More Bank Shenanigans

Just as the last bank crisis was fading from memory, a new bank crisis is emerging, this time staring First Republic Bank. Despite upbeat earnings, the bank’s stock has collapsed this week. The market cap has fallen below one billion for the first time in the bank’s existence. They are currently begging the big banks to shift some of their deposits into Republic to stem the outflow. Depositors are worried that the Feds may shutter the bank, putting their deposits at risk.

If this sounds like the crisis that brought down Silicon Valley Bank or Credit Suisse, that is because it is the same problem. Large depositors and insiders got worried and began to shift their money out of the bank. Because there are no secrets in this age and the plutocracy is relatively tiny, it does not take long for word to get out and the other large depositors begin to pull their money. Banks that rely on large dispositors will always be prone to these sorts of bank runs.

Oddly, this reveals some Dirt People wisdom. Silicon Valley Bank did not cater to the Dirt People, so Dirt People did not put their money in the bank. Instead, Dirt People end up at the big banks. The whole too big to fail thing in the prior financial crisis taught the regular guy a good lesson. The big banks are friends with the regime, so the regime will always protect them. If you want to protect your money against shenanigans from crooked bankers, put your money in a big bank.

The trouble comes when insiders in a particular industry, like the tech sector, want to conduct shenanigans away from the prying eyes of other oligarchs. This is why Silicon Valley Bank existed in the first place. It was the bank for the connected in the tech sector, so they could conduct shenanigans amongst other tech insiders. If you wanted to know what would be promoted as the next big thing in tech, you needed to be at that insider table, so doing business at SVB was necessary.

Since the American economy is nothing but shenanigans by insiders, it means all of the other areas have their insider tables too. That is where these other regional banks come into play. They will serve the large developers in a region, for example, who will park lots of cash in these banks. Those developers will draw in local warlords and potentates to their shenanigans, who will put their cash in the same local banks, so that moving money and information is simpler.

The information portion is the key to modern shenanigans. The reason the hedge funds operate in sleepy villages in Connecticut is that it is much easier to conduct shenanigans in person at a dinner party or on the golf course. If you are in New York, someone could hear you talking or you may be tempted to trust the wrong person via e-mail, so it is much safer to deal in person out in the leafy suburbs, free from the hoi polloi and the ambitious government regulator.

You can be sure this used to happen at Silicon Valley Bank. Part of what they provided to clients was introductions to other clients. One tech insider could socialize with another insider at his friend the banker’s house. If after a few drinks there were some shenanigans, who would know? This sort of thing plays out across the economy and regional banks often operate as junction points. A part of their service is putting likeminded investors together for shenanigans.

In the world of shenanigans, there is no honor, so when the money could find better deals outside of tech startups, they no longer needed Silcom Valley Bank and they pulled their money. A similar problem is happening in the commercial real estate sector, which is facing tough times. The work from home craze kicked off by Covid is here to stay, so that has cratered demand for office space. Crime waves in cities are killing urban commercial and retail properties.

The big drag on commercial real estate, as far as the banks are concerned, is the way in which property owners manage debt. If you own an apartment building, you never pay down the debt on the property. Instead, you keep borrowing against it as rents pay down the debt. That is the source of income. Of course, there are investors, who get paid from these periodic withdrawals of equity. Commercial real estate is not about the rents, but the equity, which can be pledged as collateral.

Imagine you have a property worth a million dollars. The rents far exceed the cost of maintaining the property, so it has a remarkably high cash flow. It means you pay taxes on those profits. If on the other hand, you take a mortgage against the property, the cash flow decreases, along with the taxes, but you now have a pile of cash to do things like buy another property. As rents pay down the debt, you periodically refinance the property to create a big pile of cash.

The trouble is interest rates are going up at the same time that occupancy is going down, which is driving down the value of properties. The bank is not only demanding more in interest payment, but they are also willing to loan less against the property, because of the declining occupancy. What is happening in commercial real estate is similar to what happened when the housing bubble popped. All of a sudden, lots of people are upside down on their mortgages.

This is what is pressuring regional banks. A bank that primarily works with commercial real estate is seeing a sharp decline in deposits, but also a sharp decline in many of the assets they are holding on their books. This is why everyone is suddenly nervous about the regional banks. Many of them were tied into the regional real estate markets, which are now in decline due to rising interest rates. First Republic Bank is probably the first shoe to drop in what will be another banking crisis.

Of course, the question that lingers over all of this is whether the Federal Reserve can keep the plates spinning while they work out decades of bad policy. As of this week, the Feds are not coming to rescue the local banks. They were not going to rescue Silicon Valley Bank until they had no choice. Commercial real estate has just as many powerful oligarchs as the tech sector, maybe more. That means everyone is going to be betting on yet another massive bailout of the banking sector.

All of this is a good reminder that America stopped being a market economy a long time ago due to the outsized role of banking. When you have control of the global currency, you can conjure money from thin air. When you have that power, you use it to command things of the economy that otherwise would not exist. That means this command economy is going to keep faltering as the people commanding it lose their power to command it to do things it should never have done.

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172 thoughts on “More Bank Shenanigans

  1. One notices that a story about this on The Five on Fox today depicted a few of big SVB customers : Jews and Brahmins with unpronounceable names.

  2. It’s very telling that raising interest rates to where they are even close to being non negative in real, inflation adjusted terms is enough to threaten to collapse the banking system.

  3. Wham! A homer, wham! Another homer… you’re on a streak Zman!

    I’m no financial expert, in spite of taking economics in college, but my gut tells me this collapse is going to make the Great Depression seem like the good times compared to this.
    The whole capital / finance system is way bigger and more complex than it was in the 1920’s. In spite of the collapse of Wall Street in the 20’s, those fat cats were far more intelligent, risk averse, and just plain smarter than the psychopaths running todays banking / finance.

    • Those clouds were not so far removed from the dirt. Today’s clouds don’t even know what dirt is

    • A major change in the present is government’s vastly greater entanglement with all things economic/financial. Of course, all that was “sold” as promoting stability, fairness or whatever. But as with nearly any other institution, it has been co-opted by the ususal suspects.

  4. All merely a symptom of what’s happening globally as there’s a major run on collateral. This run started before Silicon Valley Bank, most notably in Japan but also elsewhere, including Germany. That’s how you know this is about more economically and financially than 99.9% of people are aware of. Say hello to the return of 2007. Yes, it’s the same this time.

      • I would argue from all the data that it appear worse than 2007, far worse. I only vaguely follow commercial real estate, but I’ve seen how the CMBS are having major issues. If you have insight, I’d love to hear it.

        • It has to be worse, because they never let the market correct from the 1990-2008 excess. They bailed it out, on your dime to keep insiders insiders.

  5. The only thing missing from Z’s analysis today: A recession with a lot of depressed, cheap properties on the market? Gee, what a buying opportunity for the big boys (Black Rock, Vanguard, etc.) They will scoop up the properties on good terms. Lather, rinse, repeat. Intentional market manipulation? Or just fairly taking advantage of economic cycles? A bit of both, perhaps? Meet the old boss, same as the new boss? Not exactly: The oligarchs are all on board with elimianting as many of the little bosses as possible. “It’s a big club, and we ain’t in it,” said Carlin.

  6. As someone whose old job at Wells Fargo expired at the end of January (it was a contractor job). I have a new job at another financial institution that I thought I would enjoy because it said it was an investigative position.

    It turns out it’s the same bs nominally white collar job I’ve done. It involves doing background checks on people. Like I have no idea what the objective is. Who sent me the information and wouldn’t it be easier to figure out what the end goal is first? It’s like if there is a ten step process to something and Im only given steps five and six – how am I supposed to know what I’m doing?

    The other thing I’ve noticed is that despite being an office job, the type of people who work here are kind of lumpenprole. It does have a call center within it so that might explain it. Nonetheless it feels weird because I don’t have much in common with the people here as a failson. I’m staying put for the time being though since I have insurance through them.

    Anyone else experienced the same things I have?

    • Don’t fret, GloboBank has a million people lined up in Pune or Hyderabad to do your job.
      Remember: you are a valued member of the GloboBank family. Your health and safety are their number one concern.

