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According to an article in American Banker titled “SEC’s Gensler Directly Links Crypto and Bank Failures,” SEC Chair Gary Gensler has asked for more financial resources to police the crypto market. Gensler testified at an April 18 House Financial Services Committee hearing:
[Crypto companies] have chosen to be noncompliant and not provide investors with confidence and protections, and it undermines the $100 trillion capital markets …
Silvergate and Signature [banks] were engaged in the crypto business — I mean some would say that they were crypto-backed …
Silicon Valley Bank, actually when it failed, saw the country’s — the world’s — second-leading stable coin had $3 billion involved there, depegged, so it’s interesting just how this was all part of this crypto narrative as well.
Cryptocurrency experts Caitlin Long and Nic Carter take the opposite view. They acknowledge the link between crypto and the recent wave of bank failures and the runs and threatened runs they triggered, but Carter and Long make a compelling case that it was the FDIC, the SEC and the Federal Reserve that brought the banks down, by a coordinated, extrajudicial “war on crypto” that blocked that otherwise-legal industry from acquiring the banking services it needs.
The public banking movement has run up against similar roadblocks. Both cryptocurrencies and publicly-owned banks compete with the Wall Street-dominated private banking cartel, but more on that after a look at the suspicious events behind the recent bank runs.
The War on Crypto
In a February 2023 article on Pirate Wires titled “Operation Choke Point 2.0,” Carter laid out the case that the federal government was quietly attempting to ban crypto. In a 7,000-word March 23 follow-up titled “Did the Government Start a Financial Crisis in an Attempt to Destroy Crypto?”, he writes:
The two most crypto-focused banks, Silvergate and Signature, were forced into liquidation and receivership, respectively. The established narrative is that they made “bad bets” and lost, or that they couldn’t handle flighty depositors in the form of tech and crypto startups.
But there’s an alternative version of events being pieced together that is far more sinister …
The preponderance of public evidence suggests that Silvergate and Signature didn’t commit suicide — they were executed.
In January 2023, … [s]ome in the crypto space noticed highly coordinated activity between the White House, financial regulators, and the Fed, aimed at dissuading banks from dealing with crypto clients, making it far more difficult for the industry to operate. This is problematic because it represented an attempted seizure of power far beyond what is normally reserved for the executive branch.
He observes that banking crypto firms wasn’t prohibited. It was just made very expensive and reputationally risky, by burying the bank in paperwork and unpleasant interrogations from regulators. The Fed also made it clear that new crypto-focused bank charters would be denied. Silvergate, Silicon Valley Bank (SVB), and Signature were put out of business:
Now, depositors are fleeing to the largest banking institutions, money market funds, or simply holding Treasuries directly. Whether intentional or not, these policies will cause smaller banks to die off, making credit more scarce, reducing competitiveness in the bank sector, and making it easier to set policy by marshaling a few large banks for political ends.
Carter observes that the distress in the banking sector was caused by the Fed’s attempt to reverse the inflationary effects of excess government spending, particularly for COVID-19 relief, by rapidly raising interest rates. As a result, government bond portfolios, “the foundational collateral asset of the financial system,” radically depreciated, causing $620 billion in unrealized losses collectively to U.S. banks. “But,” he writes, “there’s also a political subtext here. Most banks are now sitting on mark-to-market losses in their bond portfolios, but they’re not facing runs from their clients. … Silvergate met its end because — well after the crypto credit crisis of ‘22 had concluded — its remaining depositors were cajoled and bullied into withdrawing their funds.”
The most visible smoking gun, says Carter, was the decision to seize Signature Bank:
On Sunday the 12th of March, Signature (SBNY) was abruptly sent into FDIC receivership by the NYDFS [New York State Department of Financial Services]. This was not a two-bit crypto bank. They had $110B in deposits as of YE 2022, of which around 20 percent came from crypto-focused companies. …
Almost immediately, we knew something was wrong. Signature was not a “crypto bank” like Silvergate, where the majority of deposits were derived from crypto firms. It was a pretty venerable NY bank that primarily serviced real estate. It was not in as bleak a financial position as Silvergate or SVB, or other beleaguered regional banks. They weren’t closed on a Friday afternoon after market close, as is typical in receivership situations, but snuck in on a Sunday night, practically a footnote to the SVB shutdown. The FDIC was reportedly surprised on Sunday when SBNY was delivered into their hands. The NYDFS has maintained a well known long-running animus against crypto. The bank crisis was the perfect cover to take down the last remaining bank, which was unapologetic about servicing crypto firms (and ran important fiat settlement infrastructure).
The only problem: based on what we know, it appears that Signature wasn’t actually insolvent when they were nationalized and $4.3B of shareholder value was vaporized.
Carter writes that the crypto industry found an unlikely ally in Barney Frank, former chair of the House Financial Services Committee, the Frank in Dodd-Frank, and a Signature board member. He alleged that the bank could have opened on Monday, and that leadership was shocked when they were put into receivership. In an interview with New York Magazine, Frank left “absolutely no doubt that the closure was a political hit job, primarily motivated by a desire to send a message to the crypto industry.” Carter observes:
As more data emerged, even the taciturn WSJ became convinced that Signature was a political execution.
In particular, the disparate treatment given to Signature versus their peers PacWest or First Republic is extremely telling. Both banks were in similar or worse financial positions, yet both were given time to save themselves, whereas Signature was seized on a Sunday night, right after SVB’s collapse. …
Most worryingly, the takedowns of Silvergate and Signature represent a rank lawlessness associated with authoritarian regimes. In a lawful society, solvent banks are not seized by the government simply because their clientele is politically disfavored. Shareholders in Signature had $4.3B in equity ($22B at peak) wiped out with no recourse. … Shareholders who saw their equity wrongly vaporized should sue under New York law.
