Bailouts and Bail-ins

This past weekend saw more significant bank failures on the heels of Silvergate Bank and Silicon Valley Bank. First Republic Bank, based in Los Angeles, failed on Saturday, and Signature Bank in New York failed as well.

The markets were poised to crash today (Monday), but so far that has not happened. I suspect that this is because Fed chairman Powell—who caused the bank failures—stated that all depositors will be bailed out by the Fed itself.

Nonetheless, it is likely that we will continue to see “contagion” in the banking sector in the months and years to come. Recall that when Lehman Brothers failed in September 2008, hundreds of banks failed over the next three years in a chain reaction, even though the government bailed out the banks.

Yet Treasury Secretary Janet Yellen, stated emphatically that Silicon Valley Bank would not be bailed out, because the Dodd-Frank Act banned that practice in favor of the current bail-in policy. In other words, depositors’ money is now supposed to be stolen by the banks to pay for their bad decisions. This was the precedent set some years ago by the bank crisis in Cyprus.

The main difference is that the US dollar is the world reserve currency, and the Fed can create all the money it wants. Cyprus lacked that advantage. So reports say that Biden and Powell are going to create more debt, print more currency, and replace any money that was lost by bank failures. We will see if they can keep up.

If I understand this correctly, it seems that they are saying that they will not actually bail out the banks themselves—just the depositors. If that is correct, then we can expect more banks to fail. Silicon Valley Bank, for instance, has already been taken over by the FDIC. That reminds me… if the government is now bailing out depositors, then the FDIC itself has become irrelevant. It is no longer the insurance agency for such matters, as it has been overwhelmed by the losses. The government itself is now insuring depositors.

We are exploring new territory now, so anything can happen in the coming months. I read the current news through the lens of the fall of Babylon, which is largely a financial system today. In my view, Babylon’s right to rule ended in 2017, and it will probably take 7 years (until 2024) for the system to fall—as a result of God’s redemption (Jeremiah 50:33, 34).

Background

Everything in history is a chain reaction. Nothing happens by itself. Everything is the result of something previous, and if you trace the chain back far enough, it goes back to Adam. Hence, we cannot really understand current events unless we trace these things back as far as we can in order to see the context of these events.

The Israelites came into Canaan under Joshua and were supposed to create the Kingdom of God. Instead, they adopted the practices of the Canaanites. So God put them into various captivities (Judges 2:11-13) until they repented. Then God raised up “Judges” to free them (Judges 2:16).

Nonetheless, the Israelites continued to violate the law of God and to adopt the laws, religions, and culture of idolaters. So finally, God brought Israel into captivity and exiled them to Assyria. Judah was later exiled to Babylon, which became the main pattern-setter for modern Babylon.

After a period of “seven times” (7 x 360 years), God visited us and gave us a measure of freedom through the establishment of America from 1776-1800. This was precisely 2,520 years from 745-721 B.C., when the Assyrians were conquering and deporting the Israelites. Unfortunately, we followed the example of the Israelites by forsaking God’s laws over a period of time.

So once again, God put us into captivity to a new form of Babylon called the Federal Reserve Bank in 1913-1914. This was when Congress delegated the power to create money to a private consortium of bankers who were the Class-A stockholders of the Federal Reserve. From then on, money could be created only as a debt, and gradually, the US dollar no longer represented positive wealth but was only a public debt note.

The more money was created, the greater the debt. Obviously, this was a mortal system, conceived by mortal people, because it could not last forever. At some point, the debt would reach such heights that the entire system would implode on itself.

Today’s Situation

We are now at that point in time. The system has been on life support for a long time, but old age has finally caught up to the system. Its death only awaits a final catalyst. The collapse of Lehman Brothers in 2008 threatened the life of the banking system, but the bailouts saved it for a season. They averted the catastrophe with more drugs (money), but they did not fix the systemic problem. So it was inevitable that the banking system would suffer another heart attack at some point.

The big question is whether the present collapse of the banks marks that moment in time, or if the bankers are able to inject the system with enough drugs to stave off death one more time.

The CFO of Lehman Brothers is now the CFO of Silicon Valley Bank.

Fed Chairman Powell has been raising interest rates very aggressively in the past year in order to “fight inflation.” This policy is the result of the tremendous increase in the money supply during the “pandemic” where the country was largely shut down. During the Biden administration in the past 2 years, the federal debt has gone from $21 trillion to $31 trillion, which reflects the money supply (debt) and inflation.

Powell raised rates literally to reduce the amount of money in circulation. The purpose of raising rates is to break the economy, and this finally succeeded last Friday. This morning the Fed is having an emergency meeting to decide how to fix what they broke. It is likely that they will “pivot,” and begin to lower rates immediately in order to save the system. At the same time, if they bail out all depositors, they will create more money that will increase the inflation rate.

They really have a choice to save the dollar or save the banking system. They can’t do both. Inevitably, they will move to save the banking system, as this is their top priority. So we can expect to see higher inflation, and the “experts” will continue to manipulate the figures so that the official rate will be half of what the actual rate is.