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Next US Bank Fail Cycle from 10 Year Rate Rise Surprise

Summary

  • The current administration is accused of using rigged data and financial propaganda, presenting a soft landing narrative despite concerns about an impending recession.
  • Job participation levels remain below pre-2020 COVID levels, contradicting the administration's claims.
  • Job data reveals a pattern of revisions, with 10 out of the last 11 reports being adjusted lower.
  • In 2023, 25% of job gains were later revised away, and government jobs accounted for a significant portion of December's gains.
  • Part-time jobs increased by 762,000 in December, while full-time jobs decreased by 1.5 million.
  • Full-time job gains for 2023 remained flat, while part-time jobs saw a sharp increase.
  • Rigged inflation-adjusted earnings are still -3% below 2021 levels, with concerns about underreported real inflation.
  • The fiat financialized markets anticipated multiple rate cuts from the Federal Reserve, but the US 10-year yield recently surpassed 4%.
  • Rising yields pose a threat to US banks, especially those with large holdings, potentially leading to further bank failures.
  • Central banks, including the US Mint, have been actively involved in gold bullion transactions, with significant implications for the global financial landscape.

Challenges to Economic Data Accuracy: Job Data Rigging

The current administration is patting themselves on the backs using rigged data and financial propaganda as the soft landing narrative precedes the likely next recession.

Yet more accurate data points to job participation levels still not near their pre 2020 covid levels.

Interesting Job Data Rigging Points to Consider: 

  • 10 out of the last 11 jobs reports revised lower
  • 25% of jobs gains in 2023 were ultimately revised away
  • Government jobs accounted for 25% of December 2023 jobs gains
  • Part time jobs UP 762,000, full time jobs DOWN 1.5 million in December
  • Full-time job gains are FLAT for 2023 while part-time is up sharply
  • Rigged Inflation adjusted earnings are still -3% BELOW 2021 levels and likely worse as the fiat financial powers that be consistently underreport real inflation by a factor of 2 to 3 consistently

The fiat financialized markets began this year expecting as many as seven rate cuts from the fiat Federal Reserve beginning as early as March 2024. 

You know what they say about assumptions beginning with the mother of all screw ups?

Potential Financial Crisis: Rising Yields and US Banks

This week the US 10 year yield climbed above 4% and there is a case to be made that before the fiat Federal Reserve rushes into their next rounds of rate cuts and infinite QE's inevitable return, the US 10 yr could climb well beyond its recent October high above 5% last year 2023.

Why this matters so much is that many US Banks with large combined holdings both supposedly FDIC insured and uninsured over the $250k threshold, are still teetering on the edge of bankruptcy. And while the March 2023 mini bank run crisis had been emergency loaned over, we can see that these emergency bank loan piles are still growing.

The USA's OFR or Office of Financial Research put out a ten page memo to end last month which I will back link in the show notes below.

In short, climbing yields on the US 10 year are the next domino in further bank failures to come.

The report cited that at the time there were 10 banks with a combined $3.4 trillion in assets that if their fair-value losses in their security portfolios were recognized by say another run on bank deposits akin to what we saw early last year, that could possibly result in their falling into receivership.

They go on to state that if the 10 year yield climbs higher and higher, that puts more and more large banks and asset pools in the crosshairs of potential bank failure and receivership. 

Their research confirmed that "1) fair value losses in bank assets due to increased interest rates pose a risk to their solvency, (2) uninsured deposits are the catalyst for bank runs in the case of a loss-of-confidence event, and (3) interest rate hedging at current levels is not enough to insulate most banks from fair value losses."

They conclude that the US Banking system "remains pressured by conditions similar to those that precipitated the failures of SVB, SB, and FR-B—including large fair-value losses in securities portfolios, a declining base of deposits, and elevated and potentially increasing interest rates. These difficult current conditions are reflected in underperforming bank equity prices, as well as selected downgrades and future outlook warnings by nationally recognized statistical rating organizations (NRSROs). We believe that the current unsettled conditions, combined with higher interest rates, could set conditions for future bank failures."

From the 1981 peak to the 2020 all time Covid low, the assumption that yields are going lower might be wrong in the short and even medium term.