He says that the upshot will be to drive crypto innovators abroad. In fact that move is happening already.
Killing Custodia: A States’ Rights Issue
A second smoking gun was the denial of FDIC insurance to Custodia Bank, which had a 100%-reserve business model that would have cost the FDIC nothing and posed no risk to the public. Custodia’s goal was just to provide a secure onramp from dollars to cryptocurrencies and an offramp back again. In fact, Custodia didn’t need to ensure its deposits, because it would not have been making loans from them. It would have kept them in reserve for the depositors. The bank needed FDIC insurance only because without it, the Fed refused to give Custodia a master account, necessary to participate in the national payment system.
Caitlin Long, the Wall Street veteran who founded Custodia, argues that this newly-imposed rule constitutes an unconstitutional violation of the long-standing right of states to charter their own banks. In an April 17 article titled “Why Defending the Right of States to Charter Banks Without Federal Permission Is Critical,” she writes:
Until a decade ago, it was unheard of that a bank would stop serving entire groups of customers or the people in lawful — if controversial — industries. It was also unheard of that banks would be blocked from accessing either of the two federal utilities in the banking industry: (i) deposit insurance and (ii) the U.S. dollar payment system (which the FDIC and Fed operate, respectively). Indeed, legislative history shows that Congress took great pains to keep the operation of these two utilities standalone and fully separated from the power to charter banks. As a check and balance, Congress wanted all chartering work done exclusively by the states or the lone federal agency that can charter banks, the OCC. Access to the two utilities was automatic for eligible banks, albeit with bank-specific insurance premiums and overdraft restrictions.
The dual banking system – federal and state – goes back to the days of Abraham Lincoln, when the National Bank Act was passed. Before that, state-chartered banks were issuing their own currencies as paper promissory notes with their own names on them, an unstable system. The National Bank Act unified the country under a single paper currency, the U.S. dollar, by imposing a 10% tax on other bank-issued promissory notes. With the founding of the Federal Reserve in 1913, the U.S. dollar became the Federal Reserve Note. The national currency was federally issued but states retained the right to charter banks. As Long observes:
Historically, states have acted as a check against federal overreach in banking. There is a key reason why: the mission statements of state banking agencies usually require them to support both safety and soundness AND economic development, while federal bank regulators do not have economic development within their wheelhouse. This creates a healthy tension and explains why innovation in banking often originates within the states. The Fed and FDIC have no veto power over state chartering decisions.
… Congress again respected the delicate balance in 1980 when it further clarified the utility nature of the Fed’s role as payment system operator by requiring the Fed to provide services to all eligible banks on a non-discriminatory basis. … In denying payment system access to Custodia, the Fed cited Custodia’s lack of FDIC insurance and lack of a federal regulator among its reasons for denial and, in doing so, the Fed improperly created for itself the unilateral power to require all state banks to be both insured and federally regulated.
Custodia sued the Fed, and the Attorney General of Wyoming, the state chartering the bank, joined the lawsuit. The Attorney General noted in the filing that the Fed had created a “Kafkaesque situation” where a Wyoming-chartered bank is denied access to the U.S. dollar payment system “because it is not federally regulated, even while it is also denied federal regulation.”
Five states have enacted bank charters that don’t require deposit insurance or federal regulation – Connecticut, Maine, Nebraska, Vermont and Wyoming. Such uninsured banks are prohibited from lending; they must hold 100% cash to back customer deposits, plus up to 8% of deposits as an additional capital requirement. Long concludes:
Congress tasked the Fed and FDIC with running utilities; it did not give the Fed and FDIC veto power over U.S. states – and, in turn, power to block the responsible innovations that state banking authorities create as they fulfill their economic development mandates.
Public Banks and the FDIC Conundrum
The public banking movement is particularly geared toward local economic development. The stellar and only model in the U.S. is the Bank of North Dakota, formed in 1919 when local farmers were losing their farms to foreclosure by big out-of-state banks. With assets in 2021 of $10.3 billion and a return on investment of 15%, the BND is owned by the state, which self-insures it. There is no fear of bank runs, because the state’s revenues compose the vast majority of its deposits, and they must be deposited in the BND by law.
The state’s local banks are also protected by the BND, which is forbidden to compete with them. Instead, it partners with them, helping with liquidity and capitalization. The BND has been called a “mini-Fed” for the state and its banks. That helps explain why North Dakota has more local banks per capita than any other state, at a time when other states have been losing banks to big bank mergers, causing the number of U.S. banks to shrink radically.
UK Prof. Richard Werner recently published a briefing memo supporting the case for a public bank. It was prepared for the state of Tennessee, which is considering a sovereign state bank on the North Dakota model, but the arguments apply to all states. Benefits discussed include dividends, higher state-level tax revenues, greater job creation, greater local autonomy and resilience to shocks, more options for funding public sector borrowing and state pension funds, and protection of financial transaction freedom and privacy.
The FDIC has not formally rejected insurance coverage for state-chartered publicly-owned banks, but regulators have intimated that it is not interested in covering them; and as noted by Julie Andersen Hill in an Iowa Law Review article, the Fed is “especially hesitant” to process payments without that coverage. Federal usurpation of state banking regulation not only drives cryptocurrency innovation abroad but kills innovation in local economic funding of the sort pioneered in North Dakota. Andersen Hill writes, “The language and structure of the Federal Reserve Act require that the Federal Reserve provide payment services to all eligible banks.… If the Fed wants to exclude banks, it should ask Congress to change the law.”
