inflows and weak balance sheets, and various political and economic requirements resulting in political paralysis.

In September 2008, a global financial crisis caused by the collapse of housing markets led to a worldwide recession. The United States has recovered, but the rest of the world is still in recovery. This global financial crisis is the second largest in history and is predicted to be even bigger than the first.

Experts are worried that the United States is heading towards another global financial crisis, but it will be much worse this time. Many factors lead experts to believe that it will be more challenging to recover from the economic recession this time. Some of the reasons are increased global debt, over-leveraged banks, low economic growth, and rising oil prices.

There are concerns that the recent bank collapse and other economic crises could lead to another global financial crisis, as noted by several news articles. According to a report by The Guardian, the global banking system is reeling from a series of shocks over the past week, prompted by the collapse of California's Silicon Valley Bank. This has stoked fears that this is the start of a more severe crisis.

Similarly, an article by ABC News states that the potential next phase is a global credit crunch, which could lead to another worldwide financial crisis. However, regulators and central banks are pulling out all stops to prevent that.

In addition, an article by The New York Times notes that the banking crisis hangs over the economy, rekindling recession fears, and even optimistic forecasters on Wall Street in recent months have said that the chances of a recession had risen ten percentage points to 35 percent.

However, it is important to note that the situation is still developing, and it is difficult to predict with certainty whether or not we are on the verge of another global financial crisis. It will depend on the effectiveness of the measures taken by regulators and central banks to mitigate the risks and prevent the crisis from spreading.
 

Which is Better: Bitcoin or Bank?

Money saved in a bank account is typically considered a safer option for storing the value as it is backed by government guarantees, such as deposit insurance, which can protect a certain amount of funds in case of a bank failure. Bank accounts also offer the convenience of easy access to funds, as well as potential interest earnings. However, these are currently quite low in many countries due to low-interest rates.

On the other hand, Bitcoin has shown the potential for significant gains over the long term, and it also carries the risk of substantial losses, particularly in the short term. Bitcoin is not backed by government guarantees, which means there is no protection for investors if the value of Bitcoin were to decline sharply or if their Bitcoin were to be lost or stolen.

Bitcoin's status as a safe haven asset during times of crisis varies depending on the situation. Cryptocurrencies acted as a store of value during the COVID-19 crisis and as a safe haven. Also, before the pandemic, Bitcoin served as a safe haven, a hedge, and a diversifier versus a range of international currencies.

However, Bitcoin's volatility remains a concern as it can experience massive price swings, making it a risky store of value asset in the short term. On the other hand, money saved in the bank may provide stability and security, but its value may be affected by inflation, changes in interest rates, and other economic factors.

Whether to use Bitcoin or money saved in the bank as a safer store of value is subjective and depends on an individual's risk tolerance and investment goals. However, it's important to note that Bitcoin's status as a safe haven asset during times of crisis is not guaranteed and may vary depending on the situation. It's essential to consider each option's potential benefits and risks carefully and to seek the advice of a financial professional before making any investment decisions.

Bottom Line

Today's bank failures are incredibly unusual and would likely result in a great deal of anxiety, as was the case with the collapse of Silvergate Bank, a free-floating entity cut off from the rest of the economy. How distinct can private and public interests truly be when SVB and Signature participated in both the ups and downs of the Fed policy-created tsunami of cheap money? 

Considering the previous and recent economic upheaval, should you retain your money in a bank if the U.S. government is formally bailing out banks, or should you seek a better alternative?

Ultimately, the decision of where to keep your money depends on your individual circumstances, risk tolerance, and financial goals. It may be helpful to speak with a financial advisor or conduct additional research to make an informed decision.

Silvergate Capital, Silicon Valley Bank, & Signature Bank Have All Collapsed. More To Come?

The recent scandals of Signature Bank, SVB, and Silvergate Bank have made headlines and left the industry reeling. However, the ramifications of these financial institutions' missteps for the crypto sector are yet to be entirely clear. To understand the impact, one must first look at the fundamental principles of blockchain technology and how it has upended traditional banking models.

The failure of these Banks in the United States means that many are questioning the sustainability of the cryptocurrency sector. The companies in question have all gone bankrupt, but this isn't the first time a major company has failed in the crypto sector. For example, the collapse of Mt. Gox and its affiliates in 2014 has cast a shadow on the industry, but this is not the only failure incident in this sector.

New York state financial regulators closed Signature Bank in what is believed to be the result of the Silicon Valley bank failure, as nervous depositors pulled funds out of Signature Bank. The bank's stock began to fall. The collapse of Silicon Valley Bank is expected to put pressure on several other small and regional banks in the United States.

In less than seven days, the largest bank for tech companies and two banks most accommodating to the cryptocurrency industry collapsed. The sad incidents generated uncertainty in the stablecoin market, despite cryptocurrency values rising Sunday night as the federal government intervened to offer depositors a safety net.

Silvergate Capital announced that it would be closing down and liquidating its bank. Major startup lender, Silicon Valley Bank, failed after its customers withdrew more than $42 billion in response to the bank's disclosure that it needed to borrow $2.25 billion to strengthen its balance sheet. Banking officials seized Signature on Sunday night; it had a significant crypto emphasis but was far bigger than Silvergate.

Approximately half of all venture-backed startups in the United States had cash on hand at Silicon Valley Bank, various firms that deal in digital assets, and venture capital funds that support cryptocurrencies. For bitcoin businesses, the two leading banks were Signature and Silvergate. The federal government stepped in to guarantee every deposit SVB and Signature depositors made. This action increased confidence and caused the price of bitcoins to increase briefly.

Nic Carter of Castle Island Ventures argues that the government is once again pursuing a loose monetary policy rather than one tightening since it is willing to support both banks. Historically, this has benefited speculative asset classes like cryptocurrency. However, the instability once more highlighted the frailty of stablecoins, a part of the bitcoin ecosystem that investors can often rely on to maintain a particular price. Stablecoins are intended to be tied to the value of a physical good, such as a fiat currency like the U.S. dollar or a commodity like gold. Yet, good financial conditions may prevent them from falling below their pegged value.

Image Source: Coindesk

Not Entirely Stablecoin

With TerraUSD's demise in May of last year, many of crypto's issues over the previous year have roots in the stablecoin industry. Meanwhile, during the last several weeks, regulators have focused on stablecoins. After much pressure from New York regulators and the SEC on its issuer, Paxos, Binance's dollar-pegged stablecoin, BUSD, saw significant withdrawals.

USDC lost its peg over the weekend and fell as low as 87 cents after its issuer, Circle, acknowledged having the sum of $3.3 billion banked with SVB. As a result, the sector's trust suffered once more. Circle has established itself as one of the best in the ecosystem of digital assets because of its links to and support from the conventional banking industry. It has long intended to go public and secured $850 million from investors like BlackRock and Fidelity.