    • Background checks are meant to comply with the stringent Know Your Customer (KYC) regs introduced to prevent money laundering. Unless a bank can dot the “i”s and cross the “t”s on this stuff, they’ll be completely shut out of the payment transfer systems like SWIFT. The international correspondent banks that tie globohomo together are particular sticklers for KYC as payback for FACTA, which basically ended the banking secrecy enjoyed by oligarchs in countries like Switzerland.
      The bottom line is that we Dirts don’t need to concern ourselves with this sort of crap because our sub-$250K accounts are a rounding error for these Clouds.

  7. “I swear, I am going to pistol whip the next sonufabitch that says shenanigans!”

    • Yes, its one of the words I have an uncontrollable rage against.

      I think it’s because it’s one of those “nice” words people like to use while there are more basic and honest words available.

      I prefer to use “crimes, deceptions, frauds, and tricks”

      • Agreed.

        A shenanigan is putting a whopper cushion on a chair, not stealing an election that allows policy decisions to get one’s loved one disabled or killed.
        I hate when it’s used regarding election fraud.

        • What the hell is a “whopper cushion” — and do they sell them at Burger King?

          Sorry. Couldn’t resist.

          • 🙇‍♂️

            Oh brother.

            I have to make sure the spell check doesn’t get involved before I send……

  8. Economic forecasting in a “free” market economy should be pretty straightforward, if you have good access to good data, but in a rigged palace economy it’s impossible unless you’re inside the palace. And it has been a rigged palace economy for longer than most are aware. This, I believe, is the fundamental cause of the paucity of economic forecasting in recent decades.

    Predicting when or how the palace falters is also probably impossible, since from the outside how would you know, and from the inside you’ll be afflicted with the same kind of normalcy bias toward it that most everyone is toward their own affairs. For example, even CEO Richard Fuld honestly believed Lehman Brothers was a viable enterprise right to the end, unable to accept what was happening.

    A dissident, by his nature, hopes for the collapse of the system, and must be mindful that his expectations of such are not wishful thinking. Likewise, people selling gold make their regular collapse predictions. Never mind what FDR did about gold 90 years ago during the last true American collapse, or at least the closest thing to one that anybody knows about.

    But we can gauge the stability of the palace by how often and to what degree it contravenes observable reality in its public statements, which suggest that it is just as much in contravention of reality privately. And that sure is happening a lot lately.

    I am certain that the colossal. almost unfathomable waste of resources on climate wunderwaffen will be the slow economic death of the GAE if nothing else causes a faster death. There is no public opposition left to this gargantuan, empire sinking money pit, so it is inevitable.

    • Give the negros some credit. They can destroy things faster than anything else in existence. I say they beat out the climate change hoax.

        • We need to get the rumor going that reparations checks can be picked up in person at Blackrock corporate headquarters.

          • I know I am veering slightly off topic, but here is my reparations proposal. Ask every black person in the US to push a button that would magically erase the entire US history of participation in the slave trade. Their reparation is not having to push the button.

        • The Biden admin is trying to scale it up for them with their intention to seed them throughout wealthier white neighborhoods.

          • That seems to have been the plan for years. Complicating matters is that even the most Liberal [wealthy] non-Blacks (or Talented Tenth for the matter) are aware of the implications for the value of housing and impact on public schools. And even foaming-at-the-mouth advocates might take pause when they consider that their criminally prone transplanted pets, which of course is a substantial portion, will run afoul of a local criminal justice system that likely hasn’t been dominated by decades of liberal/leftist/Democratic machine influence. In other words, little D’Shaunte is not going to be treated with the kid gloves that he was when back in the big city.

            Maybe just stay in the ‘hood guys; at least you’ve got the local government more on your side. Now it’s true there won’t be as many White girls, but on the upside, you are less likely to be doing ten to life for armed robbery or carjacking.

    • To whit, Jeffrey, today’s announcement by the Energy Secretary that she expects all US military vehicles to be electrically powered by 2030. Sounds entierely reasonable to me.

      • Yeah, I want to see the first Abrams EV’s roll off the line. What they’ll do, what they have to do, is perhaps buy/construct a few local, smallish, operational vehicles to electric. In short, cars used for military around the base. Anything that’s used operationally for off shore is gonna be fossil fuel. It can be no other way.

        • I will not underestimate the scope of their delusion. The mind virus is real. The older millenials are just now entering management.

          • I’d not bet against you. But Lord help us when the military loses big due to such “delusions”. I remember immediately in the new Clinton admin and Somalia fiasco when the Marines had no troop carriers in the conflict. Defense Sec was cashiered for refusing them.

            Then there was the 2nd Gulf war and the under armored Humvees. All hell broke loose again. I actually got to see the newest up-armored Humvees,ast week. No more steel plates, but some sort of Kevlar type material. Much, much lighter—but still putting lip stick on a pig. Humvees are not designed for such, and combat military EV’s are and oxymoron.

          • Don’t worry. They will produce deep fake footage of glorious tank victories and air them 24/7 on propaganda organs. The delusional are easily satisfied.

        • We cannot build anything like that anymore. . not tanks, rockets, ships, etc she might as well plan to run them on fairy dust .

      • I looked up her bio (Wikipedia.) 100% political animal, poli sci undergrad, Harvard JD not too shabby, but not one iota of science or industry experience. I realize that is not unusual for top political appointee, but just the same….this woman hasn’t the least conception about what she reportedly is advocating.

        I’m have a bit of science background. Didn’t do well in physics, but even I can predict that a lithium or equivalent battery large enough to power a tank may not even be possible, and even if so, probably not remotely feasible. At best, it’d be risky mass of several tons, only a few notches down from thermite in terms of flammability.

  9. Isn’t this why we have derivatives? Bubbles expand and players leverage. Bubbles contract and players deleverage. It’s the same brick and mortar with revenue in, expenses out. During the downturn, the big fish acquire the little fish. The value of the asset is its fluctuating arbitrage. If tech geniuses could get the money interests to cooperate, all would enjoy the rise and dis-enjoy the fall with everyone’s stake being proportional to their skin. It’s that little seed of temptation — my neighbor’s misfortune could be the source of my gain — that seems to make the market a casino. No insult to casinos which are usually well run profit centers.

    • Well said. In good times the majority of people seem to think that honesty is the best policy. In the real world, alas, an analogy might be two hotels in town. Your competitor has to leave town for a few days. You have a can of gasoline and a box of matches on hand, and human nature being what it is, you get some ideas on how you might improve your market position.

    • ““There are some who think that these laws don’t really matter; that they are useless red tape or that no one ever gets caught,” Totten said.

      “To those people, I hope that today makes you think twice.””

      That’s pretty explicit and basically Soviet. The accused should have told the feds the emissions controls had to be removed to protect the illegal aliens they were hauling.

      Don’t remove the mattress tags, y’all.

      • Is there emissions checking for diesel tricks on a yearly basis as here for cars? I’d like to know more details of how they ran such a scheme for a decade or so undetected.

        • One of the few cool things about the rapidly decaying state of Michigan is that there are no emissions checks or annual inspections. That means no garbage stickers cluttering one’s windshield. They are also a single plate state.

          Where these guys seem to have gone wrong is keeping detailed transaction records and not dealing strictly in cash for this activity. This is essentially how they nailed Capone and a few other mobsters.

          • I don’t know if it’s true or not, but from my scant knowledge of folk history, supposedly the Feds became able to act against Huey Long’s empire because instead of using the railway message service to send dubious funds, some genius put an envelope into the U.S. Mail.

    • “There are some who think that these laws don’t really matter”

      Wherever would imperial subjects get that idea.

    • “Prosecutors say that between 2012 and 2018, the men were involved at various levels in a scheme to “delete” emissions controls from heavy-duty diesel engines to improve vehicle performance, fuel economy and save on maintenance.”

      That last part is interesting. I didn’t realize how much emissions controls decreased vehicle performance and fuel economy while increasing maintenance. Not to mention the high cost of the controls themselves. Oh, well, any sacrifice to please Gaia.

      • “I didn’t realize how much emissions controls decreased vehicle performance and fuel economy while increasing maintenance. Not to mention the high cost of the controls themselves.”

        Anything that restricts the intake or exhaust flow of an internal combustion engine will decrease performance and efficiency. Note that on high performance engines like those used in racing or older aircraft the engines use short headers or pipes for exhaust. Yes it’s loud as Hell but there’s little to no back pressure to fight against.