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Crypto Creep. Sam Bankman-Fried. LEAKED Phone Call (Compromising!).
Video Link
More evidence of totalitarian comportment from the Federal bureaucracy.
After reading this contradictory babble, I skimmed the rest. The banks had mostly ultra-wealthy depositors who lost confidence in their loose lending schemes. They pulled funds and these banks failed. This cost the Feds billions of dollars, they didn’t want it to happen.
Investing in crypto is like investing in baseball cards. There is money to be made, but only by finding bigger fools.
Scam Bankster-Fraud was the top funder of the Democratic Party in recent years followed by George Soros.
What a wonderful Tribe.
FYI, Just above the title is a link ‘The Cobalt Gold Rush by Ellen Brown(she’s knocking them out of the park) that is definitely worth a look.
All cryptos are super-fiat.
All the same, the Fed does have the power. If this issue turns all crypto users against the Fed it’s good thing. M’god, with the IRS hiring stormtroopers we better bring this issue ahead and quick.
Cryptocurrencies, like derivatives, are just a form of gambling that has no place in a sensibly run financial system. No wonder the Chinese Government has banned them. The future hegemon is obviously a lot smarter than the present one.
I think it is worthwhile to note that when the US government decides to declare war on something, you can bank on that something succeeding wildly. Why didn’t this article mention the fact that the banking crisis resulted in Bitcoin spiking to 30k? So all that money pulled out of regional banks did NOT run to the big banks and T-bills. A lot ran to Bitcoin and gold.
The US declares war on the Russian economy; it thrives. The US declares war on the progress of China; it thrives.
The US declares war in crypto; Bitcoin thrives.
Crypto currency like bitcoin and all the other shitcoins are diversions from the growing fact that the dollar will stay king. CBDC’s being promoted are also a diversion, 97% of dollars are digital and all big money orders are tracked. There’s no point to any of it.
I’m a simple man,with simple views that has never been able to understand crypto currency and the idea that it doesn’t seem to be backed up with any real support of any kind. Isn’t it time to tell the King that he ha no clothing on?
Could Cryptocurrencies Be The Case of The Emperor Has no Clothes? | by Racheal Orianele | Medium
Apparently, I’m not the only one who doesn’t get it. 🙂
The Internet tends to bypass attempts to control it.
So does money, so do cryptocurrencies.
There are services based outside the US that provide anonymous and zero trust exchanges of cryptocurrencies and currencies between individual entities.
The attempt to keep banks from offering cryptocurrency services have the effect of preventing “banksters” (to use a fairly common term in non-legacy media) from “bankstering” in cryptocurrencies. Attempts to make cryptocurrencies illegal in the US will simply make cryptocurrency transactions much more expensive to track.
As Anglin says (somewhat pornographically) the US is in financial trouble ( https://www.unz.com/aanglin/the-world-would-have-tolerated-americas-mad-brute-behavior-indefinitely-then-they-did-the-russian-sanctions/ ). In Fiscal Year 2020 and 2021 the US Federal Government borrowed as much as it saved in taxes, about 3.5 billion taxed, about 3.5 billion borrowed. (See: https://www.whitehouse.gov/wp-content/uploads/2021/05/budget_fy22.pdf , Table S-1, pg. 23). In Fiscal year 2023 it was about 4 billion taxed, 2 billion borrowed. This trouble will sharply increase if the US client Ukraine loses its conflict with the Russian Federation.
At the same time, the Russian Federation has offered to sell oil for bitcoin, thus making at least one of the cryptocurrencies a “petro-cryptocurrency”.
The obvious reaction to such a situation is to avoid interaction with the US financial sector, and the US Federal government appears to be forcing cryptocurrencies to be very difficult to trace. It is almost as if the US Federal Government wants the US banking sector (not “industry”, banks don’t manufacture) to be forced by armed agents closing nonconforming banks to continue using US Dollars.
I can see why the US Federal Government would do that, but the policy seems counterproductive in the medium run, say the next couple of years.
The problem is that political power and economic power are inseparable. Cryptocurrencies can’t win, not because they don’t have intrinsic value — fiat currency doesn’t either. The problem is that fiat currency is supported by government, and crypto is a threat to the establishment.
Crypto currency like bitcoin and all the other shitcoins are diversions from the growing fact that the dollar will stay king
The USD remain king ? What are you on, man.
Let’s celebrate, the economy is stronger than ever and only some mistakes in the cryptocurrency market have caused some large banks to collapse,
I basically agree with your comparison, but at least baseball cards have a nostalgic value…cryptocurrency is a Ponzi scheme, pure and simple.
Bitcoin spiked for the same reason Biden is President, albeit titular; there is a hell of a lot of idiots in this country.
One is a Ponzi scheme; the other is real money.
Right, baseball cards and other collectibles provide you with an actual commodity, namely, fun, which is more than any financial instrument provides….directly, at least!
Where is Mini-Madoff? Is Babuska Yellen hiding him at the Federal Reserve?
E.B.: “…it was the FDIC, the SEC and the Federal Reserve that brought the banks down, by a coordinated, extrajudicial “war on crypto” that blocked that otherwise-legal industry from acquiring the banking services it needs.”
But of course! 🙂
Remember: “War is the health of the state” as Randolph Bourne astutely observed, so any threatening competition to the state’s own criminal monopolies, be it in banking or elsewhere will always be “de-platformed” as necessary.
Fact: The criminal Federal Reserve monopoly increased the base money supply [MB] by around 300% under Bernanke.
