Hey, this is Tom and if I had a dollar for every time I Heard some buffoon with no idea what they're talking about, giving information and advice about what's going on with the U.S Banking system I'd be a freaking millionaire within 24 hours now over the past day I heard so many clowns talk about this stuff and giving you some horrible information I have to come out and make another U.S Banking Crisis video which I didn't want to make now I Specifically purposely not going to click bait this video I'm not going to put a blasty clickbait title to get views I Just want to offer this to my community I Know it's going to be a little amount of people watching this, but I Want to explain to you what's going on with this banking crisis so you don't get some horrible information from people who are only interested in clicks, views and monetizing your fear I Don't want to fear Monger I Don't want a sugarcoat, just the honest, nuanced truth about what's going on right now with the banking system. especially given what just happened today. Now today, the job numbers came up I'm going to tell you right now, the job numbers better than expected. You can see it right here.

I mean increase by 253 000 April I Mean you don't need me to regurgitate an article for you. So if the job market is better than expected, that's great, right? Well, not exactly. And I'll explain. So the whole purpose of the Federal Reserve as it pertains to the Federal Reserve attempt to curb inflation is to slow down demand.

If they can get people to spend less, then demand will go down. And if demand for products and services will go down, the suppliers of said products and services will have to reduce their prices to attract more clients. And by reducing prices, they're going to reduce inflation. That's the theory.

Now, the way you do it is you increase interest rates if you increase interest rates. First of all, you encourage people to save. You make money more expensive. You basically create some sort of a quasi-liquidity crunch.

Basically, companies don't have money to borrow, and if they borrow money, it's very expensive. So not a lot of projects gets made and people are more encouraged to save with these higher interest rates rather than to spend. That's the basic premise. Now for this premise to work.

What you want to see is two things. On the one hand, you want to see a reduction in CPI and PPI and that's been happening. We have come down significantly from nine percent all the way down to almost five percent. six percent.

The other half that you want to see here. The other half the picture you want to see here is a Slowdown or a cooling off in the job market. You want to see some job loss. Now, it's an unpopular thing to say that the FED is trying to cause people to lose their jobs.

but I'm not here to sugarcoat. This is exactly what they're doing. They're going to use some you know politically correct words to explain to how they want to downsize their frothiness in the job market. blah blah blah.

All this, No. I'm going to give it to you straight. The Federal Reserve wants you to lose your job and when as many of you to lose a job as it's needed to reduce inflation and they don't care about if you or your neighbor lose your jobs, they care about the macro. Now Currently with three and a half percent unemployment, which is a historical record as far as a strong job market.

The Federal Reserve wants this number to go to around five percent. another percent and a half of unemployment. Now until that happens, the inflation isn't going to budge much longer. It came down from nine to five, but from this point on from five to two percent, which is the target for the FED For that to happen, demand has to be crushed.

For demand to be crushed, people need to start losing jobs. But then all of a sudden you have this report and this report says, well, jobs are better than expected. So it's not only that the FED isn't hurting the job market, it actually is doing better. Now if that's the case, Well, that means that the Federal Reserve is probably not going to pause interest rate hikes.

It's not going to reduce rates. It means that the Federal Reserve must increase the rate of interest in order to keep fighting this fight. The only problem is, and here, where the banking system comes in, is that the banking system cannot allow this to happen. Because if this actually happens, if the banking system is forced to exist in a high interest environment for another six months, another year, another year and a half, there's not going to be a whole lot of Bank from the sorry, a whole lot of banks from the regional, smaller Bank sector that's going to be left standing in 18 months if the interest rates remain elevated.

Why? Well, it's a simple reason. that simple reason being that these banks are losing their deposits. the deposits are going away from the banks into treasuries, people are no longer willing to get 0.1 percent on their savings account. Instead, they'll take the four or five percent on a three-month Treasury and be liquid and absolutely safe.

And the banks are losing clients. The banks are losing clients. Which means they're losing money now in order to provide liquidity to the customers that are leaving. They need cash and they can't get cash anywhere right now because the majority of their cash is parked in bonds.

and these Bonds were purchased where interest rates were almost zero and now interest rates are basically above five percent. Which means that the banks, in order to actually sell these bonds and get some liquidity to pay the customers that are leaving, have to sell it at a half price. But alas, when you sell the bonds at Half Price, everybody sees this happening and they understand that you're in Dire Straits And then everybody start pulling their money even faster. which starts Bank Run I Just literally described to you what happened with Svb and a whole bunch of other banks.

In fact, the latest bank that went out which took a little bit longer which was first Republic I actually lost 40 percent of the deposits just in one quarter in Q1 of 2023.. There's not a single Bank in the world that can withstand a 40 loss of deposits in a single quarter now. First Republic A hail a little bit longer than the other Banks because they got a credit facility from the FED for about like 30 billion dollars. but eventually they add a chair up and they went under now.

luckily nobody got hurt. All the depositors are safe from all the bank collapses from the cycle, partially because if the AC is going to ensure more than 250 250 000 and and partially because JP Morgan stepped into the shoes the First Republic and they'll take care of the depositors, etc. etc. All this is fine at the ending.

But now you have to understand what this job report means for the banking industry. Basically, right now, the banking system needs the FED to reduce rates. So in order for the banking system to go up for some air, they need the FED to come down with interest rates right? But for the FED to do that, they need a viable case to show you the public, the people who vote. they need a viable case to show you that inflation is getting better.

Now for them to show you that they need an invitation to come down further a little bit further. it's not there yet for that to happen. They need jobs to start going away, the ads not happening. So if that's the case, the Federal Reserve is going to have a hard time telling you the story of interest rates must go down because things are getting better.

This is a big big monkey wrench in the Fed's plan. This is not good for the banks and this means more banks will fail. This isn't going to be the last bank that failed. First Republic is not less Bank It means more banks will keep failing and it's going to be worse to best obviously.

but more banks will keep failing until the FED budgets. and what happened today with the Jobs report only slows down is the Fed ability to actually make that pivot and I foresee more bank failures. But do I foresee an apocalyptic collapse of the banking system Allah 2008 Like Kevin said in this video with the Burning House and all this, No. because the big four banks are fine.

the big banks are fine, Even the second tier banks are fine. All of them have proper risk management profiles in which they have a lot of interest swaps that cover them for that situation. And also, don't forget the Big Banks The Big Massive National Banks They're enjoying this because they're getting customers left and right from small. Banks Because they know that the big banks are safe.

So in fact, their deposits are not being withdrawn that much because they're having to steal clients from the regional smaller. Banks But when you go and you look at the regional banks, that is where the pain is. So the nuanced answer here is no, the sky is not falling. This is not 2000 yet.

So this is not 2008 Yet None of this is true. It's all clickbait, fear-mongering porn to keep you clicking. On the other hand, are we 100 fine? No. Is this a good chance to see more? Banks Fail.

Yes, probably more banks will fail. The banking crisis is far from over, and all of this is true. But this is not leading up to a massive banking collapse like we had in 2008. that's the whole story.

Yes, the US banking system is in trouble. But no, it's not about the Big Banks it's about the Smaller Banks And what just happened I Actually make things worse and whatever happens, there's a very high chance that the United States is heading for recession, but it will come out of this recession. Everything will be fine. And no, the banking industry is not gonna collapse into itself and basically implode and create this huge you know creator of nothing that's just clickbait.

So don't let these guys fool you later.