        Run an exhaust through two catalytic converters, two resonators, and two mufflers (for most modern V engines, one exhaust a side) and there’s a lot of performance robbing back pressure to fight against.

        With modern engines running very lean fuel and air mixtures to cut emissions and raise fuel economy, altering them to get a richer fuel mixture can boost performance as well.

      • That’s the thing. For a catalytic converter to work, it has to be kept very hot. Cruising at low trim at speed doesnt generate enough exhaust heat in any combustion engine to keep the cats working enough, so the ECM keeps enriching the A:F, deliberately wasting fuel to keep the exhaust pipes hot. On a big diesel doing long haul OTR loads, you can see a 30-40% fuel efficiency drop where you should be cruising at part throttle, which is hundreds of dollars a day for these guys.

  10. I was a high schooler in the late 1990s during the heady days of the tech boom, and I could foresee this moment coming even way back then. I did not know much of formal economics at the time (I have since studied it quite a bit), and I did not know anything about investing or banking or regulations (I do now), but I knew a little about history and I could trace out the ebbs and flows of human behavior over time, and it was undeniable, even if indistinctly grasped, that we were headed for this moment. Consequently, I have been thinking about all of this for a very long time.

    I know what the best way to get out of this mess is. It doesn’t mean anybody will try to do it, but if somebody were to try, this is what they should do. We need to monetize the debt and restrict the power of the banks and Wall Street at the same time. These seem like mutually exclusive goals, but there is a way it can be done while also incentivizing much needed production.

    The key would be to implement much higher interest rates along with protecting the purchasing power of workers through a reverse income tax wage multiplier. The needed “QE for the little guy” must be linked to employment so that output remains high. Savings would be protected by the government paying a hefty, above market interest rate on savings accounts. So, even though wages would skyrocket, and a virtuous wage-price spiral would obliterate old debts, it would still discourage people from purchasing too much because they could get a better rate of return leaving their money in the savings account.

    Consequently, there would be a huge pool of savings available for future investment, but only the most profitable firms could access it because only they would be able to pay the interest on it. Firms would have to struggle to be profitable but they would also be forced to pay the highest wages they could possibly afford, because the reverse income tax would be indexed to pay rates. Any company that can afford to pay even an incrementally higher wage would mean that the workers there receive an outsized premium due to the wage multiplier.

    In essence, this plan is the literal antidote and antithesis to the decades of NIRP. It not only restores market discipline, it puts it on steroids. It punishes speculation, rewards saving, unburdens workers, protects wages, and promotes intense competition and maximum productivity. No more zombies; everyone must either live or die.

    It would take quite a revolution in thought to put this through, but I think the people will jump at it if somebody can keep explaining it clearly and consistently.

    • “It would take quite a revolution in thought to put this through”

      I’m dumb about this stuff, but your idea makes sense to me. The problem is people and their economic interests. How they make a living.

      Was listening to EMJ as habit the other day, he was talking about how Reagan set all of this up, or allowed it for donations. Buy the company, run up the debt, keep the profits, let the company go bankrupt, sell the assets and offshore production. Something like that.

      Basically the same thing being done to the country itself. Not for lack of a better idea, but because that’s how the people doing it conduct business. So basically, it’s bad people and not bad ideas that need to be turned over.

    • The problem is that the government is not in control of the “little guy”, but in control of the big guy who is intent on gutting the system to his own benefit. However, the little guy is perhaps the greatest recipient of government largess (in total). 75% of the Fed budget is *entitlements*—not subject to discretion. So there are few allies o the cause.

  11. As a working man with a marketable trade skill, in the waning years of my work career, and who is “reasonably well paid” for what I do (ie an honest days work, doing something that maybe 1/250 men have the knack to do really well) this kind of thing in this post infuriates me, and nearly makes me sympathize with communism. (Emphasis on nearly)

    Ten or more years ago, I would have scoffed at the idea of hating rich people simply for being rich. I still resist that urge, but there is something imbedded deeply in my DNA that believes all men should experience blisters on their fingers, at least in their younger years when they’re entering the work force.

    Now don’t get me wrong, I think merit and/or experience should reward people as they move through their careers. A 50 year old man shouldn’t have to earn his living doing exactly the same thing he was doing when he was 20, and he usually should earn more due to his knowledge and experience. (How much more depending on his merit).

    I also understand that we need people doing work that isn’t physical. My skill set is much less physical than it is mental. (Though I do get blisters sometimes).

    What I don’t believe in is people getting rich swinging a golf club and trading their get-rich secrets with other rich people, with all their get-richer schemes resting on the misfortunes of others. Crooks and scoundrels have always been with us, and always will be. I’m just sick of this idea that people who are born into lives of wealth and privilege are allowed to maintain their lives by jet-setting around and plotting ways to steal from others. Not knowing that I’ve done everything honestly my entire life, and even though I should be able to retire at a reasonable age and enjoy that period in my life, I know I’ll never have the sense of financial security that older people should be able to have.

    I’m not a communist. But I do feel the same kind of anger that people at the turn of the last century felt, watching the robber barons looting their countrymen.

    • It’s kind of like all the “billionaires” these days. When I started in business 40 odd years ago, the term billion didn’t get used all that often, much less in terms of someone’s personal fricking net worth. Now there’s more of those
      f-ers than you can shake a stick at – undoubtedly to the detriment of everyone else – not only in terms of the rest having less, but also often pushing policies/agendas that do further harm to society, while lining their pockets in the bargain. I’d also posit that the majority aren’t worthy of that vast excess wealth. Just one more thing that requires a reckoning.

      • Granted in part it’s because a dollar has lost a lot of value, but just look at some of the billionaire class. Oprah Winfrey is worth 2.5 billion dollars. A black blimp who found a niche as a talk show host??? Call me a racist and misogynist if you wish (and guilty as charged, I’ll admit.) You will have little trouble finding your own crazy examples.

        • Oprah’s OK in that she provided something in return for her money. The women loved her show and are a pretty loyal lot, so she could spin off all sorts of side hustles to increase her earnings. The women in my family all flocked together to watch Oprah every afternoon. Then the damn side hustles started to arrive: Oprah’s “O” magazine, Oprah book of the month, Oprah clothes, Oprah diet, etc.

          It is what it is. I also don’t think Oprah is a low grade moron or at least recklessly impulsive as proven by her business enterprises and her accumulated wealth. Lots of her kin in athletics and other entertainment areas hit it big, then lost every nickel when their career ran its course. They simply thought only of the here and now,

          • Fair enough. Point I’m trying to make is that Fortune is very uneven. I’m not saying that the super rich should have their wealth confiscated (if they played by the rules to get it). I AM saying that some people get rich by dumb luck, although of course starting rich and having connecitons is the preferred way. Hell, some lottery payouts are 1 bilion+ these days (pre-tax, to be sure.)

          • I think it’d be proper if oprah acknowledged that her ancestors being shipped here are the ultimate source of her wealth – together with grifting of the White woman cohort. However, she’d prefer to castigate Whites “steeped in racism” to hopefully die soon, or some such. The hell with her fat black ass.

        • Love her or hate her, Oprah produced content that tens of millions of women love. And was savvy enough to own and retain the rights to it.

          Mark Cuban became a billionaire without producing anything that anybody used or wanted. Other than the greater fools at Yahoo who bought it from him.

          • “Love her or hate her, Oprah produced content that tens of millions of women love. And was savvy enough to own and retain the rights to it.”

            She’s a credit to her race.

    • At least the robber barons of the late 19th century were delivering:
      Concrete; and,

      What exactly is Zuckerborg’s value add? Dorsey? The Indian running Microsoft?

      • They were better at the philanthropy side of things, too. Andrew Carnegie built a gorgeous library in my rust belt town, still in use and in great shape. Today’s oligarchs try to fund your children’s reassignment surgery or the vista-destroying windmills just outside of town.

        • Those Carnegie libraries are in small towns all over the country, many still in use.

          Our host has expanded on this topic before, but essentially the difference is that the “robber barons” of old still lived in this country and considered themselves citizens of their communities. If your mansion was just up the hill from where your workers lived, it was important to make efforts to keep them somewhat content. They knew where you lived and could get there quickly.