See: “Ben Bernanke-The Greatest Inflator and Nobel Prize Winner !”:
https://onebornfreesfinancialsafetyreports.blogspot.com/2022/10/ben-bernanke-greatest-inflator-and.html
The invention of Bitcoin and other cryptos was/is a direct reaction to the wealth destroying, inflationary policies of central banks worldwide, and they are therefor viewed by the state as being a direct threat to those state protected monetary monopolies.
The good news [for crypto enthusiasts] is that, as with anything else [eg Tucker Carlson] the attempted “de-platforming” of cryptos will only make many of them more popular and stronger, not weaker, in the long run.
See: “AOC Is Wrong – Deplatforming Never Works”: https://www.zerohedge.com/political/aoc-wrong-deplatforming-never-works
Regards, onebornfree
https://onebornfreesfinancialsafetyreports.blogspot.com
It’s telling that there is a picture of a coin at the head of this post. It’s a reminder of what pure bullshit this entire crypto thing has always been. At least a tulip bulb would render a tulip. Just another jew scam.
Last month, Brown wrote a sensible piece on derivatives. She wrote.
The original purpose of derivatives was to help farmers and other producers manage the risks of dramatic changes in the markets for raw materials. But in recent times they have exploded into powerful vehicles for leveraged speculation (borrowing to gamble). In their basic form, derivatives are just bets – a giant casino in which players hedge against a variety of changes in market conditions (interest rates, exchange rates, defaults, etc.). They are sold as insurance against risk, which is passed off to the counterparty to the bet. But the risk is still there, and if the counterparty can’t pay, both parties lose. In “systemically important” situations, the government winds up footing the bill.
If derivatives are just gambling, then so are cryptocurrencies. That would be logical and consistent. Yet Brown goes out of her way to defend trading in the latter. One has to wonder. Is she personally – or the financial interests she promotes – heavily invested in cryptocurrencies ? If so, she is being very dishonest with her readers.
The Hegemon are a Plutarchy.
No Nation-State wish to have no controls over the Monies+Currencies circulating in their Economies.
Even at this Stage, Private-Public Crypto Coins can be manipulated/influenced by Hostile Parties through targeting Xchngs+Transactions+Hodlers.
Never Underestimate the DEEP_STATE.
Assuming you chose the title for your essay, your case is severely weakened by lumping SVB which started the “run” phase of our current crisis in with the obvious executions of banks like Signature. I suspect First Republic’s problem is like SVB’s: a narrow depositor base making the bank vulnerable to an old fashioned bank run panic (see also the “bank walk” or “powerwalk” theory which appears to be sound to me; TL;DR: all types of banks are losing deposits to much higher, ~5% money market mutual funds and the like).
There’s more to it like how they made a particularly stupid bet on interest rates which we can time with their losing their top risk manager (but all banks are at the mercy of borrow short, lend long mismatches), how deposits were drawn down because VCs largely stopped investing, and in the details of how VCs forced the companies they invested in to bank at SVB because they had “levers” and in general I gather it gave them visibility into what was being done with the money.
But overall not a bad article, did not for example know about Custodia.
Apr 8, 2023 Warning: Two New Economic Crises Are On The Horizon
Steve Forbes warns of two new economic crises on the horizon.
Video Link
May 21, 2013 Why the whole banking system is a scam
Godfrey Bloom MEP • European Parliament, Strasbourg, 21 May 2013 • Speaker: Godfrey Bloom MEP, UKIP (Yorkshire & Lincolnshire)
Video Link
The U.S. Debt Clock Live
https://www.usdebtclock.org/
What ever happened to Sammy the Bankman-Fried? The last I heard he was pleading innocent… You mean that might not be true? I hear everything he knew he learned from Uncle Bernie… But just lay off the Jews.
https://www.townandcountrymag.com/leisure/arts-and-culture/a42416763/sam-bankman-fried-bernie-madoff-netflix-joe-berlinger-interview/
https://www.google.com/amp/s/amp.theguardian.com/business/2022/dec/17/sam-bankman-fried-bernie-madoff-fraud-ftx
https://www.jpost.com/business-and-innovation/banking-and-finance/article-722338
=That helps explain why North Dakota has more local banks per capita than any other state=
What works in ND will never work in Chicongo. Imagine “George Floyd Bank & Trust of Social Justice” with Lori Lightfoot as President and Tavern Girl Occasional Cortex as VP. How long it will last w/o supervision ? White Suprematism will be blamed for it’s instant bankruptcy. Embezzled funds will never be recovered.
When Chinese Triads decide to openly open their bank I’ll transfer my meagre savings there. Because, as one wiseguy said in “Godfather”, they are bigger than US Steel (of which not much is left 😁 ). And they don’t believe in BitCon either.
I’ll vote for Biden in 2024 which will make my deposit at Chinese bank even more secure.
“With the Colombians, it had been an 18% to 13% commission,” said Cindric, the retired DEA agent. “The Chinese are doing it for 1 to 2% on average. And the speed at which they do it is unbelievable. The Chinese absorbed the risk. You know it will get paid.”
https://www.propublica.org/article/china-cartels-xizhi-li-money-laundering
Unlimited, fully guaranteed international money transfers with 1% commission YAY !!!
Contrary to paid chinese shills talking about muh ‘dedollarization’the yuan is a crappy currency,and the US has the best currency still,The Mises institute and laowhy86 just debunked the dedollarization being possible in recent articles and videos.
the perestroika deception russia-china shill crowd is losing hard,Apple just left china and vietnam,india and mexico are going to be the new center of world manufacturing all thanks to Xi’s draconian policies and a$$hole behaviour.
Bitcoin and Crypto are not the same. They are two different things. Crypto’s assets are Off-shore, highly leveraged Dollars. That is why the Fed brought FTX and SVB down.
