Article cross-posted from Zero Hedge.

Another California bank failure for Mary Daly's @sffed which is more concerned about DEI, colorful flags, virtue signaling and climate change than, you know, actually supervising insolvent banks

— zerohedge (@zerohedge) May 1, 2023

What emerged on Monday morning was far from perfect, despite weeks of discussions and posturing. What we have are US government institutions caught up in the policy implications of a “second best” world  — that is, the repeated inability to come up with an optimal solution. What’s emerged will come with collateral damage and unintended consequences.

First Republic found itself in a similar situation to Silicon Valley Bank, which was shut down by regulators in March. Its failure to manage an interest rate mismatch on its balance sheet ultimately crippled it as deposits flew out the door in response to the earlier bank failures. Its vulnerability was amplified by the Federal Reserve’s initial mischaracterization of inflation as transitory, the failure to take timely measures, and the inevitably highly concentrated set of hikes that followed.

The inevitable assessments of First Republic’s failure are also likely to point to significant lapses in bank supervision and regulation — the type of failures that were detailed last Friday in a  report by the Fed that, refreshingly and encouragingly, saw the central bank finally take ownership of a mistake and seek to learn from it. Unlike other major central banks, it had repeatedly failed to do so when it comes to monetary policy.

First Republic became increasingly fragile as the contraction in deposits worsened funding costs, deepened a capital hole, and plummeted its stock price by around 95%. That was the bad news. The good news was that, at least on paper, there was a constructive alignment of incentives among the main actors in the bank resolution process.

Having already lost three institutions, the banking system as a whole desperately needed an orderly resolution for First Republic that minimized the risk of further disruptions.

This was not just the case for regional and community banks where the risks of flighty deposits and duration mismatches were under a bright spotlight. It was also the case for the 11  larger banks as they had injected tens of billions of deposits into First Republic in an earlier attempt to stabilize the situation.

It was also the case for regulators, especially the Federal Deposit Insurance Corp. and the Fed. The  FDIC wanted to avoid being on the hook for financial losses and having to dispose of yet another bank’s assets and liabilities; and the Fed did not want to trigger yet again the “systemic risk” clause to allow for an extension of deposit insurance to theoretically uninsured deposits. The Fed was also keen to keep the door open for the policy “separation principle” that has interest rate policy aimed at inflation reduction and other tools used for financial stability.

Despite this alignment, it took weeks for a solution to emerge. And when it did, it involved unfavorable spillovers, as well as having one of the nation’s biggest and most dominant bank – JPMorgan – becoming even more so. With this comes the further evolution of  the largest financial institutions from major sources of systemic risk to stabilizers of the system itself. Moreover, and also departing from the previous conventional wisdom, the bigger and more diversified banks are now being considered “safer” than the narrow banks which have either no or a very limited range of capital market activities that have traditionally been viewed as a source of financial stability risk.

The solution that emerged early Monday morning  deals with the immediate threat of a disorderly failure of First Republic and, therefore, does not fuel the already uncomfortable risk of possible additional disruptions to other regional and community banks.

Yet the potential collateral damage and the unintended consequences are far from immaterial.

Four stand out in particular.

• First, the US now has a more concentrated banking system, with what was once viewed not so long ago as  “too big to fail”/”too big to manage” banks becoming larger.
• Second, there is even greater doubt about the nature of the de facto deposit insurance system in place.
• Third, the compositional risk within the banking system of less credit extending into the economy will continue, potentially aggravating the headwinds to high and inclusive growth.
• Finally, the total cost of First Republic’s resolution remains to be assessed, including how the burden be shared among the public and private sectors and, with that, the extent of the “bailout” for the 11 banks that had large deposits with First Republic.

The US economy continues to suffer from too many years of easy money, and the subsequent mishandling of the rate hiking cycle and lapses in supervision and regulation. With that comes the ever-present risk of collateral damage and unintended consequences given that first best policy responses are no longer available.

Real yields should provide an even greater tailwind for gold through the rest of 2023, supported by a weaker dollar and by buying from reserve managers.

Gold is flirting with all-time highs versus the dollar and several other currencies, while it is at its highs versus several more currencies, such as the Japanese yen, the Australian Dollar and the Indian rupee.

Gold is often simplistically taken as an inflation hedge. However, the correlation between gold returns and CPI is very close to zero over the long term. Instead, the interplay between inflation and interest rates — i.e. real rates — is more meaningful for gold.