          The modern-day billionaires have absolutely no connection to any communities–they’re “citizens of the world”–so they don’t give a damn what the dirt people think. Combine that with a level of wealth that provides really high-end security, influence and mobility, and they have no fear of being punished for any transgressions. A mob is marching on their “compound”? No biggie, by the time they make it through all the security measures, the billionaire is has already taken their fast helicopter to the private jet to scoot them off to one of their many other compounds, that has even better security.

          • Charles Murray in “Coming Apart” touches on the long-gone aspect of the rich man tending to live close to his factory and workers. Taking him at his word and my memory being somewhat accurate (the latter a risky gamble, however!) more or less, in 1950 while a Rockerfeller, a Bush, a Carnegie etc. scion would likely of course attend exclusive private academies, it was likely as not that the children of the assembly line workers as well as those of the white-collar managers who worked in the offices, up to fairly high incomes, probably attended the same public schools. The blue-collar folk lived in more modest homes, apartments perhaps in a larger town. But there was far less social and geographic stratification back then.

            It’s dismaying how much America has lost in just 2-3 generations. Maybe 3-4; I’m getting a bit long in the tooth (but at least I still have most of my teeth!)

          • I’m on the library board of directors in my town specifically to thwart any moves to introduce such degeneracy inside our four walls.

    • Sum, my feelings are similar. Envy should be discouraged within oneself and in law. (As a young guy, I was a Randian objectivist for a while.) Nonetheless, what are our choices if we find ourselves in a plutocracy, as we do?

      What follows is the kind of “what if we were planning a society?” thinking that annoys Z Man.

      Since my main concern is the ability of the rich to buy politicians, which is what we have now, I favor some sort of wealth tax that is severe enough to prevent rich people or corporations from having that ability. I acknowledge the many problems with this proposal, but if you are serious about crippling plutocracy then you must consider solutions like this.

      Another idea that I play with is to outlaw unproductive speculation on the stock market. In practice, this could mean banning all financial instruments/derivatives, except for futures that help productive people like farmers weather the unpredictable nature of their work.

      I expect many readers to recoil from what I have suggested, but if one wants to inhibit plutocracy, what are other strategies?

      • It’s not envy so much as resentment, resentment over the fact that the wealthy in GAE mostly got rich by being clever about how to move files from one folder to another, often at our expense.

      • I always thought that the tax rates ought to be a lot more progressive, go back to the old 90% or so rate, disallow most deductions and count things like cap gains and the like as ordinary income. Despite high marginal rates, or because of them the 50s-60s were the time when income disparities were much less than now.

        Also keep corporate money out of elections, set executive pay limits and clawbacks if management fails. That would end the Mitt Romney-type vulture capitalists.

        • Add one more thing, find a way to get wages up so almost any working man can support a household on his paycheck.

        • If this country was run for the best interest of its citizens, there wouldn’t be any income tax at all

          • But for revenue to carry on the legitimate functions of government, wealth tax and high sales tax. The latter would have the benefit of discouraging “conspicuous consumption” and spending on frivolous goods. How many thousands of dollars does a 50-yard-line seat at the Super Bowl sell for these days?

      • Line: I often ask the hypothetical question “How rich is rich enough?” While someone who demonstrates initiative, hard work, risk and/or ingenuity ought to be fairly remunerated, I still have a hard time reconciling the tremendous variance in income levels. Not to mention the obscene amounts paid to useless and generally dysfunctional people like sportsball players and actresses. At the same time, I don’t believe in equality and don’t desire an artificially ‘leveled’ society. Will putting any limit on potential income/wealth destroy natural human striving and initiative? I have no easy answer.

        • “I still have a hard time reconciling the tremendous variance in income levels. Not to mention the obscene amounts paid to useless and generally dysfunctional people like sportsball players and actresses.”

          You are right; these amounts are obscene. But, when it comes to useless and dysfunctional, you can’t top the average public school administrator, whose 400k salary is more offensive to me than whatever God-only-knows salary Aaron Judge is being paid this year.

          As to upper limits, take Bill Gates as an example: Rich and influential to the degree that he can influence large-scale policy in areas where he has no expertise whatsoever, he is also a maniac, and no self-governing people should have to tolerate him; let him build hospitals and buy yachts; beyond that, if he shows himself a menace, I say claim 90% of his wealth under some form of eminent domain and be done with him.

          So: My “communist” take on income limits: You can earn up to a billion, and that’s it; in the public sector, top dog in any organization gets $125,000, beyond that, get a real job or piss up a rope.

    • I’m a Mike Rowe kind of guy myself, always said he should be Sec of Labor, but that has its limits. A good entry level part-time job for a young person is great and a wise wealthy father will put his children to work learning from bottom up “the family business.”

      But such is not the norm today in many areas of endeavor. Ask yourself, who do you value more in society: the construction worker or the oncologist at the cancer center? There is nothing wrong with construction work, but there are few who can become oncologists and treat cancer.

      The old Soviet Union did actually ideologically treat the construction worker as they did the oncologist. I read many years ago that the pay scale was set for heavy equipment operators somewhat above doctors under the regime. We know where that got them.

      • This Each According To His Abilities issue reminds me of the related theme, whenever some moron political mouthpiece (pick your partisan flavor) poses as Joe BudLight by virtue-demagoguing against higher official salaries to U.S. House/Senate ($174k for both; note I’m not referring to substantive criticism of the legislature’s personnel economics, I mean the television bravery of standing with The Folks against The Swamp on possibly the least relevant fiscal policy point today, i.e. that Congress doesn’t “work hard enough”).

        “When you pay peanuts you get monkeys” -George Wallace (the comedian)

        • I might also add that waay back when these folk started screaming about Congressional pay, the report I heard was that something like 2/3 of Congress were *millionaires* upon taking office! In other words, they did not need the money and would be happy to accept no pay. Obviously the job pays off in “perks”. 🙁

          Another thing folks seem to have forgotten is that Congress hasn’t voted themselves a pay raise in decades. Why, because they fixed it (80’s?) so that cost of living raises are automatic—just like SSI.

      • “There is nothing wrong with construction work, but there are few who can become oncologists and treat cancer.”

        I suspect that if you spend a lot of time around oncologists you’d find that it’s one of the most over-rated specialties in medicine. Most of the ones I deal with are just not that bright, or maybe were bright many years ago, but have since gotten way too comfortable. It’s a demanding field that requires keeping up with current research and most of them are far too lazy for that nonsense.

        Many (if not most) oncologists fall into the category, “when the only tool in your box is a hammer, every problem looks like a nail”. Seriously though, if you ever get a cancer diagnosis, getting a second or third opinion on the diagnosis and treatment options is crucial. And nnot from a different doctor at the same practice, because they tend to think alike and back each other up. Go to a completely different institution.

        • Second opinion wrt medicine seem essential these days. Hell, most doctors simply look at their controlling org’s “standard of care” diktat and go with it. I remember my doctor and his recommendation for the Covid jab. He’s sweating balls now and I’m just fine without it. 😉

          But anyway, I was just pulling a specialty out my ass for the example. I’m sure there are any number of comparisons between professions/jobs that can be made similarly. Some jobs have higher requirements for performance than others and therefore command higher renumeration in the market. To flatten the renumeration to something one assumes “equitable” is the fast path to economic hell—as well as denies human inequality.

        • If you have the time and inclination, delve into medical research papers. I can’t help you learn the jargon, and some of those papers are only via expensive servers. But a wealth of stuff is open acess, such as at PubMed.

          I will skip details for now, but in the past year I did exactly such research on several routine treatments I took, and decided the cost/benefit ratio just wasn’t there. I’ve read the same analysis holds for a wide array of other treatments, as well as diagnostic procedures. At least by some critics, many routine screenings actually are of little benefit on the margin. Alas, a lot of the medical business is driven by what insurance or Medicare pays for.

          About the last person who will ever tell you any of the above is your doctor or other provider — unless, perhaps he’s one of the rare fee-for-service ones left.

    • I’ve no truck with somebody who gets rich supplying something that people want/need. What chaps my patootie is seeing some airhead fresh out of the “right” college getting paid six figures for a make work job at a company that never has and never will make a profit. And the millionaires, sometimes billionaires, who run such “enterprises.”

