Editor Note: I've made this post public to help support my public blog post from 3/21/2023
You had to think that FTX wasn't the only cog in that machine.
Also, during that time, Dexter and I both noticed that all through the bear market collapse of Bitcoin it was one stablecoin failure after another which caused each major downdraft, crashing bitcoin through major support level after major support level.
Finally, after FTX, with all of the leverage gone, Bitcoin found a floor at $16k, the FUD was running high that it was going to $5k. USD Tether was about to implode, GBTC has been beaten with the NAV ugly stick (Still trading at 40% below NAV), etc.
But, as always, when the headlines are that bearish and everyone is jumping out of windows, that's likely your bottom.
And it was.
In the initial flush of what happened I came quickly to the conclusion that FTX was a Fed/NY Boys hit job and turned out to be right on the money with it. Dexter was correct in his assessment of what FTX was, "a Ponzi Hoover," designed to hoover up the cash and assets of the 'crypto' space and use that to build a competitor to the US dollar payment systems controlled by the Fed and the NY banks.
FTX was close to achieving escape velocity with its system and therefore had to be taken down. Now, Silvergate was another company on the same path as FTX, having its SEN payment system capable of settling transactions 24/7/365 in real time go live with its stablecoin as the liquidity token.
Between FTX and Silvergate the Fed's own project, FedNow, would have real competition and more synthetic dollars would flood the world.
For once they even mostly get the "Who?" right. They try to pin this on JP Morgan Chase CEO Jamie Dimon, digging up that Dimon encouraged people to pull their money from SVB.
Of course, Jamie, who has suddenly emerged as a key figure in the Jeff Epstein scandal alongside Jes Staley, knows this, and would be delighted with an outcome that kills two birds with one stone: take his name off the front pages and also make JPMorgan even bigger. Actually three birds: remember it was JPM that started that "Not QE" Fed liquidity injection in Sept 2019 when the bank "suddenly" found itself reserve constrained. We doubt that JPM would mind greatly if Powell ended his rate hikes and eased/launched QE as a result of a bank crisis, a bank crisis that Jamie helped precipitate.
And while we wait to see if Dimon's participation in the Epstein scandal will now fade from media coverage, and whether Powell will launch QE, we know one thing for sure: JPM was a clear and immediate benefactor of SIVB's collapse because in a day when everything crashed, JPM stock was one of the handful that were up.
Let's review a few things that I mention all the time.
- FOMC Chair Jerome Powell has no problem with Bitcoin
- Powell, however, hates stablecoins
- Stablecoins are nothing but Eurodollars that exist in 'cyberspace'
- They are synthetic US dollars and, as such, are really artificial claims to dollars
- Again, not dollars, just claims to dollars no different than Eurodollars
What many of the Tylers at Zerohedge refuse to accept is that the Fed is at war with Eurodollars. Maybe they are finally somewhat convinced that I'm right about this but are still in denial about how the Fed extricates itself from the Offshore Dollar Markets without breaking the whole system.
It's a fair position to take, frankly. I don't claim to know if they can or cannot pull this off. But, what I can say is that they sure are acting like they can.
Now, back to SVB and Silvergate. SVB's balance sheet was stuffed to the gills with low-yielding long-dated USTs, the assets of choice for a stablecoin like USDC. They also held a whole lotta Mortgage-Backed Securities (MBSs) to get yield.
With a stablecoin, you don't actually care much about yield, only that you can get access to 'real dollars' at nearly no cost. In fact, the lower the cost the easier it is to 'print reserves' if need be through leverage and carry trades.
This is a perfect example of what I have been saying for nearly two years, that the Fed is at war with Eurodollars, both 'real world' and 'crypto.'
This bank run was absolutely another hit job on 'crypto' but not Bitcoin. Dimon is crowing this morning. It's having real repercussions around the banking community. There are going to be a few more bank runs here as well as a lot of negative headlines as payrolls are missed, layoffs occur, etc.
That's the bad news. Every 'Pivot' monkey on Twitter will be screaming that the Fed has to now. They are going back to the zero-bound. This is it! The world is breaking. The dollar is toast.
And hey do this to feather their own nests, confirm their biases, and feed their pathetic egos.
Silvergate and Silicon Valley Bank were two peas in a Eurodollar pod. One was the architecture and the other the money funnel for a competing system to end-run the Fed's tight monetary policy. These schemes were all birthed during the Yellen/Bernanke era of ZIRP and NIRP.
They were meant to be the bridge projects to build a global CBDC network which the market would beg for, because of the lure of 'yield farming' in a world where the central banks were 'trapped at the zero bound.'
My latest public blog post goes over this idea of carrots and sticks to move from one system to the next, from the petrodollar to the asset-backed BRIICSS settlement system on the horizon or from LIBOR to SOFR.
These 'crypto' projects were sold to us as the new carrot to help Davos and the old money return us to serfdom through our own greed and desperation after fifteen years of negative nominal returns.
This whole 'crypto' stablecoin thing was nothing more than an attempt to truly co-op Bitcoin (and proof-of-work) which is truly tokenizing previous human work to issue a new bearer-asset form. It is, as Christine Lagarde called it, "an escape hatch," which we will use if it's available.
The Fed, in trying to protect itself here, is actually helping Bitcoin out here by removing these projects from the landscape and calling bullshit on all of them.
Since FTX blew up, as Chris Sullivan pointed out in Episode #131 of the GGnG Podcast, liquidity in Bitcoin went to ground (back on chain) and off the exchanges. This is the reaction of a healthy market not a dysfunctional one.
The dysfunction was in the exchanges, not the protocol nor the asset.
To close, the blow up of SVB is the next formal attack on this system. It will be mostly contained. The headlines will make you want to vomit and pull your money from the US banking system. This is Davos' revenge through the media. They know that humans don't trade these markets anymore, only headline-scanning computers.
But, like with Bitcoin going to ground after FTX, the algorithms will stabilize the minute there isn't any systemic risk to the system.
One last point as I brought up in a Twitter thread yesterday before getting a lot of facts.
Let's note a couple of things:
- Powell sending the rate markets into panic on his Senate testimony
- "We don't care about your fiscal mismanagement in setting monetary policy, Senator Lummis."
- Big blow ups in a 50 bps FFR rate hike later this month.
- Davos trying to "Nuts and Sluts" Jamie Dimon tying him to Jeffrey Epstein
- A ridiculous legal ruling against Dimon/JPM in an Obama-controlled court
- This screams the Soros hit-job on Italy's Matteo Salvini over migrant boats.
- Kuroda finally stepping down as head of the Bank of Japan
- As I discussed in recent Market Reports, I believe the BoJ is about to shift policy away from Yield Curve Control.
- Tucker Carlson's expose of the fraud of 1/6 and the Committee's Witch Hunt.
- Continued attacks on Credit Suisse who the Fed bailed out last summer.
We'll really know if these things are the case if the Fed holds onto raising rates by at least 25 bps. If they go 50 bps, it's popcorn time.
FDIC Insurance, Credit Suisse and the Day the Fed Killed Europe https://t.co/MQLmtR1wna
— Tom Luongo (Head Sneetch) (@TFL1728) March 21, 2023
As Ive been saying, the #US move to raise #insurance put #ECB at a major disadvantage. The fact that he's saying they need to do this means they cant act quickly. The stage is set for massive #capitalflight #from #Europe to US as #CS skeletons will emerge from the closet https://t.co/LlHRCt1Qhw
— Guillermo Ruiz Zapatero (@ruiz_zapatero) March 21, 2023
No comments:
Post a Comment