While U.S. Goverment have emphasized the stability of the banking system, there are signs of increased customer distrust and a potential domino effect. The U.S. sovereign credit risk index has reached a record high, indicating a risk of dollar devaluation. The U.S. economy has long been trapped in a cycle of financial turmoil, with a high level of federal debt, a serious shortage of funds, and rising inflation. The crisis is expected to directly lead China to reduce its holdings of U.S. Treasuries.
Although U.S. regulators took over Silicon Valley Bank and Signature Bank within three days of their collapse, U.S. Treasury Secretary Yellen, Federal Reserve Chairman Powell, and President Biden have emphasized the resilience and stability of the U.S. banking system, reassuring customers that their deposits are safe. However, there are signs that the collapse of Silicon Valley Bank is just the beginning of a broader crisis in the U.S. financial system, and the domino effect is intensifying.
For example, First Republic Bank, the 14th largest bank in the U.S., has secured $70 billion in relief from sources such as the Federal Reserve and JPMorgan Chase, but its customers are still withdrawing their funds en masse.
Despite the government’s intervention and promise to return customers’ cash, many depositors at Silicon Valley Bank and Signature Bank were unable to withdraw their money on March 13. The banks’ websites and phone apps crashed, and anxious customers lined up at their entrances.

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Domino KICKS IN! Bank FAILURES are Just the Tip of the Iceberg of the U.S. Financial Collapse

In a shocking turn of events, the United States is currently experiencing widespread bank failures, casting a menacing shadow on the stability of the nation’s financial system. This recent trend has rattled investors and experts who fear that it is merely the beginning of a much larger crisis that could potentially plunge the country into an economic abyss.

The domino effect is starting to kick in, and while some may argue that bank failures are just the tip of the iceberg, it is crucial to understand the critical role banks play in the functioning of the financial system. When banks fail, it sets off a chain reaction that can have far-reaching consequences.

Bank failures are not new to the U.S. financial landscape. Throughout history, the nation has experienced periodic bouts of bank collapses, usually followed by periods of economic turmoil. However, the current situation seems to have distinctive characteristics that amplify concerns about the scale and severity of the impending collapse.

One of the primary drivers of the current crisis is the mounting levels of bad debt held by banks. Over the years, a massive buildup of risky loans, particularly in the housing sector, has plagued the financial industry. Predatory lending practices and lax regulations allowed banks to issue loans to individuals who were unable to afford them. As a result, a housing bubble formed and eventually burst, leaving banks with a considerable amount of non-performing assets.

The collapse of the housing market is now reverberating through the entire banking system. As more borrowers default on their loans, banks are left with a shrinking pool of assets, leading to substantial losses. Weakening balance sheets are pushing banks towards insolvency, forcing regulators to step in.

The Federal Deposit Insurance Corporation (FDIC), the primary regulatory body responsible for maintaining stability in the banking sector, has been frantically trying to keep up with the rising number of bank failures. The FDIC’s resources are stretched thin as it races against time to find buyers for failed banks or arrange mergers to prevent a complete collapse.

However, the FDIC’s efforts may prove to be just a band-aid solution for a much deeper problem. Many worry that the true extent of the banks’ bad debt is yet to be fully revealed. Additionally, the interconnectedness of the financial system means that a collapse in one bank can trigger a widespread panic, causing other banks to fail as well.

Consequently, the ongoing bank failures could initiate a vicious cycle of collapsing banks, plummeting stock markets, and a frozen credit market. Businesses reliant on bank loans for their operations may find themselves unable to access necessary funds, leading to layoffs and business closures. This domino effect would spread through the economy, affecting individuals and households in various ways.

To mitigate the risks and prevent a complete financial collapse, policymakers must act swiftly and decisively. A comprehensive evaluation of banks’ balance sheets is imperative to expose the full extent of bad debt and plan appropriate action to address it. Simultaneously, regulators must tighten lending standards to prevent banks from taking on excessive risks in the future.

Furthermore, the government should closely monitor and support the FDIC’s efforts to stabilize the banking sector. This may include providing additional funds to ensure the FDIC has sufficient resources to handle the increasing number of bank failures.

Ultimately, the current wave of bank failures in the United States is a clear sign that the nation’s financial system is in distress. While it is true that bank failures are just the tip of the iceberg, the potential collapse of the financial system remains a pressing concern. The domino effect has started, and it is up to policymakers, regulators, and financial institutions to work together to prevent a catastrophe that could have far-reaching repercussions.

Domino Effect: The U.S. Financial Collapse Goes Beyond Bank Failures, Says AsianQ appeared first on Inflation Protection.