Gibson’s Paradox stemmed from the observation that real interest rates and gold move inversely to one another (named a paradox by Keynes as it contravened standard economic theory). Gibson’s Rule said that for every percentage point the real fed funds rate was below 2%, gold should rally 8% over the next year.

The data gives a more nuanced answer. The chart below shows the subsequent one-year return of gold (in dollars) for different real-rates buckets. There is more of a parabolic relationship with real rates and gold rather than a straight line.

Real rates (-1% now) are currently very favorable for gold on historical basis.

Furthermore, real rates are set to get even more gold-friendly. CPI fixing swaps and the current level of Fed rates show that the spot real rate is expected to be between 1% and 2% for most of the rest of this year, i.e. in the most favorable bucket for forward gold returns.

If we add to this real buying from reserve managers, the backdrop has fundamental support. It is way too premature to call the end of the dollar as the world’s reserve currency, but it is clear countries are diversifying away from USTs, and some of the gap is being filled by gold.

Add in a dollar downtrend that looks intact for now, and gold should continue to perform well, and quite conceivably start making all-time highs in several more currencies, not least the dollar.

#1 The IMF: “We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like recession for hundreds of millions of people”

#2 Bloomberg: “Economists say there is a 7-in-10 likelihood that the US economy will sink into a recession next year, slashing demand forecasts and trimming inflation projections in the wake of massive interest-rate hikes by the Federal Reserve.”

#3 The World Bank: “As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023 and a string of financial crises in emerging market and developing economies that would do them lasting harm, according to a comprehensive new study by the World Bank.”

#4 Bank of America CEO Brian Moynihan: “We’re going to have a shallow recession”

#5 Mohamed El-Erian: “Many ‘high-conviction’ U.S. recession calls are immediately coupled with the assertion that it’ll be ‘short and shallow.’ Reminds me of the behavioral trap ‘transitory inflation’ proponents fell into last year”

#6 Nouriel Roubini: “No, this is not going to be a short and shallow recession, it’s going to be deep and protracted”

#7 Larry Summers: “My sense is that it’s much harder than many people think to achieve a soft landing”

#8 Goldman Sachs CEO David Solomon: “Economic growth is slowing,” Goldman Sachs CEO David Solomon said at the same conference. “When I talk to our clients, they sound extremely cautious.”

#9 Charles Schwab & Co.’s Liz Ann Sonders: “We have to take our medicine still, meaning a weaker economy and a weaker labor market. The question is, is it better to take our medicine sooner or later?”

#10 BlackRock: “Central bankers won’t ride to the rescue when growth slows in this new regime, contrary to what investors have come to expect. They are deliberately causing recessions by overtightening policy to try to rein in inflation”

#11 Michael Burry: “Inflation peaked. But it is not the last peak of this cycle. We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition. Fed will cut and government will stimulate. And we will have another inflation spike. It’s not hard.”

As you can see, there is a general consensus that things will be bad in 2023, but there is disagreement about just how deep the coming economic downturn will turn out to be.

If the worst of these forecasts turn out to be accurate, that will actually be incredibly good news.

Because the reality of what we will be facing in 2023 is likely to be significantly worse than any of these experts are currently projecting.

With each passing day, we continue to get even more numbers that indicate that big trouble is ahead.

For example, we just learned that luxury home sales absolutely cratered during the months of September, October and November…

Sales of luxury homes fell 38.1% year over year during the three months ending November 30, 2022, the biggest decline on record, according to a new report from Redfin, a technology-powered real estate brokerage. That outpaced the record 31.4% decline in sales of non-luxury homes. Redfin’s data goes back to 2012.

The luxury market and the overall housing market lost momentum in 2022 due to many of the same factors: inflation, relatively high interest rates, a sagging stock market and recession fears.

We haven’t seen anything like this since 2008.

And we all remember what the housing crash of 2008 ultimately did to the financial markets.

Normally, the beginning of a calendar year is a time for optimism.  As we look forward to a completely clean slate, it can be easy to forget the difficulties of the previous 12 months.

But this year things seem completely different. On some level, just about everyone can feel that very challenging times are ahead of us.

Decades of very foolish decisions are starting to catch up with us in a major way. Our leaders tried very hard to keep the party going for as long as possible, and to a certain extent they were quite successful in doing so.

Our politicians in Washington kept borrowing and spending trillions upon trillions of dollars that we did not have, and that definitely delayed our day of reckoning.

And the Federal Reserve kept the financial markets artificially propped up for years by endlessly pumping giant mountains of fresh cash into the system. But such foolish measures only made our long-term problems even worse, and now our leaders are losing control.