Another popular dollar-pegged virtual currency, DAI, partially supported by USDC, dropped as low as 90 cents. For these reasons, USDC to dollars conversions has been temporally halted on Coinbase and Binance. Tether, the biggest stablecoin in the world with a market valuation of more than $72 billion, has seen many conversions from DAI and USDC in the past few days. The issuing company had no exposure to SVB. However, there have been concerns about tether's operations and the state of its reserves.

Circle published a post stating that it would "fill any gap utilizing company resources," this enabled the stablecoin market to recover. Since then, the USDC and DAI have turned back toward the dollar.

Reasons Behind The Ruins of Crypto-Friendly Banks
 
Silvergate Capital, a holding company for a bank that had made significant bets on serving the burgeoning crypto economy since 2016, announced that it would cease operating as a bank. State authorities ordered the closure of Silicon Valley Bank (SVB), which had long performed a similar function by handling funds for businesses with venture capital funding.

In broad strokes, the same problem classic bank runs brought down both banks. Whether they are crypto exchanges or software firms, their former clients deal with significant commercial difficulties, partly due to the current financial and economic climate. As a result, deposits have decreased, and cash withdrawals have increased at a time when many of the banks' long-dated non-cash holdings have also been negatively impacted by the markets.

Hence, Silvergate and Silicon Valley Bank were forced to sell those underlying assets at significant losses when cash demands reached a certain level. In the fourth quarter of last year, Silicon Valley Bank, which had a bigger total balance sheet, and Silvergate reported losses on the sale of assets of $1 billion and $1.8 billion, respectively. Importantly, a substantial amount of the losses in both situations were attributable to the liquidations of U.S. Treasury bonds.

This serves as a valuable counterpoint to the careless mischaracterization of FTX's collapse as a "bank run" by several prominent media outlets back in November. There are a few similarities between what occurred at FTX and the liquidity difficulties that impacted Silvergate and SVB. These challenges have two upstream causes: the business cycle and the Federal Reserve's tightening interest rates. These elements are connected and fundamentally refer to disturbances brought on by COVID.

Image source: cryptoofficiel.com
 

The initial pressure that destroyed Silvergate and SVB resulted from Fed rate rises. It was clear that the increasing Treasury rates would discourage new investment in high-risk industries like tech and cryptocurrency. But another, mostly disregarded danger to the health of banks is the rise in interest rates. As the Wall Street Journal notes in uplifting clear language, issuing new Treasury bonds with greater yields has decreased the market value of pre-hike Treasuries with lower yields.

Most banks are legally required to keep significant quantities of Treasury securities as collateral, so they are susceptible to the same risk that affected Silicon Valley Bank and Silvergate. That's one of the reasons why bank stocks, especially those of regional or mid-sized banks, are falling.

Yet, Silvergate and Silicon Valley Bank had unique business cycle problems that might only apply to a select audience. Both catered to markets that witnessed enormous runups in the early phases of the COVID-19 pandemic, namely the crypto and venture-funded tech industries. The COVID lockdowns benefitted both industries, but cryptocurrency specifically profited from the pandemic relief funds distributed to Americans.

So, through 2020 and 2021, both banks had significant inflows. The balance sheet of Silicon Valley Bank quadrupled between December 2019 and March 2021. In 2021, Silvergate's assets also rose significantly. When interest rates on those bonds were still at or near 1%, both banks would have purchased more of them as collateral to support that deposit growth. Because of Fed rate increases, rates on new bonds are now closer to 4%, which reduces demand for older bonds. That's why Silvergate and SVB were forced to sell liquid assets at a loss when clients in booming or turning industries began withdrawing their deposits.

We're still in Covid Economy

If you focus only on one aspect of the situation, you can cherry-pick explanations to blame this disaster on whoever suits your prejudices. But the reality is that everyone is trying to escape the same COVID-caused disaster in the same leaky lifeboat, battling over who gets eaten first.
Some people may criticize the Fed for raising interest rates, especially the crypto traders, yet doing so is required to control inflation.

The inflation, in turn, was brought on by COVID-19-related actual cost increases and a materially increased money supply due to COVID relief and bailout actions. An anti-Fed criticism at this time is, at best, reductive since it will take years to fully assess the total cost and value of such initiatives.

On the other hand, it will be alluring for many in the mainstream to attribute the impending banking crisis to the cryptocurrency industry as a whole. The fact that Silvergate, ‘the crypto bank,’ failed first is the strongest argument in favor of this assertion. You could hear it described as “the first domino to fall" or other such nonsense in the coming weeks, but that isn't how things stand.

Due to its involvement in a sector-wide degenerate long bet on cryptocurrencies that was well in advance of real acceptance and a sustainable source of income, Silvergate was more vulnerable. Yet that wasn't what started its liquidity issue, and its decline won't significantly contribute to any further bank failures in the future.

Instead, all American banks are subject to many of the same structural forces, regardless of whether they are financing server farms or the physical corn and pea version. A deadly virus that has killed more than six million people is the core cause of their severe economic upheaval. If there is one thing to learn right now, adjusting financial levers won't completely eliminate that type of instability in the present chaotic world.

ESG: A Woke Ideology Wreaking Havoc As Anti-ESG Rhetoric Heightens

With all the craziness happening in the world right now, you probably won’t be surprised to know that laws are being proposed that would limit food production due to ESG mandates. The EU's controversial ESG regulations came into force in January 2023, and their advocates have described them as the most ambitious yet.

These laws would severely restrict companies' ability to choose suppliers and buyers without first studying their ESG credentials, made possible through the EU’s ‘Corporate Sustainability Reporting Directive.’ The provisions in the regulations don't just apply to companies in the EU. They apply to non-EU companies, which work with EU companies, and possibly even to consumers as well. 

While most EU lawmakers think these regulations will help increase the quality of life, the exact opposite is likely to occur. Not only will they crush competitiveness, but they could throw the EU into another energy and cost of living crisis that will have a knock-on effect globally. This article discusses the EU’s ESG directive, which provisions are the most disturbing, and reveals why the elites are so obsessed with ESG. 

Image source: Early metrics

ESG Explained

To recap from previous articles, ESG stands for Environmental, Social, and Governance, defining an investment trend driven by financial elites since the pandemic's start. In short, ESG expresses that environmental, social, and governance issues are more important than production output or profits. 

Logically, this imperative is incompatible with basic economics. Purposely pursuing more expensive energy sources, hiring people based on their personal identity rather than their abilities, and letting governmental and non-governmental organizations make business decisions is a recipe for disaster. 

ESG’s incompatibility with basic economics is why it's more accurate to refer to ESG as an ideology rather than an investment methodology. Any company that complied with ESG criteria would quickly find itself out of business. This is why the ESG ideology was mostly ignored during the first 15 years of its existence. 

The term ESG was coined in a 2005 report by the United Nations, the World Bank, and the Swiss government. However, the ESG criteria needed to be more consistent and clear, contributing to their lack of adoption among businesses. But in mid-January 2020, it all changed when BlackRock CEO, Larry Fink, wrote an open letter to all the shareholders of the companies the asset manager is invested in, ordering them to comply with ESG.

