Investor Preppers

Springdale, USA, 2021-Jun-30 — /EPR Network/ — lockdown of overall industry such that many of its component parts are in dire financial straits, and a large portion of our total labor force not earning an adequate or any income. This has easily understandable consequences to our overall national economic fabric. For example, as individuals have less or even no earned income – it implies reduced spending on their behalf, which for a consumer–based economy has notably negative consequences. Also when a lockdown occurs people cannot and do not spend as much money – so our consumer driven economy is debilitated.

Lower consumer spending also means reduced revenues and profits for manufacturers, distributors and marketers. Lower income for both individuals and companies necessarily means lower taxes collected by local and national governments, usually weakening their capabilities for stimulative fiscal policies.

Lower consumer incomes also mean that credit card, auto and mortgage loan defaults will rise – as indeed they have risen over the last several years and are likely to rise further. The inability of consumers to pay rent will cause owners of rental properties to default on their mortgages. Lower corporate profits suggests that available bank company credit lines will be tightened, and corporate bond defaults necessarily rise. Local, state, and national governments collecting fewer dollars in taxes suggests that their borrowing has to increase, heightening the concern also over such more significant bond defaults. None of this is rocket science. Corroborating this with pithy charts or tables is now unnecessary and unproductive – as such data has been ignored by investors for a decade or more, while the Federal Reserve has been flooding the country with newly created, inflationary money. Individuals, companies, and governments believe that they will always be bailed out by FED money easing policies! But quite the opposite is the truth: debt and FED money printing is now destroying both money and the economy.

Bank runs

Bank runs used to relate to banks having made imprudent or risky loans, which does not have enough cash income to service the demand of its clients. When rumor or fact of such a potential event became known within the bank customer base or its community, customers ran to the bank to take out their deposits in cash. Indeed, such intensified demand for dollars on any bank, solvent or not, could within a fractional reserve system cause it to fail.

Having briefly described our current economic scenario, one could reasonably ask when is the next run on any single or all banks in the FED system going to start? The FED has made it known that they will provide all necessary liquidity to any exposed bank, signaling to depositors that no real bank run failures will be allowed. But is this really true? Perhaps it is only half-true and half deception. If a bank is neither collecting interest on its consumer or commercial loans, nor is able to retrieve its principal because of consumer or corporate bankruptcy, no amount of liquidity produced by the FED can keep the bank viable, as trust in its operations and management is destroyed. It is possible for the FED to bail out a couple of banks – but it is not possible to float the whole failing inordinately extended debt system. In fact, a broader view beyond America’s borders suggests that the whole world is drowning in debt and the banking system is beyond reprieve.

Interestingly, the banking system’s current interest and embrace of digital currencies is driven in part to create a system which can immediately “summon up” whatever amount of “currency” is required just by a few taps on a keyboard – not the actual paper cash that depositors have demanded in a traditional bank run. Therefore, once the banking system evolves from paper currency to digital money, a traditional bank run is no longer possible. In addition, regulations have been enacted which classify bank customer deposits as junior liabilities for banks, which allows banks to seize customer accounts in the event of a bank capital emergency. These conditions now make a traditional bank run impossible, and instead expose the bank customers to financial loss. This uncomfortable truth makes appeasing statements by bank regulators deceptive.

Relavent Source: https://arkhaven.org/now-is-the-time-to-prepare/investor-preppers/