Now we gotta talk about the Federal Reserve's actual stabilization of the banking crisis. Yes, the banking crisis is actually stabilizing. Now, this is a little bit mind-blowing to folks to hear because the liquidity numbers are actually starting to come down at the Federal Reserve That's not what we were expecting. We thought this might be the return to QE and that's it.

We're screwed. We're turning the money printer back on already. Yikes. now.

Fortunately, that is not actually what's continuing. So through the week of March 29th, we've had borrowings outstanding through these new liquidity facilities of 152.6 billion dollars in borrowings the prior week sat at 163.9 And since this is sort of a a rolling uh uh account, not sort of a constant borrowing, but it sort of it adds it together. not borrowing every single week in this measure. Here, it's just the total balance outstanding through these facilities.

What do we see? We actually see that the facility has shrunk, but by about 11.3 billion dollars. this is actually outstanding Because it suggests that, wait a minute. maybe the banking crisis is starting to fade and some of that money is already starting to get paid back to the Federal Reserve which is fantastic. So what we should see at the Federal Reserve is actually sort of this: this quantitative tightening.

Uh, then we should see this sort of Spike of liquidity this injection and that should actually slowly start waning down. Which is fantastic because the last thing we want is in a an inflationary environment to continue to essentially tighten uh uh, or or rather, I should I say loosen by printing more money Because as the Austrian economic economists tell us, if you expand the money supply, you should expect nothing other than inflation. And that's obviously stands in contrast to the Keynesian Economist who were generally those who follow the thesis of our our political leaders. So take a look at the chart right here: Total assets outstanding at the Federal Reserve It's pretty hard to see, but if you look closely enough, you could see that quantitative tightening, you see the explosion of liquidity.

and look at that folks boom. An inflection point to the downside. and again, those are the numbers that I mentioned to you. that's outstanding now.

I Want to get into some more of the details here, but I First want to ask you, do you know how to compliment a farmer? Obviously you tell him he's outstanding in his field. Yay! All right. So anyway, uh, of these two, uh, there are 88.2 billion dollars outstanding in the discount window compared to 110.2 in the prior week uh and 152.9 total. Now the discount window loans.

By the way, keep in mind the discount window loans are usually 90-day loans and the bank term funding facility loans are those shrunk as well. So both the discount window and the bank term funding facility Uh, shrunk. Bank term funding facility shrunk from 64.4 to 53.7 So good. Fantastic news on shrinkages here and generally on this channel we don't like talking about shrinkage.

We like talking about expansion. Uh, all right. So now let's look at what some of the reactions on Wall Street are to this and what I want to do is: I Want to specifically start by talking about the uh, uh, some of the bank stresses as outlined by T.S Lombard and Bank of America TS Lombard. They're usually are bears, but let's go first and start with maybe a more neutral piece here from Bank of America.

So take a look at this: Bank of America Sentiment has stabilized, but excess tightening remains a concern. What do we have? We cannot declare all clear yet, but actions by policy makers have calmed fears of Regional Bank spillovers for the moment. Thankfully, we haven't been hearing about more bank failures, which is fantastic. Still, this still leaves open the degree to which bank lending standards might tighten over time.

Excess tightening remains a risk, and this is true. A lot of people are measuring that near term. We haven't actually seen any kind of tightening. we haven't seen any kind of funding restrictions near term that was according to NatWest, but that tightening may come in the future.

Emergency actions have stabilized sentiment. That's fantastic. They give us a little bit of a rundown over here of some of the numbers that we've already gone through, which is great. Uh, we.

let's see here. this is the composite tightening indicator on loans. This here is sort of a when when you hear composite. it's really just a combination of multiple different indicators together and really what they're saying is, look, we've already been in this tightening process for over a year here.