All of the “mega-bubbles” are starting to burst, and the system is beginning to fall apart all around us. It is time to turn out the lights, because the party is over.

We all had a lot of fun while it lasted, but now the bill is due and an extraordinary amount of pain is ahead.

***It is finally here! Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.***

About the Author: My name is Michael and my brand new book entitled “End Times” is now available on Amazon.com.  In addition to my new book I have written six other books that are available on Amazon.com including “7 Year Apocalypse”, “Lost Prophecies Of The Future Of America”, “The Beginning Of The End”, and “Living A Life That Really Matters”. (#CommissionsEarned)  When you purchase any of these books you help to support the work that I am doing, and one way that you can really help is by sending copies as gifts to family and friends.  Time is short, and I need help getting these warnings into the hands of as many people as possible.

I have published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe.  I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article.  The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions.

I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is definitely a great help.  These are such troubled times, and people need hope.  John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.”  If you have not already done so, I strongly urge you to invite Jesus Christ to be your Lord and Savior today.

Article cross-posted from The Economic Collapse Blog.

US stocks have had a stunning quarter so far, the best Q4 since 1999! To expect them to continue rallying would to be wish for the Hailey’s Comet to keep appearing in quick succession.

The markets have been front-running the idea of a Fed pivot for some time now. While that is far-fetched, one must still admit that a Fed pause after its funds rate reaches circa 5%-5.25% is very much on the cards. While pretty much everyone in the markets is primed for the idea of a US recession, November’s non-farm payroll numbers (and perhaps even more importantly, the hourly earnings rising at twice the forecast pace) suggest that this inflationary episode may be around longer than realized.

And that is a worse denouement than any stock investor would wish. Not only do you have a scenario where inflation is corroding the nominal coupon on stocks, but you also have to factor in a slowing economy where presumably there is also a drag on earnings. A scenario that weighs on both the numerator and denominator (a high interest-rate recession) is hardly a prescription for a stellar rally month after month.

At current levels, the S&P 500 offers an estimated earnings yield of around 5.40% and the Nasdaq 100 around 4.32%, hardly anything to write home about in an environment where you can invest in two-year Treasuries that offer 4.27%.

Yes, there may be something to be said for being a part of that smart-money brigade that has made a grand return of 20%+ within a quarter and fleeing to where the honey is next, but that is predicated more on getting the timing right — an iffy proposition even with the most seasoned investors. For every one idea that works out as per plan, the nine that follow come a cropper.

As Benjamin Graham said, investment is most intelligent when it is most business-like, not when you treat the stock market as a casino, looking for the next big lottery that will offer massive returns overnight.

The reason I believe this is because the Biden-Harris regime as well as other western governments appear to be intentionally manufacturing a collapse. We must assume they’re doing so on behalf of the Liberal World Order so the globalist elite cabal can realize their dream of The Great Reset. It’s hard to convince people to abandon a system that isn’t broken, so the powers-that-be are trying to break western capitalism and replace it with their Neo-Marxist dreams of utopia for the elites and dystopia for the rest of us.

But my theories are not enough to make people “know” the Uniparty Swamp in DC is intentionally taking us into a depression. The best clue I’d ask everyone to examine is the messaging coming out of the White House. While it’s easy to dismiss their seemingly idiotic claims of good tidings for the economy as election-driven denialism, we must dig deeper. Ahead of a midterm election during a down economy, there’s only one strategy that helps those in power retain power. If Democrats really wanted to win, they’d acknowledge the economic downturn that’s blatant to everyone else, then offer a tangible plan moving forward to fix things.

Pretending like the problem isn’t really there is a surefire way to LOSE elections. This is why I cringe when I hear conservative pundits claim the Democrats’ denial of our fiscal woes is their attempt to salvage their election futures. Democrats KNOW they’re putting out the wrong messaging. The only thing that can make any politician risk losing their power is if they have an agenda driving them. Today, that agenda is The Great Reset.

By trying to keep people in the dark while making themselves look like financial dunces, the Biden-Harris regime and their Uniparty Swamp cronies are just offering fodder so people won’t realize this is all manufactured. They don’t want to risk being exposed as intentionally tanking the economy — not yet, at least — so they’re pretending like they believe everything is fine. This keeps the people and the vast majority of conservative commentators busy insulting the regime’s idiocy so we don’t take time to recognize this is all part of their plan.