    • Here’s the thing though: for six thousand years, your progeny was your “retirement plan.” Now, in the last 75 years, people (especially of a specific generation or 2) have decided that the government and or your own bootstraps should care for you in your dottage. Much evil has come from the idea of “building your own comfortable retirement,” not least that such is a mirage built on “robbing Peter to pay Paul” financialization shenanigans. You should be turing to your dutiful sons and pietous daughters at your station in life, not your “financial advisor” and your accountant.

      • This seems a modern thing, perhaps even only a modern “Western” thing. When I went back to Europe with my father to visit the “homeland”, we walked by the old age home (in his birthplace) for the town. He explained that when folks had no alternative, they were placed there when he was a small boy. He also said that the expenses were assessed/apportioned to the individual’s *family members*—children, sisters, brothers, etc.

        That’s how it was done then. Families were expected to be responsible and take care of their members. Now we (USA) have advertisements—heard one the other day—advertising a firm’s advisors creating plans to hide your elderly parents assets from Medicaid/Medicare/Access recovery efforts upon their deaths. So not only do you rid yourself of a burden (Parental Responsibility), you get/attempt to keep whatever assets they had and pass the cost off to the rest of us.

        Gawd I hate this society.

    • This is what happens when we let some insiders put their thumb on the scales of literally every financial transaction by corrupting the currency.

  12. How are the banks supposed to survive this catastrophe? All the banks have the same essential problem. They all hold a bunch of low interest long term debt in the form of bonds and mortgages. The Fed’s balance sheet is already $8.43T At the start of the last banking crisis, the Fed’s balance sheet was a few hundred billion. I assume the low interest bonds and mortgages are at least another $10 Trillion. The consensus is for the Fed to raise interest rates 25bp next week.

    Worse, a good 1/2 of the government’s debt is in short term bonds. If they issue new bonds to pay off the old ones, it will be at a new higher interest rate. Higher interest payments are arriving just in time when SS payments are set to explode and as the military has drawn down its equipment which now needs to be replaced at a minimum, not to mention continuous new equipment to be sent to Ukraine.

    Big changes are coming.

    • But Tars, it’s the “velocity” of money that counts. Look at it this way. The Fed’s will print money and give it to the MIC which will buy munitions. The munitions manufacturers will buy supplies and hire more employees. The employees will buy bread from the local baker who will now have money to pay his mortgage to the local bank. The local bank will now be solvent and begin to loan out more money…

      Well at least the bullshit above is the “official” line. 😉

      • Bravo. A variation of Bastiat’s so-called broken window fallacy (easily google-able; I shan’t elaborate here.) A variation from Keynes, I think, was the concept of a community thinking they’d increase the common wealth by taking in each other’s washing at ever-higher prices.

        Wonder how we got here? I’m probably oversimplying a bit, but it starts with the governent giving chartering a private central bank (the Fed) since in theory, they would be less susceptible to government manipulation. But what about banks manipulating the government? Did they think of that? Well the bankers probably did. Now, I’m sure it’s hidden behind layers of accounting, but consider that so-called Fed balance sheet. Call it $8T or whatever. Here’s a pithy question: Just who owns it? “The FED” probably. Is that actually the member banks thereof? How did the Fed acquire all those “assets”? Didn’t they create money out of thin air, buying those assets? I think so. In less flattering terms, I’d probably say they bailed out cronies who had bad debts on their hands. One hand washes the other, so to speak. Great scam as long as it lasts.

        • No “bravo” earned. I stole it, but just the gist. I can’t remember all the actors and relationships. I only seem smart at times. I steal shamelessly from others. And you know something, I’m fine with that.

        • The Fed wasn’t even the first attempt. I think the first version was killed by Andrew Jackson.

          I believe the federal reserve act was passed on Christmas eve, when all the goyim were home.

          They knew exactly what they were doing. The first thing they did was fund a war. The second thing they did was blew up a giant bubble and then collapsed it and drew down the money supply. A lot of consolidation happened in the 1930s.

          “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered….”

  13. This leads us to the shenanigans of the Summer of St. Floyd riots. They were promoted, permitted and celebrated by the oligarch’s mouth pieces. Yet, they had to have hurt commercial real estate. The legalization of looting is the same. It directly hurts the retail oligarchs and whoever finances them.

    So who is permitting this and why? Is this a potential crack/rift between factions of the oligarchy? They could crack down on this. But they don’t. I’d love to hear people’s thoughts on this.

    • Those now making decisions in America are not seeking to repair the economy or to maintain the financial system.

      They are seeking to destroy the nation and nationalism generally in order to bring in something that further consolidates their hold on power and wealth.

    • I was thinking about your point:

      “Yet, they had to have hurt commercial real estate. The legalization of looting is the same. It directly hurts the retail oligarchs and whoever finances them.

      So who is permitting this and why? Is this a potential crack/rift between factions of the oligarchy?”

      And thought about where I used to live: Chicagoland. I worked in the collar counties and in the city of Chicago in the actual Loop.

      So you’ve got to figure in Blue Cities and Blue States, a developer has to “grease the wheels/grease the palms” of the ruling party to get things done. And if these are large commercial developers they should have plenty of barrels of “grease” to contribute to reelection campaigns at the city, state, and national party level.

      So the COVID shenanigans occur, and “Mostly Peaceful” demonstrations occur, and people are quite happy working from home on their company provided laptops. Suburbanites see news stories and internet posts and say “DAMN! I’m not going downtown any time soon.” and stay out in the ‘burbs. Companies say “Well, we really don’t need all this office space with everyone working from home so . . . ” and let the lease run out.

      The Left cut their own nose to spite their face, but even worse, they cut off a major source of funding. They don’t seem to care.

      I think what’s happening is it’s a dangerous mix of hubris and ignorance where The Cloud People feel they can do anything they want and not suffer consequences. They can entertain any foolish idea and no harm will befall them.

      At some point the can cannot be kicked further down the road, and The Cloud People will squarely kick a brick wall and break their feet.

      • “The Cloud People feel they can do anything they want and not suffer consequences”

        I keep coming back to this. I call it “presumption of abundance.” Since they have never known anything else, never known consequences worse than a temporary dip in the market. Seems to afflict the majority of Americans who can’t or won’t remember the Depression.

    • The amounts of money held by today’s (let’s call them) financiers are so large, burning every building in the world wouldn’t put a dent in them. Their giant numbers are all “nominal,” fake, mere digits—of course. But that doesn’t matter at all. Islam isn’t true and it rules a third of the world. BlackRock (e.g.) does nothing but wreck your life.

    • Assuming the forces of Satan (or TPTB or whatever you wanna call them) are monolithic is a category error.
      People have interests, and then groups have interests. Sometimes the align, sometimes not. The PR grrlpower bosslady at Bud Light doesnt give a flying rodent fornication if a single can of pisswater gets sold, she gets a gold star on her resume and a new job with a 50% salary bump at some GoodThink marketing firm that her friends and classmates will admire even more than Budweiser (after all, dont they market mostly to white men!?!?). The group and the individual have divergent and opposing ends. See also, “principal-agent problem.”
      Here, it seems that the principalities and powers pushing for blood in the streets are not the same group and misaligned with the “fleece the suckers” group running the commercial real estate racket. They have different ends, command and control pathways, and different incentives for the individual operators of evil. Satan is as fickle and despotic to his followers as to everyone else, perhaps more so, and appears to delight in setting them at odds to one another.

    • @Reality Rules: Watch the Catherine Austin-Fitts interview of the documentary Planet Lockdown. Quite cohencidentally, every mostly-peaceful protest took place in a Fed redevelopment zone. The Floydian Mobs were used as a tool to gut the inner cities so that Friends-of-the-Fed can scoop up that real estate at a steep discount. Hello Smart City of the future. Enjoy your CBDC and being culturally enriched to death.

  14. The Fed is trying to ween the economy off of cheap money, and it’s going through withdrawal. The country – the world, really – spent the past 15 with the cost of capital at or near zero percent after inflation. The govt was effectively borrowing at a “real” interest rate of zero (even below at times), while Wall Street and big companies were borrow just marginally above inflation or even zero.

    Naturally, this lead to a massive borrowing binge by govts, banks, big-time real estate and large corporations. But now the Fed wants to get rates closer to historic averages because it has realized that ZIRP (zero interest rate policy) is terrible for economic growth and widens the wealth gap.

    But by bringing up rates, you cause several problems:

    1. You lower the value of every asset because all asset values are based on the risk-free rate. Increase the risk free rate and your assets need to fall in value to increase their future expected rate of return to match the increase in the risk-free rate.