 
The Standardization Of ESG Criteria

In late January 2020, the world's elite gathered in Davos, Switzerland, for the World Economic Forum (WEF) annual conference. There, the big four accounting firms standardized ESG criteria. The ESG criteria have since become synonymous with the UN's Sustainable Development Goals (SDGs). For reference, the SDGs are a set of 17 goals that are supposed to be met by all 193 UN countries by 2030.

Image source: Weforum.org

The convergence between ESG and the SDGs comes from the strategic partnership the WEF signed with the UN in mid-2019. The announcement states that the WEF will help "accelerate the development of the SDGs.” In other words, they will provide private-sector funding and compliance. Besides developing the digital ID, SDGs mandate the development of smart cities, central bank digital currencies (CBDCs), and carbon credit scores to track and reduce an individual’s consumption. 

All these technologies are being developed by companies closely affiliated with the WEF, but as mentioned above, ESG is not compatible with basic economics. This begs the question of why the private sector is on board. Well, the short answer is ‘artificial profits.’ 

Companies that comply with ESG get lots of investment from asset managers and better loan terms from mega banks. Companies, which refuse to comply with the ESG, see investments pulled and risk losing access to financial services altogether. Meanwhile, on the public sector side, they risk excessive regulations and bad press from governmental and non-governmental institutions working with these asset managers and mega banks.

This terrifying situation comes from the unnatural accumulation of wealth caused by a financial system where limitless amounts of money can be created. The short story is that asset managers and mega banks borrow lots of money at low-interest rates and then use it to buy assets, influence, and further push their ideologies. Understand, the ESG ideology would not exist in a sound money system; it would not be possible.

The ESG Push

Now although the ESG push has come primarily from private sector entities affiliated with the WEF, there are a few public sector exceptions. The biggest one is the European Union (EU), whose ESG initiatives are rooted in the Next Generation EU pandemic recovery plan.

Not surprisingly, the implicit and explicit purpose of Next Generation EU is to help all European countries meet the UN's SDGs by 2030. The recovery plan is expected to cost over €1.8 trillion. In other words, it provides public sector funding and compliance, complementary to the WEF’s initiatives. 

Image source: commission.europa.eu

One-third of all this printed money will fund the EU's green deal, which was announced at the pandemic's start. Now, to give you an idea of just how ideological the green deal is, one of the three goals noted on its website is to ensure that “economic growth is decoupled from resource use.” This impossible goal is why it's appropriate that the EU’s ESG regulation is part of the green deal. 

The Corporate Sustainability Reporting Directive

The ESG regulation in question is called the Corporate Sustainability Reporting Directive (CSRD). It was first introduced in April 2021, was passed in November 2022, and went into force this January.

However, there are two caveats here. The first is that the CSRD is technically a directive, not a regulation. Whereas an EU regulation requires all EU countries to comply with the EU law as it's written, an EU directive allows EU countries to adjust the EU law and can take their time rolling it out. 

Image source: Kvalito.ch 

This ties into the second caveat: going into force and being enforced are two different things. While the CSRD went into force this January, it won't be enforced until 2025. To clarify, ESG reporting standards will be published in June. In 2024, EU companies will start collecting data using these standards. In 2025, this data will be reported. 

Image Source: DFGE.de

A spokesperson for the agency tasked with setting these standards specified that over 1,000 ESG data points must be reported.  In a December 2021 interview, one of the architects of the CSRD revealed that the directive's purpose is to “bring sustainability reporting to the same level as financial reporting.” He also indicated that all the reported data would have to be digitized and that this won't be easy or cheap. 

Failure to comply with the EU ESG disclosures will result in sanctions that should be “effective, proportionate, and dissuasive.” The CSRD will require governments to publicly shame the companies that didn't comply, order them to stop violating ESG criteria, and fine them. The CSRD is expected to apply to around 50,000 companies operating in the EU, but because of the absurdly low bar for what counts as a large company, the actual figure will probably be much higher. 

An EU company is considered a large company if it meets two of the following three criteria; it has a revenue of more than €40 million per year, has more than €20 million in assets, or has more than 250 employees. Publicly listed EU companies will also be required to comply with the CSRD regardless of their size. 

Moreover, the CSRD will also apply to non-EU companies which meet the following criteria; it returns more than €150 million each year for two consecutive years and has a subsidiary in the EU or a branch that takes in more than €40 million each year.  

Another big reason the CSRD will apply to more than 50,000 companies is because of highly concerning provisions in the CSRD, which, as mentioned above, could apply to small and medium-sized businesses inside and outside of the EU and possibly even to consumers.

Image source: WSJ/Deloitte

The Double Materiality Provision

The most problematic provision is called Double Materiality. As stated by KPMG, the third largest accounting firm and one of the big four auditors, "double materiality requires companies to identify both their impacts on people and environment – Impact Materiality, as well as the sustainability matters that financially impact the undertaking – Financial Materiality.” 

Double materiality sounds like yet another bureaucratic buzzword. However, these two insignificant words open the door to forcing small and medium-sized companies and possibly even consumers to comply with the CSRD’s ESG reporting requirements. 

This is simply because double materiality requires companies directly affected by the CSRD to collect ESG-related data from individuals and institutions which lie upstream and downstream from their actual business operations. 

In other words, in addition to the company’s own data, it would have to collect and report extensive ESG-related data from all suppliers they buy raw materials from – Upstream part of the provision. Then the company would need to chase up its largest consumers who have purchased its product and ask them to provide their ESG data for its reporting purposes. This is the downstream part of the provision. 

In a real-world scenario, the company may have trouble collecting the data due to non-compliance, or the supplier may fall short in their ESG ratings. In this case, they would have to switch to ESG-aligned suppliers to meet the CSRD criteria to avoid a low ESG score and being fined. In such circumstances, the company could quickly end up in bankruptcy. 

However, BlackRock comes to the rescue with investment, and the bank gives the company a loan. It stays afloat and finally gets all its most significant suppliers and consumers to provide detailed ESG data. There's just one problem: they all scored poorly on ESG, they need to use more renewable energy, their workforces need to be more diverse, and they are not members of the WEF. (Remember, ESG stands for environmental, social, and governance.)

BlackRock and the bank see the company’s annual ESG report and inform them that they won't be able to provide any more financial support unless they force its suppliers and consumers to improve their ESG scores. The company tries to jump a few more hurdles, but after trying so hard to comply, the company ultimately goes bankrupt.

Image source: contextsustainability.com 

The Harsh Reality

The reality is the CSRD has the potential to impact individuals and institutions worldwide. Large companies in the EU will bear the brunt of the burden. The time and money they will take to report ESG criteria will be a massive expense. 

Any small or medium-sized businesses, which lie upstream or downstream from these large companies, will likewise be required to report, and their expenses will be even greater in percentage terms. Never mind the costs and the surveillance that will come with digitizing all this sensitive ESG data. 