The Fed doesn’t submit to the interest rates being set by the City of London in Libor but under the newly established SOFR.
The war between the City of London and the Fed is on. You need to add this fact into your calculus.
A Ponzi scheme :
* is centralized – a Mr Ponzi (and his team) is at the center
* is secret – the internal data not published
* is dishonestly exploited for the benefit of the Ponzi team
* can be manipulated or changed on a whim
* collapses upon too many withdrawals
* only pretends to trade
While BTC :
* is de-centralized
* is open, with everything public
* has no dishonest exploitation – just businesses making money
* can only be changed by an open majority vote of a large community
* does not collapse upon excess withdrawals
* does trade in BTC with an immutable documented record
BTC may well have weaknesses and risks, but is the opposite of a Ponzi scheme.
Funny you should ask that. In something I don’t recall ever hearing before, he got additional indictments twice after the original set he plead not guilty to. Illegal political donations (OK, we could expect that) and attempting to bribe PRC officials (then again, what do you do when Communists steal a trillion of your assets??). They could also probably get him for witness tampering; he’s quite the outlaw.
BTW this does make sense given his was a foreign company (with a US unit among many other per country ones) and his record keeping … he didn’t believe in the concept, not even to the point of having a list of all the banks and accounts they had money in. So as world class forensic accounting headed by the guy who unwound Enron continued to construct what his empire actually was, finding new crimes was likely.
BTC can be used to transfer even large amount of funds, anywhere in the world, for a few dollars, in a few minutes – without any trust in a third party.
Baseball cards can’t do that, tulips can’t do that, nor can gold nor $ nor €
So, it is now not safe for US banks to hold USD? Maybe they should settle in Yuan! WE could see this coming from the get-go of CV and associated rhetoric – if you are wokely acceptable you will be able to suck on the teat indefinitely, but if you do not comply, you will lose access to funds. Banks, companies, countries and people. My way or the highway.
I don’t own any crypto and I’m not defending it. I was just pointing out that all banks are bankrupt, or would be if faced with a run on 20% of their deposits in a day and a half; it’s baked into borrowing short to lend long, the basic fractional reserve model. But only these 3 banks got hit. Why? What triggered the run? The war on crypto, instigated by certain Congresspeople. I could name names but might offend some good friends, so I’ll refer you to the Nic Carter articles, which are quite compelling and detailed. The banking system IS sound as long as people trust it. We have nothing to fear but fear itself, as FDR said to the bankers of his time. The dollar is backed by the full faith and credit of the American people. As soon as we start screwing around with people’s trust in it, including the trust of govts abroad by confiscating it in “sanctions”, it will go down.
Sure, but the question is, WHY did the investors lose confidence and run? Many other banks had similar unrealized losses from long-term Treasuries, but they didn’t suffer runs. As Nic Carter writes:
“[C]atalysts should not be confused with ultimate causes. VCs (correctly) telling their startups to reduce their SVB exposure were not the cause of the SVB run. (Shouting “fire” in a movie theater isn’t morally blameworthy when there really is a fire.) Nor were the “risky bets” made by SVB leadership (their portfolio was completely ordinary, and raised no red flags among their regulators or ratings agencies). ‘Systemic risks introduced by crypto’ certainly weren’t the cause either, as all of the affected banks had survived the 2022 crypto market selloff and were still in business as of Q1 2023. Nor was loosening of Dodd-Frank coverage of regional banks, as the 2022 Federal Reserve stress test’s baseline and “severely adverse scenario” did not contemplate a 25 percent annual drop in the price of long term Treasuries. The ultimate cause of the collapses was not Peter Thiel, David Sacks, or a loosening of Dodd-Frank, but rather the massive spending spree of the Trump and Biden admins and the resultant inflation, which forced the Fed to hike rates dramatically.”
For the record, I don’t own any crypto and I’m not defending it. And I’m glad Custodia is suing, because it will help a cause I am particularly interested in, the public banking movement, which is also being blocked by the FDIC purely for policy reasons.
That was as far as I got as well…….
I was certain this was the Bee and not a serious take. What hogwash.
Why would one spend one of their bitcoin when it’s going to be “worth” $1,000,000 ‘soon’?
Why would one accept payment in bitcoin? It’s just dropped in “value” by $20,000 so had I sold you something in bitcoin I lost money on that sale.
Why do bitcoin shills always quote it’s value in dollars, yen, deutschmarks and pounds fucking sterling….or in the very same fiats it’s claiming to replace?
One “could” make the claim it’s a store of value but an everyday currency? Give me a f’ing break.
‘The banking system IS sound as long as people trust it.’ — Ellen Brown [my italics]
That’s an incredibly ambivalent, telling remark. It derives from the awkward fact that banks borrow short, lend long (as you noted), AND habitually operate with excessive leverage — typically 10-to-1, but in the case of several European zombie banks, multiples of 10-to-1.
Crises of confidence erupt about once in a generation. A business model which depends on the fickleness of confidence, backstopped by government bailouts when confidence collapses, is designed to fail hard and often.
Even as we speak, tonight the FDIC is urgently seeking a buyer for First Republic Bank. I’d bid a dollar for it, on a non-recourse basis, just to get me a plush corner office (hopefully with a private shower, so I can live there) and a posh company car.
Will FRC be the last bank failure in this business cycle … or merely the third of dozens to follow? My bet’s on the latter, for the reasons cited above (defective business model).
It took them this long to discover he was a fraud? Just like with Madoff, the real scandal is that they weren’t busted long before the fact. The regulators should also be going to trial.
