The following YouTube video by Crypto Casey warns of a possible global financial crisis, due to excess cash printed by the Federal Reserve, and sketchy trading practices by banks and other financial institutions. It is a very dense explanation, so I have broken it down into bullet points. This crisis can be averted if the Fed is convinced to do the right thing. But we can’t count on that, so cryptocurrency and other assets give us an escape route.
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- The Federal Reserve controls the US money supply by printing money, and issuing, buying, and selling treasury bonds. A bond is a loan, which is a debt instrument. So a treasury bond is a debt instrument issued by the government.
- Financial institutions buy bonds, so those dollars are taken out of circulation. The Fed buys bonds from those institutions to increase the money supply.
- Holders of bonds earn interest. Interest is the cost to borrow money.
- “Repo” is short for “repurpose agreement,” and the repo market is where financial institutions buy, sell, and trade bonds for cash.
- Treasuries are used as collateral for bond loans. Financial institutions swap treasuries for liquid cash on the repo market.
- Interest rates depend on the amount of money in circulation. When there’s more money, interest is lower. When there is less money, interest is higher.
- Interest rates also increase when demand for cash is greater than the supply, when institutions that trade in the repo market are unstable, and/or when there aren’t enough collateral treasuries on the market.
- “Rehypothecation” is when institutions borrow using other institutions’ collateral. This is very risky because the Fed or banks don’t know who actually owns the collateral, or how many times that collateral has been borrowed.
- The same treasury can be rehypothecated multiple times.
- Interest rates in the repo market are now negative. This is because of an increase in demand for collateral, and a shortage of treasury collateral in the market.
- The Fed has printed more dollars AND bought more bonds from institutions. Therefore, banks and institutions have more cash than they know what to do with.
- Institutions want collateral rather than cash, because they want to short treasuries to make profit: they borrow collateral they don’t own, lend it in the repo market at high cost, then buy it back whenever it lowers in cost.
- Interest rates in the repo market are negative because institutions are so eager to get collateral, they’ll pay other institutions to buy their bonds so they can short them later.
- The Fed could have solved the problem of negative interest by issuing its own treasuries and lowering demand. Instead, it’s buying bonds and treasuries.
- Treasuries will grow in value, ruining the institutions’ plans to short them.
- Institutions will have to buy the treasuries back at any price- a short squeeze. Sound familiar?
- Institutions will have to go back to rehypothecation to stay liquid, and there won’t be enough collateral treasuries for everyone.
- If banks aren’t willing to lend to these endangered institutions, causing the price of the dollar to skyrocket, in turn causing a liquidity crisis.
- The Fed is issuing “reverse repo,” so institutions can offload cash at the Fed without buying treasuries. Why doesn’t the Fed issue treasuries like it ought to?
- The Federal Reserve is unelected, and has no oversight because Congress and the media are too cowardly to audit it. It is probably controlled by narcissists who are good at feigning competence, instead of being competent. (Related Post: “How To Fight Corruption: The Fake Confidence Of Narcissists Vs The Real Confidence In Yourself”)
After that detailed rundown, Casey predicts an economic crash, followed by a steady rise in crypto. There is nowhere else for all that cash to go. Many other assets like precious metals and real estate have been rehypothecated in their own markets.
The Federal Reserve, and other central banks around the world, are responsible for many economic and geopolitical woes. Every 40 to 50 years, the central banks’ system breaks down, so they reset their monetary policy. The last big move was in 1971 when the dollar was taken off the gold standard. The “Great Reset” that people talk about is really the banks’ plan change money once again, so they can continue to control humanity through debt. Bitcoin and other cryptocurrencies give us an opportunity to escape and preserve our wealth.
Casey links to her preferred resources on her video page. You can also click my referral link to ITrust Capital. ITrust lets you start a retirement plan based on cryptocurrency and precious metals, and it helps support my blog.