In the 2022 conference held by the WEF in Davos, the ESG panelists agreed that small and medium-sized businesses would eventually have to comply with ESG to get investments and loans from financial institutions. One of the panelists gave an example of compliance with the ‘social’ criteria of ESG, stating that small and medium-sized businesses must pay their employees a “fair wage.” 

Some argue this is code for paying their employees as much as a big enterprise can, which small and medium-sized companies often cannot do. With the CSRD applying pressure from the public sector and ESG investing applying pressure from the private sector, it's more than likely that many small and medium-sized businesses affected will go bankrupt. 

As far as the elites are concerned big business taking over everything was always inevitable. The only things that will protect small and medium-sized businesses from going under will be investments from asset managers, loans from megabanks, and grants from governmental authorities. 

This will give them the power to pick winners and losers based on their compliance with the ESG ideology, not on output. Assuming this ESG ideology continues to grow, we could see a scenario where businesses are occasionally prevented from providing goods and services to consumers on ESG grounds. 

Excuses could include climate change, social inequality, and the inability to track what's been purchased. Again, basic economics says this would not be sustainable, but printed and borrowed money would make it so. 

The EU could achieve its goal of having an economic output with zero input. It would just be rising numbers on a screen, with inflation kept in check by capital controls on digital currencies. Quality of life would quickly diminish as no actual inputs means no tangible outputs. There would be frequent and chronic shortages of critical goods and services, which the elites will blame on the same crises that ESG claims to solve. If it's allowed to be discussed at all, ‘real’ inflation will be off the charts. 

Image source: cryptonews.com

The Elite’s ESG Obsession

So why are the elites so obsessed with ESG? The answer is ‘inflation.’ The byproduct of ESG policies creates inflation. The fact is, the wealthiest individuals and institutions have trillions of dollars of debt that they can't ever hope to pay back. And as mentioned above, most of this debt was used to buy assets and influence, all to push dystopian ideologies which go against the natural laws of economics. 

In theory, most of the issues ESG seeks to fix could be more easily fixed with a sound monetary system. Saving is incentivized, wealth accumulation is arduous, and harmful ideologies are more difficult to finance. In practice, the elites default on their debts and lose all their assets and influence.

That's why there's only one solution in their eyes: to centralize control so intensely that it becomes impossible for them to default. This requires controlling where you go, what you say, and how you spend. If you look at the bigger picture, you'll realize that this is the true purpose of the SDGs and ESG.
 

Image source: US Debt Clock 

The Silver Lining

The silver lining is that the elites will likely fail in implementing ESG policies. Evidence of this was in mid-2022 when energy prices soared, and we saw a rise in anti-ESG rhetoric because people knew ESG was the ultimate cause.

Although ESG saw a comeback after energy prices fell, this won’t last long. That's because the energy market fundamentals still need to be addressed. There needs to be more supply relative to demand, and energy companies are reluctant to expand in the face of ESG opposition. 

When energy-driven inflation comes back, and it will, ESG will become Public Enemy #1 again, and rightfully so. When energy prices spike, you'll see governments declare oil, natural gas, and nuclear energy as green and spend $500 billion to burn so-called ‘dirty’ coal to keep the lights on as Europe and the UK have already done, and that's just what will happen in the developed world.

In the developing world, entire countries will go under; revolutions will arise, along with mass migrations, and all those angry people will know that ESG is ultimately to blame. This will lead to global instability, which will thwart the UN and the WEF’s plans. 

Recently, Vanguard, the world’s second-largest asset manager, resigned from the Net Zero Asset Managers initiative, stating they were “not in the game of politics.”  Moreover, Vanguard doesn’t believe it should dictate company strategy, saying it would be arrogant to presume that the firm knows the right strategy for the thousands of companies that Vanguard invests with. 

Vanguard’s decision to withdraw, citing a need for independence, has perpetuated the anger of climate extremists since the Pennsylvania-based asset manager refused to rule out new investments in fossil fuels in May 2022. 

Now, the elites are hyper-aware of this, so they're trying to move quickly to take control of everything before the purchasing power of their fiat currencies goes entirely to zero. They will fail because people will opt out of the current system when they see it closing in on them. 

They’ll opt out by participating and supporting parallel ecosystems and adopting alternative technologies like cryptocurrency, which have been in development for years in preparation for this exact transition. As fiat currencies implode, the current system will collapse, and an alternative system will emerge. 

The Critical Distinctions of CBDCs and Cryptocurrencies You Need To Know

The subject of Central Bank Digital Currencies (CBDCs) is more pervasive than ever, with governments worldwide rushing to roll out their CBDCs, advocating that central bank digital currencies are like cryptocurrencies, only better. Citizens all over the world know this statement is false and vehemently oppose this new monetary system by lodging petitions and protests. However, a substantial proportion of society doesn’t recognize or even comprehend this age of digital technology. 

Today we’ll look at the difference between CBDCs and cryptocurrency and how they cannot be compared. That’s because one system will be used to enslave us, and the other will give us freedom and sovereignty.

 
When Did It All Start?

The two financial technologies are rooted in various digital currency initiatives, mostly coming into existence in the 1990s. The most significant difference is the digital currencies of that time were created to optimize payments primarily in a domestic setting. In other words, these digital currencies were intended to optimize the existing financial system by integrating with it.

An example is Finland’s eMoney system, Avant, in the 1990s, which was closely connected to its national currency and banking infrastructure. While some consider Finland’s eMoney to be the first CBDC, it is generally believed that the first actual CBDC to be released was the Bahamian Sand Dollar in October 2020. Although now, almost every country is actively working on a CBDC of some kind. 

In contrast to CBDCs, cryptocurrencies were initially created to replicate or even replace the existing financial system. In many cases, this meant they were internationally available to anyone with an internet connection. Two examples are David Chaum’s Ecash in the 1980s and Adam Back’s Hashcash in the 1990s.  Today, Adam is the CEO of Blockstream, one of the largest Bitcoin-related companies.

Then along came Bitcoin in 2008, boasted as the first cryptocurrency, created by a pseudonymous individual or group called Satoshi Nakamoto.  The first Bitcoin block contained a hidden message: "Chancellor on brink of second bailout for banks.” This was the headline of The Times newspaper on January 3rd, 2009, the same day Bitcoin went live.

Image source: https://bitcoinbriefly.com/21-million-bitcoin/

Bitcoin’s explicit intention is to replace the current financial system, and every prominent cryptocurrency that has come into being since that time shares this ethos. Whereas Bitcoin was created in response to the 2008 financial crisis, the CBDC was essentially created in response to cryptocurrencies. More to the point, CBDCs were created in response to alternative digital currencies of all kinds, be they public or private. 

For example, China began developing its digital Yuan in response to the country's rapid growth of financial technology companies during the 2010s. Similarly, the United States started developing its digital dollar in response to Facebook's digital currency, Libra, which was revealed in 2019 but never made it off the ground. On the other hand, Indonesia began developing its digital Rupiah in response to cryptocurrencies after the last bull run in 2017. 