“Bookkeeping is oppressive, man… That’s old school… Linear, binary. Books are obsolete… I don’t read books, man! Books are like, too heavy… they hurt my mind! You’re trying to turn me into a beancounter, man! How can I think my genius thoughts… When I’m counting beans? Don’t worry about the money, man… I’ll just make more.”
https://www.washingtonpost.com/opinions/2022/11/29/sam-bankman-fried-reading-effective-altruism/
https://www.google.com/amp/s/arstechnica.com/tech-policy/2022/11/new-ftx-chief-slams-complete-failure-of-corporate-controls-at-crypto-exchange/amp/
As I understand it, the powers that be that run Bitcoin explicitly decided it was a store of value by limiting its transaction rate to a theoretical 10/second, practical is said to be ~5/second. Per the last full trading day page I just found it’s hit 5.6/second.
BTC has no intrinsic value. It solely depends on a greater fool to increase in value.
It is not a store of value because it is not a medium of exchange… it is backed by nothing, just like the US dollar.
Cryptocurrencies like Bitcoin work the same way as Ponzi schemes, according to critics like Roubini and Quinn, with new investors paying out early investors because no actual cash flows are being produced.
‘Why do bitcoin shills always quote it’s value in dollars, yen, deutschmarks and pounds fucking sterling….or in the very same fiats it’s claiming to replace?’ — interesting
For the same reason that the former monetary unit, gold, now is quoted in fiat currencies. When gold actually WAS money, its value was invariant: $20.67 an ounce for decades, until Franklin Democrat Roosevelt unilaterally, illegally confiscated it from citizens, then hiked it to $35 an ounce in 1934 in a competitive devaluation versus the rest of world.
If Bitcoin were legal tender money, its value would not fluctuate either. Under the current untethered fiat system, Bitcoin’s price is correlated to the Nasdaq 100: i.e., an index of liquidity, speculation and probability of systemic default.
When legal tender currency is managed by political whim, all other prices and values in the economy are indeterminate and volatile. Chaos theory predicts larger and larger swings in prices, until the system self-destructs like the Tacoma Narrows bridge did in 1940.
Fasten seat belts: turbulence ahead!
Just once I would like to hear what the anti-crypto’s alterternative investments are, and how they are better?
Quit trying to sound informed…You’re not.
The Talk of the Town Trailer Estates Park Sociology Round Table comments as follows:
Granny Yidell – I am ashamed of Sam Bankman-Fried. As a member of the Tribe. He sets a poor example of character.
Jabber – I made $2,453,124.74 in the last two years in crypto. And never came out my bedroom, except to use the bathroom.
Mother – Jabber bought me a new minivan with his crypto earning. Finally, I have room to stretch out.
Father O’Hair – I maybe a wannabe priest but I dress like one. Initially, I proposes throwing Jabber out of the park for trading money, but he got my Dodge Challenger Hellcat fixed. I absolve him of any sin of indolence.
Bozero – Sam Bankman- Fried has freakier hair than me and I am a clown.
Fiona – I love Jabber 2,000,000 times than before. Glad his double-wide trailer has ample sized windows. Money makes us happy. Don’t tell Mother.
Probably true — more bank runs to follow. But they wouldn’t have started without those first 3, which were triggered by something other than “unrealized losses,” since many banks had unrealized losses and would not have withstood a run of 20% of their deposits in a day and a half. What was different about those 3? Crypto banks. First Republic isn’t a crypto bank per se but it is “crypto friendly,” and much of the SVB deposit base fled into it.
Who’s “them” and is three and a half years a “long” time??
FTX the parent company was incorporated in Antigua and Barbuda in the West Indies , per Wikipedia almost all its 100K people live on the former island. 91% negro, there’s just not a lot of talent available to police companies incorporated in it that aren’t doing much if anything in it, its people have better things to do.
Then it’s on places like Barbados where its final HQ was located, and countries where it had a presence like the US but maybe not a big one. Or another nexus for the US was it doing business with US citizens and institutions. And of course SBF worked very hard to portray his companies as being above board. Compare to Madoff, how long he ran his literal Ponzi scheme, and how many times the SEC was informed in detail of what he was really doing, and could not have been doing as he claimed.
As I understand it, it also didn’t show big signs of trouble until it took a second run at Terra/Luna, causing that system to fail in May 2022. What, when, who and how do you believe should have done something sooner than its November 2022 collapse?
https://finbold.com/guide/buy-bitcoin-with-first-republic-bank/ How to Buy Crypto With First Republic Bank [2023] | Step-by-Step
BTC is not “decentralized”. It is controlled and centralized by the BTC Core developers with the key developers paid by Blockstream whose majority holder is Mastercard. The BTC Core developers control the keys to the Github repository and they are the ones who determines what goes into BTC.
There are only 2-3 primary miners on BTC that control over 50% of BTC’s hashpower. In addition BTC is NOT even Bitcoin as of 24 August 2017 with the introduction of SegWit followed by Taproot and other changes to the Bitcoin protocol that is not defined in the Bitcoin Whitepaper. The Bitcoin Whitepaper serves as a contract and contractually binds the miners to the protocol. Not following the protocol is a breach and BTC does not adhere to the Bitcoin protocol.
BTC is a Ponzi which was captured by the Blockstream paid developers around 2012-2013. They are currently being sued in the UK but the inventor of Bitcoin for IP theft and for passing BTC off as “Bitcoin”.
There is no “war on cryptocurrency”. “Cryptocurrencies” are SECURITES and all of them are in violation of SEC rules and now the SEC is finally ENFORCING their rules after giving these crypto scammers and thieves a pass for over a decade.
Ms. Brown as well as you need to do better research before writing about a topic you both know nothing about.
