It became obvious that the collapse of the macro-financial system is what is happening right now. The global economy is changing. Banks are not in sound monetary shape. What is coming next economically is unpredictable and the world has to find an answer to the question of how to bail out the financial system.
Let’s look at the bigger picture and try to simplify things. The macroeconomic problems that we are facing in 2023 are caused by the reckless moves of Central Banks. Briefly, the excessive issuance of fiat money and debt, and the era of easy credits are not helping. Did it affect the bank runs? The answer is not that simple to give, but mostly it is yes.
A bank run happens when creditors effort to withdraw deposits from a bank because they are concerned about the institution’s uncertain future. They attempt to take money off before the bank becomes liquidated.
The U.S. banking system is an example. In March 2023 it is facing the biggest monthly loss in deposits in its history. The loss is worth -$389 billion, according to the Federal Reserve BOG.
FED says that the U.S. banks are doing fine but the truth is we all know what just happened with the second biggest U.S. bank, Silicon Valley. Creditors withdrew $42 billion a single day, which is a quarter of all deposits of that institution.
Besides that, Signature Bank also got into the same trouble, just two days after the previous.
Many U.S. banks are near insolvency and it’s not a promising fact.
One of the global consequences of the US banking financial crisis is that many countries are distancing themselves from the dominance of the US dollar. Malaysia and China are cutting dollar reliance. Saudi Arabia is shifting to Yuan and Russia also uses it as the most traded currency. The dollar is no longer required in international trade with India.
Market analysts say that it might be the end of the dollar as the world’s reserve currency. This sure will affect the global economy.
Some monetary specialists, so the FED, believe that the light at the end of the tunnel should be the BTFP (Bank Term Funding Program). By giving one-year loans to banks, credit unions, and other institutions, they try to ensure the liquidity of these subjects.
This monetary injection is kind of a push-and-pull game and it’s risky, but it is an emergency program so they guess it will cool the economy down for now.
On the other hand, some financial experts say that investing in precious metals might be the solution. Gold is seen as the best safe-haven asset. They say coming back to a gold standard could repair a part of the damage made in the global monetary system. Fixing the value of currencies to the amount of gold is a well-known stability-providing method, which the U.S. abandoned in 1971.
Investors are already turning to gold and silver for safeguarding their money, so allocating investments in precious metals.
The stability of the global financial system is shaken and the illusion of macro-economy safety is gone. A global strategy is needed as soon as possible and it has to be applied urgently. It seems that we are at the doorstep of a big monetary change, a kind of financial revolution.