I hate to be the one that’s sounding the alarm, but I am sounding the alarm. The baking collapse is here and is actually just getting started, unfortunately. In this video, I’m going to walk you through a lot of data. I’m going to show you what happened in 2008-2009 and what sequence of events played out so that you can analyze that and look at what is happening right now to determine potentially what you do with your own Regional Banking Index wealth.
So, what we’re looking at right now is a regional banking index. You can see that it has just got demolished here recently, all the way down about 54, and I think it’s still got a lot of room to grow because what people don’t realize, banks are in 1.7 trillion dollars of unrealized losses.
Now, how do they get into unrealized losses? It’s because they take the money that you deposit, and in 2020, they made it so that they don’t have to keep any of the money that you deposit in the bank. Okay, so a hundred percent of your money that you put in the bank can be invested and lent out to borrowers. So, they don’t hold or they don’t have to, at least, hold any of the money that you deposit in the bank. You’re pretty much giving them money and saying, ‘Hey, go make investments,’ and by the way, don’t pay me anything, pay me 0.01 percent a year, and you go do whatever you need to do. And what do they do? They bought a ton of treasuries, but treasuries have an inverse relationship to interest rates.
So, interest rates have been going massively up. We’ve seen the fastest rate hike in history. And what does that cause? That caused the value of the treasuries to go down. Okay, so since interest rates flew up, all the treasury prices came down 30, 40, 50 percent. And now the banks are sitting at 1.7 trillion dollars of unrealized losses, which is making a lot of the depositors worried, saying, ‘Okay, well, where is my money in this big Ponzi that’s happening right now?’ And then people start to withdraw money, and then this person withdraws money, and they talk to that person, and that person, and all of a sudden, you get a run on the banks. And then they lose money, they have to liquidate investments at a loss to pay back the depositors. And then what do you know, they don’t have 50% of the money because they had 50% in unrealized losses from the investments that they made. So, they don’t have people’s money; they lose it in the market, gambling on tragedies and other debt vehicles.
Alright, so what actually played out? Let’s go ahead and look at what happened in 2006. The FOMC paused the rate hikes right around in the summer of ’06. So, if we look back here, right, let’s actually zoom out a little bit to ’06. This is when they paused rates, right? So, you see how this line is flat? They were hiking rates this entire time and paused right here. Okay, then what did you see happen in the S&P 500? The S&P 500 went up; it rallied all the way to its high of October of ’07. Okay, FOMC begins actually cutting rates right here. So, yes, it did pause back there, but then what did it do? It started to cut right here in July of ’07. Okay, and then this gray box, this big gray box, is the actual recession that the US went through. So, the FOMC starts to cut rates, okay? And everyone thinks that that’s so bullish, ‘Oh, the market’s gonna go way up, guys, because they’re bringing down rates,’ which makes debt easier to attain. It’s less expensive, and that should make people borrow more money, spend more money, and it should increase the velocity of money. Maybe it increases inflation a little bit, but the overall economy should be better, right? No, what happens is when they hike rates for this long, well, it makes it very difficult for things to play out right away, but as they bring up rates, the ripple effect then starts to play out, usually after they pause and then drop rates. If we look at 2000, guys, what happened? Well, they came up to the high, they paused rates, they started to drop rates, and then what happened? The tech bust of 2000 collapsed. Okay, same thing in ’08. They hiked rates, paused, we saw a little bit of a rally, and then we saw a huge drop in rates and a massive drop in the S&P 500, over 50 percent. Okay, then we see right here, Bank of America buys Countrywide. Then we see JPMorgan buys Bear Stearns because Bear Stearns goes under.
Then we see Bank of America buys Merrill Lynch. Also, Lehman Brothers goes bankrupt, and as one starts to fall after another, after another, after another, everyone starts to get really worried about the stability of not only the US dollar, the actual banking system, but also the stock market and bond market. And what happened? We saw a massive drop after that. So, the total drawdown from here to the bottom was 57 percent. After the actual freak-out, which is really like the big panic moment, which is when Merrill Lynch and Lehman went under, was, you know, that was another 48 percent just from there to there. So then you saw Wells Fargo also buy another bank called Wachovia.
And now, what is happening? Let’s actually look at our timeline. Well, we just talked about how, well, they have not actually paused rates; they continue to hike, even though we are seeing massive banks go bankrupt. I’m about to show you; it’s pretty crazy. The size of the banks that are going down is not a good sign, and I don’t want to be the fear-monger, but this is reality.
Okay, so we saw the big sell-off, actually the biggest drawdown in US dollar terms that markets have ever seen because the bonds, commodities, crypto, stocks, everything went down as they started to hike rates. Now, we’ve seen a little bit of a rally, but we saw SVB, Silver Gate, and Signature Bank go insolvent right here. Then we see UBS buys Credit Suisse right here. Then we see JPMorgan buys First Republic. And these are not small acquisitions; these are really big acquisitions, really big banks going under. I mean, SVB, Silvergate, and Signature all went under in like the same week. It was crazy. Then we saw Credit Suisse, a massive bank, Republic…
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