I think what is greatly misunderstood here is that cryptocurrency holdings, like any other asset, have to be converted back to fiat at some point and therein lies the problem — this requires the services of a third party willing to take the risk of acquiring your ledger entries and giving you “equivalent” local fiat in return. What happens when market volatility makes this undesirable or impossible?
Speaking of Sam Bankman-Fried, what about the other Sam of FTX/Alameda fame — Sam Trabucco? Have they found his yacht already or did he scuttle it?
And why did the top FTX/Alameda Little Rascals end up in Manhattan, out of all places? I know some of these people come from very affluent backgrounds and I’m sure they have plans for all sorts of contingencies. I guess they couldn’t get Erik Prince on speedial for a priority extraction out of the Bahamas…
Maybe you’re new to Unz: Who’s “them? Jews. It’s just deja vu all over again… A typical Jewish comedy played out many, many times.
https://www.latimes.com/politics/story/2022-12-26/sam-bankman-fried-cftc-sec-revolving-door
The central international bankers want to control the world. This is the root of everything. All happenings in the banks revolve around this central theme. Whether any given event is an orchestrated maneuver by the central international bankers to take further control or a counter-move by the resistance is what I have some difficulty in understanding, though I agree with Brown that the latest in cryptocurrency is a move by the central international bankers. Whether there is a backlash to regional public banking remains an open question at this point, but I highly doubt that such a backlash will succeed. The only solution is local removal of economies from the banking system entirely.
At least boring fiat does not lose half its value in year. Also, bitcoin is worth anything because its value is denominated in dollars. No one measures bitcoin wealth in actual units of bitcoin, but always relative to an underlying currency. Anyway, going back to $10k soon probably. The financial system has flaws, no doubt, but crypto is not an answer.
Because for some odd reason the Federal court district that includes Wall Street is by far the most experienced in handling financial crimes? That’s expertise in both prosecutors and judges.
You:
The banking system IS sound as long as people trust it.
However, in the previous article by you, posted 13th March, you write of:
The Looming Quadrillion Dollar Derivatives Tsunami
You continue in that article.
Technically, the cutoff for SIFIs is $250 billion in assets. However, the reason they are called “systemically important” is not their asset size but the fact that their failure could bring down the whole financial system. That designation comes chiefly from their exposure to derivatives, the global casino that is so highly interconnected that it is a “house of cards.” Pull out one card and the whole house collapses. SVB held $27.7 billion in derivatives, no small sum, but it is only .05% of the $55,387 billion ($55.387 trillion) held by JPMorgan, the largest U.S. derivatives bank.
So it is the exposure of the Strategically Important Financial Institutions to derivatives that can bring down the whole financial system. Nothing there about people’s confidence in the system. Just keep on betting wrongly and long enough and the whole system collapses.
You:
The dollar is backed by the full faith and credit of the American people.
Give me that ole time religion, Granny Brown ! The congregation will go down on their knees and pray for the sustenance and good health of our stricken brother, the United States Dollar. That should do the trick!
That’s not the issue and you know it. The USD is many times overvalued in relation to nearly all other currencies. Unilateral free trade, offshoring of industries and wars designed to make the Middle East safe for Israel have resulted in catastrophic trade deficits and national debt levels. The only thing preventing collapse are the USD’s continuing status as the world’s reserve currency.
That won’t last much longer. Once that status is lost, hyperinflation and economic, political and social collapse beckon. External force majeure will overwhelm faith, hope and credit.
The only proper banking movement would involve the people’s gold and silver, denominated in grams, stored in a vaulting institution that also runs the accounting system to show the transfer of ownership as commerce causes wealth to transfer from one to the other. It is the idiocy of national currencies, even if backed by gold, that is the underlying problem. Let me say it plainly – there should be no national currencies. Gov’t should have nothing to do with what the people use as real money, not fraud currencies.
Banking as we know it needs to disappear totally. It needs to be replaced by a brokerage model where the banking broker introduces those with funds to those that need them and allow the parties involved in any given transaction to determine the interest rate and other terms.
The current US banking system is one giant swindle that relies on confidence to maintain its aura of respectability when none actually exists.
‘Technically, the cutoff for SIFIs is $250 billion in assets.’ — Verymuchalive
As white-shoe law firm Skadden Arps comments, ‘Some of these [large bank holding] companies are subject to regulatory orders … [which] generally prohibit these companies from making substantial expansionary acquisitions or investments.’
https://www.skadden.com/insights/publications/2018/04/quarterly-insights/increase-in-sifi-threshold-should-spur-more-bank
This past weekend, one source asserted that JPMorgan would need a special waiver for its acquisition of First Republic Bank, announced this morning. Early articles are silent on the subject.
But apparently, being the biggest of the big, and politically connected, means JPMorgan easily obtains special permissions … just as investment banks Goldman Sachs and Morgan Stanley did in 2008, when they were designated as commercial banks to qualify them for bailout funds.
Bankstering is an insider club, fraught with moral hazard. On a de facto basis, JPMorgan may the safest bank on the planet, because Big Gov won’t let it fail.
JP Morgan is backed by America.
America, too big to fail.
America, the exceptional nation, immune to the laws of history.
I don’t think so.
Sometime later this decade, JP Morgan will be toast.
De facto
De iure
De finite
Exactly, and therefore they manifest as fiat.
Value is what people are willing to pay, and people are willing to pay ~ €25K currently, therefore BTC is worth that much. ‘Intrinsic value’ is a meaningless term. BTC has great value because it has important features – being deflationary, secure, fast, and requiring no 3rd party trust.
It is a store of value, and it is being used as a medium of exchange. It is backed by trust, and secure mathematics.