The regime and their corporate media proxies are gaslighting us. We can see with our own eyes when we look at our bank accounts that the economy is not “strong as hell,” but that’s exactly what Biden claimed. We look at our investment portfolios and retirement accounts and wonder if things will at least level out if not recover before the wealth we’ve worked so hard to earn is gone.

This is why I continue to be extremely bullish about precious metals despite the fact that I panned them just two years ago. I’ve never had precious metals sponsors for two reasons. The first is because until this regime took power, I did not see gold or silver as necessary investments. That has obviously changed. The second reason is because the vast majority of precious metals companies that sponsor conservative news outlets are quietly donating the money they earn to Democrats. Many are even attached in some way to proxies of the Chinese Communist Party. I’m not willing to support such companies. Thankfully, the last year-and-a-half I’ve been vetting out companies and their executives to identify precious metals companies that share our America First worldview. Out of just over two dozen I looked at, I found three. Just three. They are:

• Our Gold Guy – Family-owned business for personal consultations

• Genesis Gold Group – Mid-sized company with a Christian worldview

• Goldco – Corporate precious metals

The article below by Mary Villareal from Natural News offers further details about some who believe recession is coming and there’s pretty much no way to stop it. I generally avoid doom-and-gloom articles when it comes to the economy as nobody really knows with 100% certainty what’s coming, but this is worth a read because it’s very likely true.

Bloomberg Model Projection Says Recession Is 100% Certain in Next 12 Months

President Joe Biden is trying his best to convince Americans that recession is avoidable – especially with the midterm elections so close.

But according to a model projection from Bloomberg Economics, the U.S. economy is effectively certain to enter a recession in the next 12 months. The probability models maintained by Bloomberg economists Anna Wong and Eliza Winger had earlier shown just a 65 percent chance of a recession over the coming 12 months.

The latest projection doesn’t bode well for Biden and the Democrats ahead of the November elections.

Biden has repeatedly said that the U.S. will avoid a recession and that the downturn would be “very slight.” The president is obviously trying desperately to reassure Americans that the economy is still on solid footing. It’s not.

The tightening financial conditions, which include persistent inflation and expectations of a hawkish Federal Reserve pressing ahead with rate hikes, are raising the risk of an economic contraction.

A separate survey of 42 economists also showed rising probability of a recession –  from 50 percent last month to 60 percent this October.

The odds of the U.S. entering a recession even sooner are also up. In the 11-month window, the probability is at 73 percent – up from 30 percent. In the 10-month window, the probability rose to 25 percent from zero.

These forecasts are a sharp contrast to Biden’s positivity. He has focused on strong job growth as he campaigns to help Democrats win House and Senate majorities in the midterms.

Inflation, which has hovered near a four-decade high, has been a drag on the prospects of Democrats in an election where polls indicate that the economy is the voters’ top concern.

Biden still in denial despite dire numbers presented by experts

Despite the dire numbers presented by economic experts, Biden still insists that he does not anticipate the U.S. to enter a recession.

He noted that economists have been predicting a slowdown in the economy for months, but the recession has not yet occurred. “I don’t think there will be a recession. If it is, it will be a very slight recession,” he said in a recent interview with CNN‘s Jake Tapper. “It’s possible. I don’t anticipate it.”

This remark came just hours after the International Monetary Fund (IMF) forecasted a global economic slowdown and a tightening of monetary and financial conditions in the United States.

“In short, the worst is yet to come and, for many people, 2023 will feel like a recession,” the IMF said. (Related: Americans for Tax Reform president slams White House for attempting to redefine recession.)

The IMF noted that the high inflation, a slowdown in China and the ongoing war between Russia and Ukraine are contributing to the challenges in the global economy.

Meanwhile, Biden said he has no intention of meeting Russian President Vladimir Putin at the G20 summit in Indonesia next month, although he will consider a conversation depending on the topic.

Biden said he would speak with Putin if the latter approached him at the conference and said he wanted to talk about releasing professional basketball player Brittney Griner.

Visit Collapse.news for more information about the possibility of a recession in the United States.

Watch this video to know why economic experts are warning of a global recession.

This video is from the NewsClips channel on Brighteon.com.

More related stories:

• W.H. argues current recession isn’t ‘technically’ a recession, ‘it feels unique, because it is unique.’
• JPMorgan CEO Jamie Dimon: U.S. could experience RECESSION within 6 to 9 months.
• THIS IS SERIOUS: Financial wizard Jamie Dimon predicts major recession coming to U.S. thanks to worsening economy under Biden.

Sources include:

• Breitbart.com
• Bloomberg.com
• USAToday.com
• Brighteon.com
• NATURAL NEWS