Uh, this is the unanticipated changes in Bank tightening and you could actually see an inflection down over here at the end so of of Q4 last year. So basically we went into the year with a little less tightening than expected. We've got a little bit of a review here on GDP, which we covered yesterday, which is good, but let's look at some of their core views. So GDP growth has slowed to 0.9 in 2022 based on the Q4 over Q4 numbers and we expect it to further decline to negative point four percent in 2023 fourth Quarter over Fourth Quarter as the lagged effects of monetary policy and financial conditions cool the economy before recovering in the fourth quarter of 2024..

in other words, Bank of America has this core view that we're going to see this kind of recovery where basically this right here is, uh, where we're at a zero Line Bank of America says Hey Right now, we're at about four percent point four percent. GDP We're going to go about negative 0.4 and then by the fourth quarter of 2024, we should be back out at about point four percent growth which is below Trend growth. Uh, so this could this what's still coming here? What is still ahead of us which I'll highlight in green here. this segment is really still ahead of us and obviously everything to the right of that.

That's where we could really see earnings estimates. uh, come in slower and maybe Morgan Stanley's Mike Wilson will end up being right: a mild recession this year. an ongoing Goods deflation should lead to disinflation next year. It's interesting I think a lot of people were hoping that 2023 would be the year of disinflation, but it looks like it might end up being next year before we can actually shout game.

The lead. Yeah, In headline, Pce grew at 5.7 Well, we just reviewed Pce for this last uh a month, which is I think is more important than the quarter over quarter numbers. Uh, the Federal raised the target for the FED funds rate. Uh, two, four, seven, five to five.

As expected, we no longer expect the 25 BP hike in June and now foresee a terminal rate. So one more hike in May This is Bank of America's base case. Basically, construction spending moved up about 0.1 percent in uh February. It's actually a little bit surprising.

uh, given the real estate slowdown that you would see even any kind of take-up over here. but you did a little bit. Uh, ISM Manufacturing edged up slightly but still in recessionary territory expecting Auto uh, seasonally adjusted uh sales rates basically to drop to 14.3 million for the year in March. that would be the annualized figure Services still coming in a little bit hotter than Uh than the 50.

Anything under 50 is generally a recessionary read: uh and so this kind of gives you a little bit of a core view from Bank of America on some of their thoughts. But now I want to look at TS Lombard because they're usually are bears over here. I Mean this person basically has bearish in their name one letter away and that's their Chief Economist Beamish I Haven't heard of that one before. But anyway Global liquidity is drying up M2 growth is negative year on year.

That's the expansion of the money supply is actually negative. Which means it's Contracting which is a disinflationary force in the U.S and already falling at the margin in the Euro area in the United Kingdom Chinese M1 growth is solventedly falling, falling to rise significantly. What? I Have no idea what that line is I Think they have a typo there, but anyway, money growth is a good leading indicator of nominal GDP growth in the bank in banking Centric Economies of Northeast Asia and Europe Hench Our forecast of an L-shaped recovery in Europe Uh, and China Now l-shape That's generally not what you want to hear. L-shape is like down and then very slow recovery that compares to a Nike Swoosh which looks a lot more like that, right? So LL is usually not what you want to hear.

Just think about it. like taking it out. It's bad. Will the systemic drain on deposits slow? Obviously a lot of people moving to money markets and such.

We'll talk about where you might be able to get some yields in just a moment as well. Global Liquidity growth is likely to remain slow or negative if policy makers continue. as planned, Quantitative tightening which destroys deposits was just about justifile if the economy had been powering ahead, while credit generation which uh or creation which generates deposits counterbalances Qt's withdrawals. That just gives you a little background on how QT versus QE works.

And to stem the bleeding, banks will have to raise their deposit rates of course. So could China come to the rescue? If it were the 2010s right about, now would be the time when China would begin re-pumping the system. However, China has a China's ability to do so has waned through the 2010s and the transmission of stimulus through that M1 growth which is ultimately needed to bring a turnaround of things in China is sputtering loudly. Okay, let me try to translate this so far.

Really, what they're saying is, look in the 2010s, China was able to pump uh, the liquidity machines as we after we came out of the Great Recession China was basically able to turn on the money printer and uh, the black line here which is the year over year money growth was uh, was positive, massively positive. I could Circle right here. Massive money printing to get out of the session. Massive printing over here in 2016 as well.