Image source: Cointelegraph

Meanwhile, the Marshall Islands began developing its digital currency, dubbed the Marshallese sovereign, in response to developing CBDCs in other countries. Nevertheless, the common theme is centralized financial system control. This ultimately makes today's CBDCs different from their predecessors, which focused on payment optimization rather than centralized control. 

As such, we can define CBDCs as a type of digital currency centrally controlled by the government and requiring permission. Alternatively, we can define cryptocurrencies as virtual currency that is not controlled by anyone and does not require permission. 

CBDC’s and Cryptocurrency’s Underlying Implementations

Understanding how CBDCs and cryptocurrencies work under the hood is essential, starting with three definitions for the often misunderstood terms; Blockchain, Distributed Database (DDB), and Distributed Ledger technology. (DLT)

A blockchain is a specific type of distributed ledger technology. Notably, all Blockchains are distributed ledgers (DL), but not all distributed ledgers are blockchains. Permissionless or public blockchains are decentralized, meaning a single individual or institution does not control them. Instead, they are controlled by a vast network of unrelated individuals and institutions, so there's no single point of failure.

Distributed databases store data in a shared network rather than at a centralized location. This solution is for businesses that need to process huge amounts of structured and unstructured data, which could scale across networks. Consensus mechanisms such as Paxos or Raft control read/write permissions and establish secure communication channels among participants. However, these protocols assume that each participant cooperates in good faith, which limits their application to private networks under a centralized authority. 

Distributed Ledgers (DL) are like DDB protocols in that they maintain a consensus about the existence and status of a shared set of facts but do not rely on this assumption of good faith. They achieve this by leveraging strong cryptography to decentralize authority. They are different from generic distributed databases in two fundamental ways:

1. The control of the read/write access is genuinely decentralized, whereas it remains logically centralized for distributed databases.

2. Data integrity can be assured in adversarial environments without employing trusted third parties, whereas distributed databases rely on trusted administrators.

Image source: Blockchain Tutorial 

These terms are good to know because many countries claim their CBDCs will use a blockchain. However, countries claiming their CBDCs will use a Blockchain will use a distributed database because the Central Bank will centrally control it. It's possible that the officials making these statements don't know the difference or don't care to make the distinction. 

Some argue that the purpose of using the term ‘blockchain’ or ‘inspired by Bitcoin’ is to intentionally mislead the public into thinking the CBDC is just like a cryptocurrency. Although, it’s worth mentioning that a few regions seem to be planning to launch their CBDCs on cryptocurrency blockchains, such as the Marshall Islands, which has selected Algorand technology. But even then, it's likely that the central bank will still maintain total control of its CBDC because it would be issued as a token. 

What Is The Difference Between Coins And Tokens?

As we continue to be enlightened by this technology, the two different cryptocurrencies are often misrepresented, so here are the definitions of crypto coins and tokens.   

A cryptocurrency coin is native to its blockchain and is given as a reward to the miners (basically just powerful computers) that process transactions. Cryptocurrency coins also pay transaction fees on a cryptocurrency’s blockchain. For example, BTC is given as a reward to cryptocurrency miners that process transactions on the Bitcoin blockchain. These cryptocurrency miners also earned the transaction fees paid in BTC.

Conversely, a cryptocurrency token is a customizable digital asset that exists on a cryptocurrency’s blockchain. Unlike coins, which directly represent a proposed medium of exchange, crypto tokens represent an asset. These tokens can be held for value, traded, and staked to earn interest. Unlike coins, tokens can choose not to be bound to a single blockchain, gaining flexibility and becoming easier to trade.

Tokens are used with decentralized applications (DApps) and are usually built on top of an existing blockchain. One example is Markethive’s Hivecoin, currently being integrated into the Solana Blockchain.  Cryptocurrency tokens can be used for all sorts of things and have led to some exciting applications, such as decentralized finance (DeFi), non-fungible tokens (NFTs), and emerging crypto ecosystems in social media and marketing.   

The key takeaway here is that the creator of a cryptocurrency token can give themselves total control over the transfers of that token, the supply of that token, etc. Some stablecoins are cryptocurrency tokens that mirror the price of fiat currencies, primarily the US dollar. So, in the case of centralized stablecoins that are centrally controlled by the companies which issued them, any CBDCs issued as cryptocurrency tokens will likely work similarly. 

The Economics Of CBDCs And Cryptocurrencies

For context, let’s look at the economics of the current financial system. Central banks worldwide are tasked with encouraging economic growth while keeping inflation under control. They do this by raising and lowering interest rates. When interest rates are low, borrowing becomes cheap, making saving less attractive. This incentivizes individuals and institutions to spend rather than save, which increases economic growth. However, it also increases inflation as more money is circulated with low-interest rates.

When interest rates are high, borrowing becomes expensive, making saving more attractive. This incentivizes individuals and institutions to save rather than spend, which lowers economic growth. However, it also decreases inflation as there is less money in circulation when Interest rates are high.

Image source: PricedInGold.com

The big problem with this economic model is that money can easily be created, but taking it out of circulation is much more challenging. This inevitably leads to inflation in the long term. Long-term inflation wasn't a problem because fiat currencies were backed by gold. This limits how much money could be created in an economy because more gold had to be acquired to issue more money. 

However, this limit was lifted when the gold standard collapsed in 1971. And since then, we've seen what can only be described as long-term inflation, with the prices of many assets exploding in fiat terms while staying the same when priced in gold. 

However, it’s become clear that this inflation didn't show up in official inflation statistics until very recently because they have been adjusted and under-reported since they were introduced to make them seem less severe. This inflation is starting to appear in the official statistics, which means it's even worse than the authorities reveal.

Individuals and institutions took on record debt levels when interest rates were low, which means that raising interest rates too high would result in an economic catastrophe as these individuals and institutions would be unable to pay back their debts. 

It’s also apparent that many governments have record debt levels, and we're already seeing the first signs of default in some countries. In short, the money supply has grown so much that inflation is off the charts. And raising interest rates is not an option because of all the debt built up in the financial system over the years.

CBDC Economics

From the banks' perspective, CBDCs offer a solution to this situation. This is because, in a CBDC system, one of the many features is that it'll be possible for the central bank to destroy money as well as issue it easily. For starters, there'll be two types of CBDCs. Select individuals and financial institutions will use wholesale CBDCs, and regular folks like you and I will use Retail CBDCs. 

Image Source: Technode.global

This means there will be one financial system for the people in power and another for everyone else. Now, in addition, to being able to create and destroy money, Retail CBDCs will make it possible for central banks to; 

• Freeze CBDC holdings. 
• Set limits on CBDC holdings. 
• Set expiry dates on CBDC holdings. 
• Set location limits for where CBDCs can be spent.
• Set time limits for when CBDCs can be spent. 
• Set limits on how much CBDC can be spent. 
• Decide what can and can't be purchased with CBDCs. 
• Add a tax to every CBDC transaction. 
• Automatically flag or block suspicious CBDC transactions.
• Create custom CBDC limits for different individuals and institutions, depending on whatever criteria they decide. 
• Implement negative interest rates by gradually deleting unspent CBDC holdings over time. 