    This is a massive problem for everyone, but, particularly, banks. That’s playing out right now.

    2. You increase the debt servicing cost for anyone with short-term debt that needs to be refinanced with the new, higher rates. This is the problem in the commercial real estate sector and will become a problem with many businesses as their debt that they took out in 2020 and 2021 needs to be refinanced over the next couple of years. It’s also an issue for govts, most of which are indebted up to their eyeballs.

    Given that global debt (non-finance) is 350% of GDP compared to 278% in 2007, which itself was high, it’s hard to see how the world can handle normalized interest rates.

    And, no, govts can’t dig their way out by raising taxes and cutting spending. That doesn’t work at debt levels this high. It just makes the problem worse. Nope, the path forward – at least for govts – was shown over 2021 and 2022: Let inflation run hot while keeping interest rates well below inflation.

    Govt debt around the world fell from ~116% to ~110% to gdp almost entirely due to inflation in 2022. That’s a nice drop. Keep that up for five or ten years, and you’re home free.

    • I’ve got a great idea that is going to help solve this problem. Let’s open up all of the countries to massive, unprecedented levels of migration. Let’s tell these migrants the society they are entering and getting bennies and being helots in are evil and that the heritage populations are disgusting racists. Let’s teach their children that they are preferred on the victim status chart and that the heritage population children are subservient and wicked.

      I think that will get the population all rowing in the same direction and willing to make the needed sacrifices to get through this transition and restructuring.

      • Don’t joke. I’m quite sure this will be floated as a plan to help boost economic growth, which is the one painless way to reduce debt to gdp.

        • It is the plan. Canada is going to go from 38 million today to 100 million by 2100. Clearly that is the plan here and in Europe as well.

          They actually believe that consumption drives the economy. This is Krugman’s spend like we are fighting off space invaders plan but with immigrants being given money to buy consumer goods and houses.

          Not sure how creating racial animosity is going to help. That must be a part of the plan somehow.

          • Egypt has 100 million people; Mexico has 120 milliom; Pakistan has over 300 million.

            It is quite obvious that just having a large population doesn’t automatically mean wealth, or power. Per capita or overall.

            Whether the people in charge are just dumb, ideological, and short sighted, or if they actually do want to kill all Europeans, well remains to be seen.

          • Gee, B125, what is the common denominator among the above countries? Could it be national IQ’s hovering about 90?

      • The powers that be really do seem to believe massive immigration is the proper response to the real estate problem. More immigrants mean mores warm bodies for apartments. So what if the taxpayer has to cover that rent. But it’s not really the taxpayer, it’s the money printer. So, it’s all just money laundering from the money printer to the real estate developer.

    • Problem is, even as the debt as a percentage of GDP may go down, the cost of servicing that debt goes up. The US government should have spent the last 15 years rolling all of our old debt and new debt into 30 year treasuries. But they didn’t. I hear about 1/2 of the US debt is under 18 months maturity.

      Every single day, more boomers retire and go from tax payers to SS recipients. All of that equipment we’re sending to Ukraine needs to be replaced plus whatever else we send them. All of the housing Boomers own are going to come on the market over the next 20 years, probably sooner. McMansions cost a lot of money to heat, to cool, to maintain and to pay property taxes.

      • The US govt will alright if it can keep their interest rate below inflation. But the question becomes whether investors will be willing to willing to accept that deal. Crazy as it sounds, they might since treasuries are more than just an investment. They’re used for all kinds of things (collateral) and also just as a way to access dollars.

        But let’s say that investors are willing to accept that deal. It still causes problems for the global economy. The global bond market issues ~$27 trillion a year in debt (either new or, much more likely, refinancing old debt). Well, the US now needs the global bond market to finance ~$8 trillion in debt – $6 trillion in debt being rolled over and $2 trillion in new debt (the annual deficit). That’s a huge portion of the bond market.

        Just a few years ago, the US only needed the bond market to finance ~$5.5 trillion in annual debt. In just a few years, the US has eaten up an additional 10% of the global bond market capacity. That means less money for everyone else.

        That’s a serious problem.

        But let’s say that the bond market isn’t willing earn less than inflation on US govt debt. Who picks up the slack? The Fed does via QE, and that only works if inflation stays low.

        Either way, the US govt – and most other govts – can’t handle paying interest rates at or above inflation for very long. It just doesn’t work, so it won’t happen. Whether the bond market pays the low rate or central banks, that interest will come down at some point.

        Hard to say exactly how that impact economies and assets. Really just depends on inflation. If the Fed can’t raise rates for a sustained period to keep inflation down because govt can’t afford the higher rates, we’ll have inflation like in the 1970s. Inflation shoots up, Fed raises rates, economy slows, inflation comes down, Fed lowers rates, economy picks up, inflation goes right back up. Rinse and repeat.

        But it’s also possible that slow economic growth keep inflation down by itself. In that case, interest rates remain low, inflation stays low, economies limp along.

        I’d say that the more likely scenario is 70s style stagflation, but it’s not guaranteed. What I do know is that the govt’s interest rates won’t stay above inflation for very long.

        • “What I do know is that the govt’s interest rates won’t stay above inflation for very long.“

          And that folks is Citizen stating the economic “law of gravity”. 😉

          • Govt runs a small deficit with just SS, Medicare, Medicare and a few other entitlements. That doesn’t include defense, discretionary spending or interest on the debt.

            What’s scary is that a bunch of other countries are in the same boat. We’ll know that the US is in trouble long before anything happens because other countries will fall first.

            There’s simply too much debt (govt, corporate, household and banks) relative to income. It can’t be serviced at interest rates above inflation.

            US govt debt of 125% of GDP. Let’s say inflation is 3% and real GDP growth is 2%, so nominal of 5%. Historically, the 10-year yield about nominal GDP growth, so 5%. That would be 6.25% of GDP – for interest expense alone. Govt tax receipts are only ~17.5% on average.

            That would cause debt to GDP to grow by between 7 and 10 percentage points a year, so we’d be 200% to 250% debt to GDP in a decade. That can’t happen.

            Interest rates have to stay at inflation or lower for the govt to continue to kick the can down the road. (We’re still screwed, btw; it’ll just take longer.) There’s no alternative, at least in the medium to long term.

        • “The US govt will alright if it can keep their interest rate below inflation. But the question becomes whether investors will be willing to willing to accept that deal”

          They were more than willing to accept that deal, because that was just the cost of doing business. Taking a hit to pretend there was any sort of sustainability was just the 10 for the big guy. In return financial institutions were free to run any ponzi scheme they could come up with. That can only work if the $ is the king.
          The king is dead, so now you will own nothing, speak nothing, eat bugs, take drugs, play video games and be happy, and that is only part of the problem, because people that will keep you happy will only get more corrupt going forward.

    • Sorry to break it to you, but the real alternative is World War. A state of emergency to first suspend and then renege on / renegotiate AND inflate away the debt.
      And then we get to rob the losers of all of their wealth, and then award ourselves contracts to rebuild all of the mess and destruction we caused.
      What’s not to like ?

  15. No one at the bottom of the social pyramid can influence any of the developments that are now playing out in the various corporate boardrooms and corridors of power in DC. We are all like ping pong balls floating down the Mississippi River, carried along in the current, and subject to whatever calamities may arise downstream. The Feds role in this debacle is to try and soften the inflation impact as much as possible so that the temperature in the boiling pot only increases a few degrees each year. Ideally, this keeps the pitchfork mobs at bay while kicking the can down the road.

    Why allow this insanity (overt which you have no control) to make you more crazy with anxiety and despair? How does that help you to survive the coming collapse? It does not. Rather, it just causes you to lock up and wring your hands uselessly. Better is to ignore “news” and retreat into the task of regaining control over your own life and circumstances. Move to a safe haven far from a big city. Stock with supplies and prepare to defend yourself against the coming Crazy. Save your anger and wait for the fog.

    • Amen. We simply cannot control the price of things; but we can control the decision to buy. Stop using credit to keep up with the Joneses or to self soothe with unnecessary “treats” like designer clothing, weekend spa trips, avocado toast and other Instagram-worthy foodie crap. Buy tools and basic necessities. Host BBQs and get to know who amongst your neighbors is reliable and worthy of cultivating as an ally. Shit is gonna get real and all you can do is endure it to try to survive it. Beyond providing initial motivation, fear and worry are counterproductive to the clarity and determination needed to adapt. Be prepared and be well.

