Aired on May 17th, global hedge fund manager and macro guru Hugh Hendry provided his thoughts on the international banking crisis on The Daniela Cambone Show. He warned that the Federal Reserve’s monetary policy has raised the probability that customers could eventually face restrictions on the amount of physical cash they can withdraw.
If we went back a year ago, the probability you would assign to that would be almost zero. And I’m saying that probability, like mercury, is rising.
Why is it rising? It’s rising because we have experienced, I call it ‘the Fed folly.’ One can say factually that this Fed hiking is the fastest and of the greatest magnitude. They’ve never done this before.
He told Cambone
He also noted that the United State’s banking industry will probably begin to see more flights in deposits because customers have a much easier time extracting their money than before.
[The] Fed’s rate hikes over the past year have created an environment that makes it attractive for depositors to take their money out of banks and invest it in money market funds.A combination of being stuck with these uncompetitive rates and now the tyranny that money can fly so quickly […]. The thing that’s pulling money out is the Fed’s offering too much via money markets. I mean, you could go to the Fed directly.
So what’s the Fed doing? It’s encouraging more and more and more money to leave banks.
Hendry said
SEE: Israel Bans Large Sum Of Cash Transactions Over $1700
AUTHOR COMMENTARY
I believe Hendry is absolutely right, that in order for many of these smaller banks to try and save themselves from a crash and bank run, they will have to put a limit on how much cash they lend. At this point the economy is so dead and the dead is so weak it becomes costly for banks to hold on to more of the green cabbage.
Moreover, when larger banks start doing this this will signal things are about most likely to totally implode. It would also most likely signal that the rollout of a digital dollar and CBDC draws nigh.
Regulars of The WP have heard me say many times to keep your money out of the banks and be your own: I still recommend that; only keep enough to maintain minimum balances, pay bills, and make online purchases, but do not keep a lot in them right now.
Stay sharp.
He that handleth a matter wisely shall find good: and whoso trusteth in the LORD, happy is he.
Proverbs 16:20
[7] Who goeth a warfare any time at his own charges? who planteth a vineyard, and eateth not of the fruit thereof? or who feedeth a flock, and eateth not of the milk of the flock? [8] Say I these things as a man? or saith not the law the same also? [9] For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? [10] Or saith he it altogether for our sakes? For our sakes, no doubt, this is written: that he that ploweth should plow in hope; and that he that thresheth in hope should be partaker of his hope. (1 Corinthians 9:7-10).
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