Financial institutions have openly discussed all the above features of CBDCs. The craziest part is that a continued increase in centralized control is required to prevent the current financial system from imploding, at least as far as central banks and governments are concerned. 

Any alternative would involve giving up some or even all of the central banks' and governments' control over the financial system. They would much rather see the financial system burn to the ground than lose control of it. This is why the IMF has outright recommended countries use CBDCs to fight cryptocurrency adoption to maintain that control. Many institutions are even trying to wipe out the crypto industry.

Images sourced from imf.org.pdf

Cryptocurrency Economics

It depends on the coin or token we're discussing regarding cryptocurrency economics. Bitcoin’s BTC is the obvious choice to reference as an example since it's arguably the biggest crypto competitor to the current financial system. Unlike fiat currencies, BTC has a maximum supply of 21 million. This supply is created slowly over time, and every four years, the amount of new BTC being mined or created is cut in half. 

It's believed that the last BTC will be mind around 2140. As basic economics dictates, a gradual decrease in supply combined with the same or more demand results in a higher price. Over the years, Bitcoin has seen exponential adoption that has increased demand, while the new supply of BTC has been declining, resulting in the price action shown below. 

Image source: coinmarketcap.com

BTC’s gradual appreciation in price has incentivized millions of computers to process transactions on the Bitcoin blockchain, which has made it highly decentralized and, therefore, very secure. As a matter of fact, Bitcoin is believed to be the most secure payment network on the planet. 

The best part is that as BTC's price continues to climb, the Bitcoin blockchain will only continue to decentralize. This makes it the ideal base layer to build additional financial technologies, and many crypto projects and companies are leveraging the Bitcoin blockchain for its security. Because BTC is increasing in value over time, even relative to Gold, this creates a strong incentive to save rather than spend BTC.

 
The Custody Difference Between Cryptocurrencies and CBDCs. 

With cryptocurrencies, you have the option of self-custody, meaning you can keep your coins and tokens in a digital wallet that you entirely control. Because personal information isn't required to create a cryptocurrency wallet, all cryptocurrency transactions are pseudonymous by default. 

Unless you're holding cryptocurrency in your personal crypto wallet, chances are it's being stored in a custodial wallet, which includes cryptocurrency exchanges. This means that the crypto is technically owned by someone else under your name. You might think you have control over your crypto with such a setup, but in reality, the custodian only lets you make transactions so long as you abide by their terms and conditions.

Self-custody simply does not enter into the equation for CBDCs. If all the terms and conditions, or dare I say, restrictions mentioned above, didn't make it clear enough, the central bank will keep all your CBDC holdings and ultimately decide what you can or can't do with your digital money. 

Regarding privacy, I reckon this sentence from one of the CBDC reports from the Bank for International Settlements (BIS) sums it up “Full anonymity with CBDCs is not possible.” This is because the central bank needs to be able to track everything specifically to impose these sorts of totalitarian controls.

It goes without saying you’ll be required to complete the KYC protocol. Also, according to the World Economic Forum's Digital Currency report, central banks will assign your digital identity a dystopian social credit score, determining what you can and can't do. The result will be a total absence of privacy with CBDCs, which is a massive problem because privacy is required for financial freedom. 

CBDC transactions that don't belong to you will not be viewable, meaning only the central bank can see what's happening behind the scenes. This will also apply at the network level because the technology that underlies a CBDC will likely be a closed source. 

A View Of How Both Economic Systems Could Play Out

So what would a cryptocurrency-based economic system look like as opposed to a CBDC-based system? As mentioned above, BTC has been increasing in value over time, even relative to gold, creating a strong incentive to save rather than spend BTC. This makes a BTC-based economy analogous to one where interest rates are consistently high, meaning inflation would be very low or even negative. 

Logically, this means a BTC-based economy is also one where it would be more expensive to borrow, and that could limit economic expansion. In a worst-case scenario, this could lead to a deflationary death spiral, where spending decreases, resulting in lower prices, lower production, and so on, until the economy dies. 

The thing is that the threat of a deflationary death spiral is nothing more than a ‘fiat currency finance conspiracy theory,’ as evidenced by the fact that the economy has been deflationary for most of human history. This is simply because innovation makes everything cheaper as time goes on, and the deflationary trend only changes whenever a central bank decides to turn the money printer on.

Image source: Adioma.com

A BTC-based economy also doesn't necessarily require using BTC as the currency. BTC could become the hard money that backs a more elastic currency, the same way gold was used to back national currencies, and that system has worked out pretty well. Ironically, a CBDC-based economy would face the same sort of deflationary risks for similar reasons. 

For instance, a CBDC status is considered a safe-haven asset in the eyes of the average investor. Multiple central banks have noted this status as the primary reason they're not rushing with their CBDC rollouts. A CBDC could siphon billions or even trillions of dollars from the traditional financial system. And this includes government bonds, which are also seen as safe-haven assets and considered cash equivalents by experienced investors and regulators alike. 

The interest rates on government bonds determine the interest rates in the broader economy, which are dictated by supply and demand. If everyone started selling government bonds for CBDCs because of a financial or geopolitical crisis, this would cause the interest rates in the economy to skyrocket, eventually leading to a next-level, deflationary death spiral and, potentially, even a full-on government default and collapse. Even if central banks programmatically put measures in place to prevent this scenario, a CBDC economy would still put central banks in direct competition with commercial banks. 

The Bank for International Settlements admitted in its CBDC report, “a common theme is that maintaining bank profitability would be challenging.” The Bank for International Settlements also determined that the only way a bank could remain profitable would be to raise interest rates. That would make borrowing extremely difficult and result in substandard economic conditions due to deflation.

Although, it seems the financial elite has a solution, and that's a synthetic CBDC, which was defined by the World Economic Forum in their CBDC and stable coin report. A synthetic CBDC would involve having a centralized stablecoin issuer holding the assets backing its stablecoin with a country's central bank. As discussed in this article, the two largest regulated stablecoins are supported almost entirely by cash equivalents, and that’s 'code' for government debt. 

This is quite clever because it means everyone buying a regulated stablecoin is financing the US government by indirectly purchasing government debt, which keeps interest rates low and allows its fiat ponzi to continue.

Image Source: Markethive.com

A Positive Note To Wrap Up

After studying various reports and following these topics, there’s arguably no chance CBDCs will reach mass adoption. There are a few reasons for this; 

Firstly, the Bank for International Settlements found that only 4-12% of people in developed countries would voluntarily adopt CBDCs. This is significantly lower than the current adoption rates for cryptocurrency. The fact that financial institutions are studying cryptocurrencies to recreate the same adoption curve with CBDCs is evidence of that. 

Secondly, the people who know how to create distributed ledger technologies are better off working on a blockchain than a distributed database. Creating a cryptocurrency coin or token that does something useful and valuable can result in astronomical profits and no shortage of social approval. Being involved in creating a CBDC will generate a six-figure salary at best and be seen as the enemy of society in the eyes of many.