      • “We simply cannot control the price of things; but we can control the decision to buy.”
        When the price of food went up 20%, I just started eating 20% less. But don’t knock the avacados, they are a pretty good source of healthy fats.

    • I don’t understand the downvotes, this is spot on. They are monetizing the debt slowly. And I think whoever said living well is the best revenge had this in mind, not “well” as in the sense of extravagantly, but rather as you should live.

  16. Glad to have it explained to a finance-dummy like me. I took two Econ courses in college and it all seemed like made-up gobbledegook to me.

    Despite my lack of expertise, I will opine that the solution to this problem is not technical, but personal. As in hanging a few Finance Shenanigan Bigshots from a Bayshore Highway overpass in Palo Alto. During rush-hour. Followed by a whole bunch of Accounting of the bank’s books, followed by more of you-know-what.

    I do not know finance but I do know human nature.

  17. “America stopped being a market economy a long time ago due to the outsized role of banking.”

    It’s not just banking, it’s everything. Autos, manufacturing, real estate — all of it is essentially driven by some combination of rent-seeking and or regulation. EV subsidies, MFN for China and Mexico, penalties for oil companies, tax breaks for mortgages and 401(k)s, medicine, etc. All roads lead to Washington. One of the most insidious false beliefs that Normie and Griller need to be disabused of is the notion that America is a “free country” with “private enterprise.” It isn’t. It’s corporatism, where “private” companies are effectively adjuncts of the State.

    • That “long time ago” is important. If Normie continued to think the United States was a market economy after the Eighties/Nineties Savings and Loan crisis, let alone 2008, he is uneducable. Hint: Normie is uneducable.

      • This is why I favor national socialism (lower case).

        Let’s dispense with the fiction that we have free markets and private enterprise, shall we? We already have a government-controlled, socialist economy. The only question is whether the socialism will benefit the American people, or benefit the global corporations, oligarchs, foreigners, illegal aliens, and an ethno-religious tribe who has their own country in the Middle East.

        I am not “for” socialized medicine by any means, but like it or not, the COVID hoax proved that the medical industry is 100% regulated by the government, and is 50% (or more) socialized already between Medicare, Medicaid, SSI, and the VA. My elderly dad died last year, with “insurance,” in a supposedly “private” and “religious” hospital that was totally regulated by the government, and the care could not have been worse if it had been directly run by the government. Meanwhile illegal aliens swarm across the border for a free ride on your dime while Americans get shit on. Fuck that.

        • I appreciate the sentiment, but calling it national socialism won’t change anything. Every government on earth is an oligarchy with a facade of democracy/capitalism/communism/socialism/fascism, whatever.

          Won’t Get Fooled Again by the Who seems wiser every year:

          There’s nothing in the street
          Looks any different to me
          And the slogans are effaced, by-the-bye
          And the parting on the left
          Is now the parting on the right
          And the beards have all grown longer overnight.
          Meet the new boss
          Same as the old boss

          Their solution is a little defeatist, but yeah:

          Smile and grin at the change all around
          Pick up my guitar and play
          Just like yesterday

        • There are definite problems and I’m sure some may be corrected by “socialized” medicine (leave the definition vague for the moment). However, such brings along its own problem. Examine the NHS of Britain.

          Basically, all these systems (as we’ve seen with Medicare) run into a fiscal deficit as demand always exceeds supply and in one form or another rationing becomes manifest in the system.

          But perhaps most obnoxious is that the elite of those societies do not use their mandated socialized medical system when they have a serious problem. They fly off to other—not so enlightened—countries for treatment.

      • I agree with this article and top comment confirming normie is tarded:

        Another comment reports an anecdote confirming libs are just fine with the controllers flying private jets because, “…they’re doing important work.”

        Total slave mentality. I highly doubt the controllers’ work is more important than the team of guys that keep the power and water treatment plants running.

  18. > The reason the hedge funds operate in sleepy villages in Connecticut is that it is much easier to conduct shenanigans in person at a dinner party or on the golf course.

    Read somewhere that in his real estate days Trump almost never put anything in writing until the final deal was made. Rest assured, he did a thousand things that were technically illegal in those Thousands of golf course discussions, but was subtle enough where the clients could read between the lines and there was plausible deniability and no trail.

  19. “America stopped being a market economy a long time ago due to the outsized role of banking”

    True, and obviously there are factors other than banking that make this true. As hard as it is for the ‘Muh Market folks to accept, the United States has more or less a palace economy, and while the government may not own the means of production, its connected oligarchs and their preferred servants certainly do, and that’s a distinction without much difference.

    GameStop was the tell for me on this point. When the plutocrats were outmaneuvered by a bunch of kids who, heh, made bank, federal agents were dispatched to “investigate” how this unauthorized profit-taking happened at the expense of the digital robber barons. It then became reasonable to assume federal regulation is routinely used to reward friends and punish enemies whenever “the market” works against the former and the latter profits. It is also reasonable to assume this caught the attention of foreign investors and entities long before the feds highlighted with the Russia seizures just how unreliable the United States can be for depositors and investors who are not its friends and allies.

    As to your post today, the propaganda organs have memoryholed the massive graft at taxpayer expense to bail out the uber wealthy at Silicon Valley Bank. The Dirt People who foolishly have more than $250k laying around Hooterville Bank are about to find out who Karl Schmitt is even though his name will not be mentioned. Those will millions that were idle in deposit accounts of SVB certainly know who he is, even if the name is unfamiliar to them.

    The lawlessness you have highlighted recently over time if not soon will destroy the American economy because trust is going if not gone.

    • While I was standing in line at the post office to mail taxes on the due date, a gentleman told everyone that he was born in ‘41 and has requested extensions from the IRS for longer than most people have been alive. He said he’s glad to do whatever it takes to make it harder for the bastards.
      The sand needs to become grittier.

      • This is not uncommon. Late penalties were painful when money basically was free, but now reflect the market rate more or less. Expect that to change.

        As far as sand in the gears, that is one of the few brakes on even more oppression.

    • One of the podcast Weinsteins (I can’t tell them apart) flipped out on Twitter when the Gamestop thing happened. The normal guys briefly outmaneuvering the insiders and being cheered for it, not the wild lawless regulatory/etc. response, signified that America was on a one-way no-exit road to Shoah #2.

      A *single instance* of normal people not losing in the “market”…


  20. As for control of the global currency – courtesy of Bretton Woods – conjuring money from thin air. and commanding into existence things that should not exist – it will falter (to put it as mildly as possible) as the commanders discover 2 + 2 does not equal 5 (or any number other than 4) and that gravity (or what goes up must come down) will not be denied. The height from which the fall to earth occurs will mar the world with a vile stain that cannot be erased for…a long time.
    Perhaps that’s too simplistic.

  21. In medieval Catalonia, bankers who became bankrupt, were publicly disgraced by town authorities, and given nothing but bread and water to eat until creditors were paid off – After a year, if bankers failed to paid, they would be beheaded & their property sold off to pay them

    • This is the right idea. Don’t try to solve the problem with technical adjustments, that never last anyway. Solve the problem with ‘personal adjustments’.

      • Indeed. That you reward you get more of, that you punish you get less of. Some of my favorite anecdotes are of how the CCP has punished unbridled capitalists whose antics crossed the line and were seen to be bad look for national economic policy. A bullet through the head being a typical government response. 😉

    • And it doesn’t take many examples to instigate a rapid return to honesty and integrity in the banking system. Ancient wisdom.

  22. “ If you want to protect your money against shenanigans from crooked bankers, put your money in a big bank.”


    I did that but over the years, my bank slowly stopped looking like a bank, and started looking like a gay bazaar in Bangladesh – complete with rainbows. I started having to deal with people that couldn’t speak English and a “small clerical error” ended up costing me $1700.00. The rag headed pajeet I had to deal with just shrugged so I pulled my cash. I put it into a credit union but I may just buy a cheap safe and keep my money at home. I’m seriously considering silver and gold.