Uh, and and then they kind of just sort of enjoyed the surpluses here. The issue now is there are some real questions about: is China actually growing as much as people expect I referenced this yesterday within another video as well, but this was a Bloomberg live blog on there on the Bloomberg.com website and the reporter wrote The Following While the Premiere was touting this resurgent tourism industry and I could generally agree with the Premiere, I could say as someone who's been booking hotel rooms in China there are a lot of vacant rooms and they capitalize a lot. Now they don't. They didn't have to inject that opinion in a live blog, but they did and it really makes me wonder: is China potentially is TS Lombard Right here is China not able to basically stimulate the way they used to uh coming out of the Great Recession and is it likely that that China basically won't be very useful in terms of carrying the global economy out of a recession? I Think so I Think maybe the Chinese recovery could be a little overblown.

Here gives you a chart of small Bank deposits under particular strain. We see that leaving obviously discount window we saw that explode although that's already inflected down and they don't reflect that inflecting down. But if I were to draw that here, it would Because we just got these numbers late yesterday, it would probably look something like that. so a tiny little inflection down at least it's not exploding again, which is good.

So it really gives us an indication that, uh, the the banking crisis is starting to stabilize. The question now is just okay. Look, if we can't rely on China to carry us out of a recession, then maybe what Bank of America suggests is accurate. Look, we're not going to face another banking crisis, but we're going to have these lags of the tightening that we've already experienced hit us hard by the end of the year.

It seems that most economists are projecting a recession somewhere between Q3 and Q4. That's actually when I want to be buying for house hack I Think that's going to be potentially sort of a peak fear high inventory period of Time For Real Estate Obviously, we don't have a crystal ball. We can't guarantee that we'll be able to make money no matter what I expect in house hack knock on wood. We do have a funding deadline for accredited investors today March 31st and then hopefully we'll get to non-accredited by June-ish or so It depends.

We're expecting to file within the next week or two here. Uh, this is always something else that we're trying to. We're trying to put together a very nice package for the SEC They haven't looked at any of it yet and so we're excited to submit that in. but uh, in terms of uh, banking stresses, it does.

I Do think there is good news that we can conclude out of this: I Think the good news is the banking stresses have faded. The bank contagion has actually been prevented. So like what the policy makers did or not. I've had very strong opinions on this.

Uh, they did. You know in hindsight here it looks like they did the right thing. They prevented more Bank collapses I Think most of us were expecting this was just going to be the beginning of the bank collapses. They prevented more Bank collapses.

Yeah, there may be some moral hazard in what they did in terms of the the way. uh, the banks were bailed out with taxpayer backstops. especially in Switzerland But also here in America taxpayers are backstopping Silicon Valley Depositors Uh, you know, outside of that, banking contagion has been limited. the banking crisis I Don't want to say is over.

But and and our eyes are still on the banking crisis. But the banking crisis is is not a crisis anymore. Uh, the crisis has mostly been averted. Dare I say now it could pop up again I Think everybody sort of woken up now to banking risk, but the the vast majority of this crisis is over.

Now we're dealing with the leftover of the crisis which is inflation which fortunately today reiterated an inflection down which is fantastic. So the banking crisis is limited. Inflation is limited. What's the remaining problem? Well, the remaining problem is global and U.S growth and Global and you West growth May shrink us into a recession in Q3 and Q4 So we'll see.

But what we ultimately want is the Federal Reserve To you turn on interest rates not because of a recession, but because inflation has been conquered If the Fed Cuts rates. At the same time as they declare that inflation has been conquered, stocks will Skyrocket I'm highly confident of that if inflation stays High and the FED Cuts because of stability concerns, the market will tank. so TBD But right now it looks like shallow recession. No banking crisis and disinflation is still on its way.

which is fantastic. But we're not out of the woods yet. and since we're not out of the woods, I Have to remind you to get life insurance in as little as five minutes via the link down below. Paid promo motion one day.

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