Last but not least, central banks are losing the narrative on CBDCs. The awareness of the masses is continually increasing, with hoards of concerned citizens making their voices heard worldwide, physically and virtually, on thousands of truth-seeking internet media. 

The more people become aware of how dystopian these CBDCs are, the harder it will be for governments to roll them out. We're already starting to see politicians in the United States and elsewhere propose bills to prevent their central banks from issuing CBDCs, and it's because they are aware their voters don't want the Digital ID/CBDCs. 

The “pen is mightier than the sword” is an adage coined in 1839, and this phrase remains commonly known and used 182 years later. Or perhaps we can use a more updated version of a “post is mightier than a gun.” So, get the word out to the unawakened to ensure they know the difference between Central Bank Digital Currencies and honest-to-goodness Cryptocurrencies. 

What Have The Bureaucrats Planned To Save Banks In The Next Financial Crisis? 

The government bailed them out…Now you will bail them in

Financial freedom is often misunderstood as meaning that you have lots of money. In actuality, financial freedom means that you own your assets, and you decide how, where, and when they are spent. Another misconception is that your money in the bank belongs to you, but in truth, the banks own your money and can use it to bail them out during the next economic crisis. 

The first time I heard the term “bailout” was in 2008 when the global economy was hit hard by a financial catastrophe caused by the bursting of the housing bubble. More accurately, big banks invested in bundles of bad mortgages, which crashed in value when the housing bubble burst. Initially, the big banks thought everything was fine. That was until the collapse of Lehman Brothers in September 2008.

The Lehman Brothers institution was well-respected and the fourth-largest investment bank in the United States. As such, the news of its bankruptcy sent Wall Street into a frenzy that eventually threatened the entire financial system. Ultimately, the US government had to step in to bail out Wall Street. 

According to CNN, the US Treasury gave over $200 billion in loans to hundreds of financial institutions. This is less than a third of the total cost of bailing out the entire financial system, estimated to be $700 billion. Meanwhile, the regular people affected by the economic collapse got essentially nothing. Everyone knew that Wall Street speculation was to blame, but only one person went to jail; Kareem Serageldin, a former executive at Credit Suisse; however, all the other big bank executives were given bonuses.

The Securities and Exchange Commission (SEC) was supposed to investigate just how much the big banks were to blame for the 2008 GFC. However, the SEC allegedly destroyed the evidence it had been given as part of the investigation instead of exploring.

Image source: Satoshi Nakamoto Institute

Not surprisingly, the average person was not happy about how the GFC of 2008 was managed, even manipulated. And as many will know, the bank bailouts are why Satoshi Nakamoto created Bitcoin, which surfaced in 2008. However, the politicians had a different solution: passing a long list of new regulations. 

One of these was the Dodd-Frank Act in the United States, passed in July 2010 and infamous for being long and vaguely worded. It contains some questionable provisions, with the Act's primary focus being the enormous derivatives market.

For those unfamiliar, a derivative is an investment that derives its value from some underlying asset. One example is Futures; when you buy a Futures Contract, you're effectively betting that the price of some asset will be higher or lower at a future date without actually buying the asset itself. 

The total value of the derivative market is estimated to be as high as $1 quadrillion, or $1,000 trillion. The actual value is unknown because of poor accounting, but what is known is the 25 largest banks hold roughly $250 trillion of derivatives.

Image source: goldbroker.com 

There’s no doubt that this is a substantial financial risk. That's why the Dodd-Frank Act included a provision that states that in the event of an economic collapse, derivatives claims come first. In other words, if 2008 happens again, derivatives debt owed by big banks will be paid off before anything else. The difference is that bailouts won't pay off these debts; they’ll be paid off by bail-ins. 

Bailouts, Bail-ins; What’s the difference?

Whereas a bailout is when a big bank receives money from the government or institution to pay back its debts, a bail-in is when it uses its clients' money to pay back its debts. This includes people who lent money to the bank and people who have money in accounts with the bank, such as you and me. 

The Dodd-Frank Act opened the door to allowing big banks to use their client funds to bail themselves ‘in’ the next time there is a financial crisis. It's assumed that an issue in the derivatives market will cause the next financial crisis. And derivatives debt will, again, take precedence in the payouts. 

So, who came up with this crazy idea? Two now-former key executives at Credit Suisse, Paul Calello and Wilson Ervin coined the term bail-in in an article for The Economist in January 2010. Paul died a few months later, reportedly from cancer; however, in a presentation about bail-ins, Wilson revealed that the people in power had been working on alternatives to bailouts since 2008. He explained that the desire to develop an alternative to bailouts increased after the financial crisis started to affect Europe. 

In mid-2012, the International Monetary Fund (IMF) published a paper advocating bail-ins as the ideal alternative to bailouts. All the IMF needed was somewhere to test this new bail-in method.

Enter Cyprus

Cyprus was one of the European countries that were hit the hardest when the 2008 contagion spread. By the end of 2012, Cyprus was on the brink of default and begging for a bailout. In early 2013, the IMF and the European Union bailed Cyprus out for €10 billion. As with all IMF loans, the bailout came with multiple conditions.

One of the conditions was for Cypress's largest bank to execute the first-ever bail-in. Almost 50% of all bank account balances worth more than €100,000 were seized. Cyprus was also required to take 6.9% of all bank balances lower than €100 thousand and 9.9% of all bank balances higher than €100,000, regardless of the bank. 

Despite the social chaos and capital controls that ensued, the IMF and its allies declared the first-ever bank bail-in a success. In 2014, the G20 countries agreed to pass bail-in laws per the Financial Stability Board’s (FSB) bail-in guidelines. The FSB's policies include issuing bail-in bonds, which should be sold to pension funds. This means your pension money could also be used to bail out banks. 

The United States was the first to legalize bail-ins in 2010, with the Dodd-Frank Act mentioned above. The UK followed suit in 2013 with the Financial Services Act, and the EU legalized bail-ins in 2016 with the Bank Recovery and Resolution Directive. In my country, Australia, the Australian government's new bank bail-in laws were sneakily pushed through parliament in February 2018 with only seven senators present. So be sure to check when your country legalized bail-ins. 

The specifics of bank bail-in laws vary from country to country; however, all these laws follow the same three rules, likely because of their collective conformity with the FSB. 

The First Rule

The first rule is that bank bail-ins are only allowed for banks that are deemed to be domestically or globally important. It could be more precise which banks fall into the domestically important category, but it's safe to assume that this rule pertains to those with the most assets under management. 

As for globally essential banks, the FSB publishes a list of them yearly, along with their de facto risk of default due to derivatives debt. There are currently 30 globally systemically important banks, with JPMorgan being noted as the highest risk. JPMorgan reportedly has $60 to $70 trillion of derivatives debt.

Image source: FSB.org

What happens when a non-systemically important bank goes under? The answer is that they are acquired by a domestically or globally important bank. 