    The more diverse your bank is, the greater your peril. There is a reason why those turd worlders wear their wealth instead of banking it locally…

    • Exactly. I was in high school during the ’08 TBTF crash happened, and even then I knew big banks were too risky, so I’ve only ever banked with credit unions my entire adult life. I’m not saying no one switched to big banks after that crisis, but the stats bear out the credit unions have gotten more popular in the last decade and a half.

        • They have the same FDIC insurance promises, deal with smaller and less frequent transactions, but are more tied to local economic conditions. They aren’t necessarily safer, they just have a different risk profile. In essence, they are unlikely to be bailed out if something goes south, but are equally unlikely to need a bailout.

          • Perhaps, but this brings to mind a strange event at the credit Union we had here that dealt with University and other school employees.

            One day it was announced the the CU was closed by the FDIC (or whatever the Fed agency was). The next day (literally) it was announce that another CU had assumed operation and financial liability (backed by the FDIC).

            Why odd? To my recollection, no reason was ever made public. I kept listening for one, such as insolvency or corruption of whatever sort. None was made public. Strange. Lost interest and since not a member, received no notification of reason personally.

        • karl von hungus: Their deposits are ‘insured’ not by FDIC but NCUSIF – i.e. still relying on fedgov to protect one’s assets. I don’t know if they rely as much on real estate as the big banks, but personally I don’t trust any bank or credit union much.

        • They’re co-ops, so they exist to serve their members, rather than making money off of customers. Otoh, even family comes down to trust.

    • I have had three significant problems with a regional bank in the last year. We were able to get them all settled correctly, but it was much harder and time consuming than it used to be. As long as you have below $250k your deposits are FDIC insured anyway. Your local and regional bank are most likely desperately trying to catch up to Wells Fargo and Chase in diversity hiring.

        • Insurance premiums are raised on survivors, and/or doors are shuttered, and/or assets seized. In theory there would be enough assets to cover all deposits under $250k. So the FDIC is self-funded…right now, before systemic failure.

          The caps were raised after the 2008 meltdown in anticipation of the next meltdown, I think, and that be underway now.

        • This. I think the math was that the FDIC is funded at about 1.5% of what it’s supposed to cover via insurance (I’m not sure if that was before or after they pledged to cover all deposits).

    • Same here. Every bank branch looks like a bath house from the 3rd world.

      Unfortunately all the big banks are same. There are some smaller online banks but its hard to gauge their hiring practices without them having physical locations.

    • Glenfilthie: This. We have been practicing ‘home banking’ to a large degree for a while now, although still use ‘big bank’ for paying bills. Just opened account in smaller, regional bank for bills in new place of residence (everyone here speaks English and there are no branches of ‘big bank’ within 100 miles). Husband is considering changing where his paycheck is deposited so it will be easier to remove larger sums of cash as needed. Working to ensure we have a suitable quantity of beans, bullets, bandages, and bullion on hand.

  23. “All of this is a good reminder that America stopped being a market economy a long time ago due to the outsized role of banking. When you have control of the global currency, you can conjure money from thin air. When you have that power, you use it to command things of the economy that otherwise would not exist. That means this command economy is going to keep faltering as the people commanding it lose their power to command it to do things it should never have done.”

    The US economy is mostly oligopolies, monopolies, and cartels — healthcare, military-industrial complex, tech. They’re all propped up by state sanction, power, largesse. But if all the zombie corporations — an increasingly large sector of the US economy — have to be propped by by newly created fiat money, then that fiat money sooner or later loses its purchasing power. I think this is what you’re saying. I also think the US economy is as ossified as the Soviet economy of the 1980s, or close enough. The US economy is a Potemkin village.

  24. Market forces stopped being relevant, at least since the ‘08 banking crisis and probably even before that. Now that the unquestioned dominance of the dollar as the world’s reserve currency is under pressure let alone assault, the idea that the fed can simply step in and prop up or buy everything in sight is getting more ridiculous sounding by the day. The natural cleansing process has been thwarted for years and the resulting sewer blowout is probably going to be one for the ages.

  25. Here’s what is really going on:

    ZIRP hit reality in 2021, finally causing the inflation that had been predicted from-its inception.

    To fight that inflation the FED has to end ZIRP and raise interest rates.

    ZIRP had lasted for more than a decade – which meant that all of the banking sectors assets are based on it.

    Which means that those assets will fall precipitously in value with the end of ZIRP.

    The FED will have no choice other than buying those assets at par – which will in effect create a further monetary expansion.

    The FED will also have to keep interest rates below the level needed to end inflation, until banks have replaced their ZIRP assets with new assets based on higher interest rates. Which will create further monetary expansion.

    All of which means that we are in for up to a decade of mid-high inflation, and rising interest rates – which will trail the inflation rate.

    It’s basically the 1970s all over again – and we’re about at 1972 in the cycle.
    So plan accordingly.

    • Thanks. I made similar points above in my comment. One thing that people need to understand is that govt debt can’t be brought down by austerity.

      Yes, austerity works fine for an individual. If I have too much debt, I cut my spending or work an extra job and use that money to pay down my debt. But govts can’t do that without impacting the economy. They’re too big. Corporations are the same, at least if they act in aggregate.

      History shows that govts that get in over their head in debt only make the problem worse by cutting spending and/or raising taxes. It’s too much, too soon. Yes, if a country notices early enough that it’s on a bad trajectory, it can very slowly and very gently cut spending and raise taxes to turn the ship around because it’s only marginally impacting the economy and letting growth continue. But once they get into trouble, that slow-go method isn’t enough to stay afloat.

      High inflation helped bring down govt debt to gdp around the world in 2022. There’s really no other choice but to keep that going for the next five to ten years.

    • While it’s not strictly a savings account, almost anyone can have a brokerage account. You can trade via your browser or your mobile. Trading costs are not always zero, but many times are. Here’s a major point: you can treat it as a boring savings account, gamble in the market every day, or literally anything in between. I recently looked over my past two years. I made several hundred trades per year. Of completed trades, my gain in two years averaged about 1%. I would have done better just letting it earn interest. Right now, most of my funds are in GLD, a proxy for gold. You could also invest in (un)safe bonds, etc. There are thousands of possibilities.

      Insurance: Yes, some form of it. In a major crisis, of course, you’re likely screwed. But in lesser ones, I assume it’s as safe as regular banks, credit unions, etc.

      Checking, credit or debit cards and other bank-like services are often available. But I use mine as my “home repair” account. Last year I raided it to buy a new heat pump system. It’s easy to move money to/from checking account.

      At tax time, accounting can be a hassle, especially if you trade a lot. But I just print out the transactions and let the CPA handle it.

  26. A friend has been CFO of small and regional banks for 30 years. He said TARP 2 is probably necessary. The problem is that almost every bank has a SVB or First Republic problem. Basically, these banks have 10 year treasuries and MBSs paying 2-3% on their books. These securities were investment grade in 2021 but now are underwater since interest rates are now 4.5% to 7% on these types of securities. Additionally, the loans on their books are less valuable as demand for commercial real estate, particularly office space declines.

    He said TARP 2 would consist of the Fed taking these securities onto its books and holding until maturity. It would probably halt the panic.

    Also remember that First Republic was heavily involved in the crypto stuff so the government does want to kill them.

    • I wonder what portion of the quadrillion dollar derivatives market is tied to this gap between book and market value. That is an unknowable number, but it is a number that exists.

    • Basically what Mike said. (Although I don’t think First Republic was really into crypto (Signature was though, so they got hammered)).

      The “long emergency” has become a self-licking ice cream cone. First Amazon destroyed retail real estate. Then Covid closures finished the job. Then Covid closures crushed office space and inflation, which spiked interest rates, did the rest.

      Experts estimate that 70% of commercial RE in the US is backed by regional bank loans. This problem will take years to solve. It will force more bank industry consolidation and starve credit to small/medium businesses. It is ultimately deflationary unless TARP 2 is enacted. I agree with Mike’s friend that it’s inevitable, since insiders stand to loot the system when it comes.

    • They could do TARP 1 without blowing up the currency, TARP 2 though…
      It will be some play like Japan which has already gone down this road: no debt is allowed to fail so as the buyer of last resort the Fed becomes the buyer of only resort and will own almost all the debt. This is what they’ll have to do anyway since as they continue to raise rates to head of the inflation both them and the rest of the regime is generating, even more debt will go bad.

  27. Isn’t criticism of the banking industry and financial shenanigans the near definition of anti Semetism?


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