by Brenda Baletti, Ph.D., Childrens Health Defense:
Experts warn that recent bank failures and the stabilization measures taken by the Federal Reserve and Wall Street are creating even greater bank consolidation — which could further pave the way for a central bank digital currency.
A week-and-a-half after the second-largest bank failure in American history ignited uncertainty throughout the global economy, experts warn bank failures and the stabilization measures taken by the Federal Reserve and Wall Street are creating even greater bank consolidation — and might further pave the way for a central bank digital currency (CBDC).
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Silicon Valley Bank’s (SVB) collapse earlier this month led to the collapse of Signature Bank, the voluntary closing of Silvergate Bank and the takeover of all three banks by the FDIC.
In response, top credit rating agency Moody’s lowered the outlook for the entire U.S. banking system to “negative.”
Now the banking crisis is spreading to Europe. Swiss regulators engineered a “forced marriage” between UBS and the troubled Credit Suisse this past weekend as part of an effort to stabilize the bank in the face of increasing concerns that a major financial crisis is imminent.
The collapse and downgrading of these banks have bolstered the position of what has come to be called the systemically important banks (SIBs) — financial institutions whose failure could trigger a financial crisis.
These “too big to fail” financial institutions — which include JPMorgan Chase, Bank of America, Goldman Sachs, Citigroup and Wells Fargo, among others — have been inundated with billions of dollars of new deposits “as smaller lenders face turmoil,” the Financial Times reported.
This happened despite the fact that the federal government stepped in to guarantee all of the deposits of SVB and Signature clients last week.
This series of events led analysts to raise questions about how this might open the door to the Federal Reserve’s exploratory plan to launch a CBDC.
Independent journalist and political commentator Kim Iversen said a CBDC is the Fed’s “end goal.” She predicted further consolidation of smaller banks into larger ones will make it “that much easier to roll out a central bank digital currency and social credit score for us all.”
Iversen added: “You want to control someone, control their money and that’s ultimately the end goal.”
Fed and U.S. Treasury want ‘to centralize control and centralize money’
Catherine Austin Fitts, founder and president of the Solari Report, told The Defender the financial instability we are seeing now is “a symptom of a mismanagement of the federal credit by the Fed and the U.S. Department of the Treasury over a very long period of time.”
She said the goal of their economic management strategies has been “to centralize control and centralize money.”
Economist Jeffrey Sachs explained that the direct root of the current crisis is the tightening of monetary conditions by the Fed and the European Central Bank after years of expansionary monetary policy.
For the last few years, they both kept interest rates near zero and flooded the economy with liquidity in the form of quantitative easing — or “printing money” — and then with pandemic response measures, which led to inflation.
Both central banks are now tightening monetary policy and raising interest rates to staunch inflation.
Federal regulators encouraged banks to invest long in treasury bonds and mortgage-backed securities, Austin Fitts said. But these long-term investments were made with short-term deposits.
The banks purchased these instruments when interest rates were low, but when the Fed began aggressively raising interest rates, the value of the banks’ portfolios went down.
Fitts also pointed out that SVB’s loan portfolio — like that of Signature and Silvergate — was composed of life sciences and biotech start-ups — speculative industries with loan repayment based on successful initial public offerings.
As the economy cools, there are more defaults and slowdowns in this type of loan portfolio, she said.
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