The Second Rule

The second rule of bank bail-ins is that they do not apply to bank balances below the deposit insurance threshold. In the US, the FDIC covers $250 thousand in deposits. In the UK, the FSCS covers £85,000; in the EU, it's €100,000 with various insurers involved. If you think this means your money is safe, think again. 

As pointed out by The Huffington Post, “deposit insurance funds in both the US and Europe are woefully underfunded, particularly when derivative claims are factored in." In short, insurers don't have enough money to cover all bank deposits. 

In the case of the FDIC, its 2021 annual report suggests that it only has around $120 billion in its Insurance Fund. This is chicken feed compared to the $19 trillion of bank deposits in the US and a drop in the ocean of the derivatives market, which could be in the $quadrillions. 

The Third Rule

However, a third rule of bank bail-ins states that you will be given some alternative asset in exchange for your lost deposits. Believe it or not, these alternative assets are typically shares in the bank you bailed out. I don’t think I would favor the bank taking my money and replacing it with its worthless stock in return. 

To compound matters, if governments passed laws to make Central Bank Digital Currencies (CBDCs) legal tender, you could be paid back in CBDC instead of cash. Incidentally, bank bail-ins would be the perfect way to force people to adopt CBDCs; perhaps that's the plan. 

Speculation aside, it's important to note that we could temporarily lose access to our funds during a bank bail-in. As we've seen with Cypress, banks could put limits on their hours of operations, limits on payments, transfers, and limitations on cash withdrawals until the bail-in process is complete. Can you imagine the social turmoil it would trigger if banks worldwide simultaneously imposed these bail-in restrictions on their depositors?   

Image source: Federal Deposit Insurance Corp.

Bail-In Simulation Phase

The ‘powers that be’ are hyper-aware of the looming unrest of ‘we the people’ because they've been coordinating bank bail-in simulations for years. The FDIC held the most recent high-profile bank simulation in November 2022. Several panelists from prominent financial institutions and regulators participated in the session, including Wilson Ervin, Chief Architect of the bank bail-in process. 

It was a tedious, lengthy discourse containing much financial jargon; the most exciting stuff began around the 1-hour mark, and snippets from this section went viral. At around 1:18 minutes into the video, one of the panelists speculates how the FDIC and its secret allies should maintain the public's confidence in the financial system when the bail-ins inevitably happen. She argues that transparency is the answer but that some entities should get more transparency than others.

This panelist also commented on ensuring the public understands that “prior compensation could be clawed back.” That sounds very much like the banks can take your money long after the bail-in process has been completed. She even asked the other panelists how they could “address excess cash use in such a crisis.” 

This suggests governments are planning on introducing a CBDC using bank bail-ins. Then again, it could reference the freeze on cash withdrawals mentioned above. The panelists also said they should “make the announcement on a Friday, ideally a Friday night.” For context, Fridays are famous for being one of the days when nobody pays attention to the news. Hence why bad news often comes out on Fridays.

The second panelist agreed with the first about being selective with transparency about the bail-in and specified that they should tell the banks and big investors first. He said they shouldn't tell the public until later because they would panic. The third panelist agreed with the second and said something sinister, akin to the public having more faith in the banking system than we do, let's keep it that way. The other panelists laughed. 

He continued to repeat that only institutional investors should know what's going on, and they should “be careful with what we tell the public.” But wait, there's more; a fourth panelist then said something even more sinister. The timestamp is around 1:27 minutes. She literally says, “the information should go out once we're moving out of the recession.” 

This fourth panelist explained that non-bank entities, including cryptocurrency exchanges, should be included in the bail-in process. This statement could mean that she wants them to be subject to acquisition by big banks or that she wants to use the crypto you hold on exchanges to bail them in. 

A little later, Wilson said they must ensure that disinformation about bank bail-ins doesn't get out before the fact-check-approved version of events. He even suggested that this online censorship should happen in advance so that people don't talk about their money being taken. Governments worldwide are rolling out precisely these kinds of online censorship laws, most of which will be going into force later this year or next year, as documented in this article.  

If you’re interested, the video of the entire simulation can be found on the FDIC website, but they haven't made it easy to find. Click on Archive, as shown in the image below, and scroll down to the video dated 2022-11-09, Systemic Resolution Advisory Committee.

Image sourced at: https://fdic.windrosemedia.com/

What Can We Do To Protect Our Money?

So the big question is what we can do to protect our money from being taken by the big banks when the next financial crisis hits us. You can do many things, and they all fall under one umbrella: keep your money out of globally and domestically important banks. Check the details of bank bail-in laws in your country or region first. 

The first hedge against bank bail-ins is to move your money to smaller banks that are not globally or domestically important and have minimal exposure. Or even diversify savings across banks and in different countries. Monitor banks’ and institutions’ financial stability and avoid banks with large derivative and mortgage books.

Financial institutions should be chosen based on the strength of the institution. Jurisdictions should be selected based on political and economic stability. Culture and tradition of respecting private property and property rights are also significant.

The second hedge is to keep enough cash on hand to pay for at least a few months of expenses, depending on your personal circumstances, although this may be challenging or even possible. However, remember that fiat currencies are losing value by the day due to inflation and will continue to do.

The third hedge against bank bail-ins is to have physical gold in allocated accounts with outright legal ownership. Have some physical gold and silver in denominations that could be used for payment if necessary. If you are in the United States, gold and silver eagles are technically legal; however, there’s a catch. Their face value is much lower than their actual value. You can thank the government for that. 

The fourth hedge against bank bail-ins, and one which is increasingly becoming more popular, is to hold cryptocurrency. To be clear, this means decentralized cryptocurrencies, not centralized ones like stablecoins. Ideally, these cryptos will be kept in your own personal crypto wallet. 

In Closing

If the deliberations at the FDIC simulation are anything to go by, the people in power will start doing bank bail-ins after the next recession. It’s all speculation about when the next recession will be official. Still, it doesn't seem to matter because they don't plan on telling us that our money has been used to bail in the bank until all the institutional investors have gotten out. 

At least we know the announcement will be made on a Friday when nobody's paying attention, as per the FDIC panelist. The unpredictable factor is what happens after the bank bail-ins are announced. Again, the social unrest will be unprecedented. This could create another crisis that the people in power could use as an excuse to exercise even more control and bear in mind the possibility of CBDC-based insurance payouts. 

The silver lining to this situation is that people are becoming increasingly aware of what's happening and what the elites are planning. With all this upheaval society worldwide is experiencing, many are preparing to protect themselves and participating in parallel communities and economies to counter bureaucrats and their inept, self-serving policies. 

By the Grace of God, we will prevail while the powers that be fall on their swords. Our increasing knowledge made available to us via decentralized media gives us the wisdom to remain calm and optimistic that the ignorant and arrogant decision-makers are very close to their complete demise in this time of tribulation. May God bless us all.  

This information is provided for informational purposes only. Nothing herein shall be construed as financial, legal, or tax advice.