My strong suggestion is to watch the 10 year yield. There is still over $6 trillion in uninsured deposits in US Banks which as the authors suggest could again be the largest catalyst for future bank runs, further bank system consolidations, and even the crisis that makes an eventual CBDC launch in the USA not resisted but instead a welcome "solution" over continuing bank failure cycles.

Global Economic Trends: Central Banks' Gold Bullion Buying

Central Banks admitted reporting to have added on net about 6,250 times the gold bullion you see here. That is just over 44 metric tonnes of official gold bullion buying for November 2023.

Many buyers buying large volumes of gold of late are the global south aggressively moving away from US dollar dominance. We'll have a deeper dive into that topic in the second half of this week's update. Stick around for that.

We'll likely have to wait one more month to get the official central bank gold bullion buying figure for 2023. We'll see if last year's all time record high number gets matched or not. 

To put this additional 44 metric tonnes in the month of November into further perspective.

The record amount of gold bullion sold by the US Mint in 2023 amounts to just over 46 metric tonnes, so all the American Gold Eagles and Gold Buffalos sold over last year is about what central banks admit to buying just in November 2023 alone.

Here is raw troy ounce sales data for US Mint gold bullion coin sales over the last 38 years it has been doing so.

Silver Eagle coin sales moved up in overall troy ounces thanks in large part to lowering premiums last year compared to 2022.

As we look at the all time overvalued US Stock market by its broadest indices, the Wilshire 5000, we can see a stock bear market is likely underway masked by recent nominal price rallies to close 2023.

Even stock cheerleading channels in the west are having to recognize that gold north of $2,100 oz and silver later on playing catchup to gold is another rhyme in time. 

The silver and gold spot price in fiat USD sold off slightly this week mainly driven by relative fiat USD strength in the DXY.

Weekly Precious Metals Update: Gold Surpasses $2,050/oz, Silver Rebounds to $23/oz

The spot gold price closed just over $2,050 oz ask while the spot silver price finished just over $23 oz ask after briefly dipping into the high $22 oz intra-week weakness.

The spot gold silver ratio climbed on the relative weakness in silver to close the week at 88.

The Financial Times was back at this week publishing opinion pieces on why the western world needs to come together to steal the frozen $300 billion in US debt assets Russia bought fair and square, confiscate and hand them over to Ukraine in the coming months. I have been hammering you with this crazy story for weeks now but it is a major potential escalation in our trust level of lawlessness further eroding internationally.

Former central banker and global liquidity plumber Kathleen Tyson had the following rebuttal on twitter X.

"Rather insignificant economist says “Seizing Russian reserves is the right thing to do "based on precedent that is entirely US stealing other assets in the past and agreed reparations between victors and vanquished after declared wars.

I have a JD in International Law. He’s wrong.

The US was able to steal assets without consequences in the past. 

With debt of $34 trillion and annual interest at $1.1 trillion, not sure it gets away consequence free this time."

We're going to end this week's update with some snippets from Kathleen's presentation from October last year 2023 regarding the multipolar world order changes afoot, partly displayed by record gold bullion buying mostly in the eastern world.

She has a deep resume and many insightful positive insights on where the greater world is trending.

The full presentation link is in the show notes below, but we'll watch some highlights here.

That will be all for our weekly SD Bullion Market Update. 

As always to you out there, take great care of yourselves and those you love.

Show Notes:

CNBC 3 stock lunch clip on Gold Silver:

WGC Central Banks Buy +44 Metric Tonnes Net in Nov 2023

https://www.gold.org/goldhub/gold-focus/2024/01/central-banks-bought-net-44t-gold-november

OFR on How US Banks Remain Vulnerable

https://www.financialresearch.gov/briefs/files/OFRBrief-23-04-two-new-metrics-bank-securities-portfolio-risk.pdf

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James Anderson
James Anderson
Senior Market Analyst & Content

A bullion buyer years before the 2008 Global Financial Crisis, James Anderson is a grounded precious metals researcher, content creator, and physical investment grade bullion professional. He has authored several Gold & Silver Guides and has been featured on the History Channel, Zero Hedge, Gold-Eagle, Silver Seek, Value Walk and many more. You can pick up Jame's most recent, comprehensive 200+ Page book here at SD Bullion.

Given that repressed commodity values are now near 100-year low level valuations versus large US stocks, James remains convinced investors and savers should buy and maintain a prudent physical bullion position now, before more unfunded promises debase away in the coming decades...

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