I showed above that BTC is the opposite of a Ponzi Scheme. There is a huge cash flow, just like that involved in share markets e.g. Investors buy, investors sell, cash flows – like every other market.
You have no idea what you are talking about 🙁
Not so.
The developers do not control BTC, they can only suggest changes using BIP. It requires the majority of miners to change the BTC protocol. Like I said.
Yes, currently 2 mining pools control over 50% of hash power, Foundry and AntPool, which is of some concern.
Yes, BTC has changed – so what? Things change. The Whitepaper is not a contract.
I showed above BTC is the opposite of a Ponzi – you ignored it.
Presumably you are referring to Craig Wright, a fool who falsely claims to have invented BTC.
Pardon ? BTC is an abbreviation for Bitcoin.
While this is largely true, there are an increasing number of exceptions :
There are bullion sellers who sell gold / silver directly for BTC. There are places where BTC can be used directly at the supermarket cash register. Some luxury car dealers take BTC. Newegg, AT&T, and Microsoft take BTC. BitDials and other luxury watch makers take BTC. You can subscribe to the Chicago Sun-Times with BTC. Swiss insurer AXA accepts BTC. I understand houses have been bought directly for BTC, and I am sure there are many such individual examples.
BTC already functions as money.
Why do the words “Tulip mania” keep ringing in my ears. At least, if you got the bulb, you could plant it and have a nice addition to your garden. However, this was seldom the case.
Traders met in “colleges” at taverns and buyers were required to pay a 2.5% “wine money” fee, up to a maximum of three guilders per trade. Neither party paid an initial margin, nor a mark-to-market margin, and all contracts were with the individual counter-parties rather than with the Exchange. The Dutch described tulip contract trading as windhandel (literally “wind trade”), because no bulbs were actually changing hands. The entire business was accomplished on the margins of Dutch economic life, not in the Exchange itself.[33]
Ledger entries ? Fine tulips would be infinitely more attractive.
Very much so. The BTC Core developers control the Github repository. The were able to push out Gavin Andressen who was assigned to run the Bitcoin project after Satoshi left the project. These developers were employed by Blockstream. Below are some of the name of the BTC developers being sued directly in the UK because of their control of BTC: The names comes directly from the lawsuit.
(2) Wladimir Jasper van der Laan
(3) Jonas Schnelli
(4) Pieter Wuille
(5) Marco Patrick Falke
(6) Samuel Dobson
(7) Michael Rohan Ford
(8) Cory Fields
(9) George Michael Dombrowski
(10) Matthew Gregory Corallo
(11) Peter Todd
(12) Gregory Fulton Maxwell
(16) Jason Bradley Cox
I’m glad you agree because it clearly shows that BTC is NOT decentralized. It also shows that all the so-called “nodes” “validating” on BTC are actually a waste of energy, time and resources because they do not produce blocks. Foundary and AntPool pretty demonstrate that BTC is not decentralized.
Bitcoin is a protocol and the miners are under contract to adhere to the rules as outlined in the Whitepaper. It is a contract because the miners are rewarded for their efforts via the subsidy. The BTC miners failed to uphold their end of the contract by allowing the BTC core developers to hijack the source code and by allowing them to corrupt the system. You like many, mistakenly believe that “open source” is public domain. It is NOT. The Bitcoin source code is copyrighted and the Whitepaper serves as a binding contract. You are ignorant of IP Law and this is why the aforementioned BTC core devs are being sued.
No you did not. BTC is a security under the Howey Test. It was surprising that a financial expert as Ms. Brown was ignorant about these SEC violations. Bitcoin is a commodity and therefore BTC is NOT Bitcoin and is in violation of SEC rules. In fact the BTC core devs have also violated tax laws because BTC was trading at over $4000 per coin on 24 August 2017 when they airdropped a new coin when they implemented SegWit and owe taxes on $84 billion. Commodities, a fixed protocol, are not subjected to change. If it changes like you advocate then it is a security.
Dr. Craig S. Wright was GRANTED the copyright of the Bitcoin Whitepaper in 2019 and had to provide proof of identity. He also enforced his copyright to the Whitepaper in the U.K. In addition, he won the lawsuit in late 2021 where he was being sued for 50% of both the Bitcoin IP and the Satoshi coins. In that case, he proved that he is the inventor of Bitcoin as that was the premise of the entire case. So he is not “claiming” to being the inventor. He’s proven to being the inventor and he is protecting his IP rights and his invention. If you are going to rebut this please do better.
BTC is NOT the abbreviation for Bitcoin. BTC is the hijacked ticker symbol of Bitcoin, stolen via collusion of the bucket shop (aka: exchanges) such as Coinbase, Kraken and others. Bitcoin now trades under the BSV ticker symbol which has been targeted by these same shops for delisting campaigns. These “exchanges” are engaging in open consumer and investor fraud by passing off BTC as “Bitcoin”.
What we are now seeing is NOT a “war on crypto” but the start of legal enforcement of financial and security laws that has long been ignored by the authorities as well as IP law and property law.
This is largely untrue. The companies that you mention USED TO accept BTC during the 2013-2015 heyday because of the novelty and promise behind Bitcoin. BUT when BTC got hijacked by the Blockstream, with the Core Devs pushing out Gavin and Mike Hearn , they deliberately kept BTC at 1 MB per block limit. BTC can only process transitions at a rate of 7 per second. The BTC core developers deliberately crippled BTC in order to market their side-chains and level-2 solutions (like the Lightning Network). They did this not only for their own self-interested reasons but because they wanted to get the transactions off of the BTC chain where those transactions are traceable and auditable.
With SegWit, BTC breaks the definition of electronic cash as defined by the Whitepaper. Electronic cash is defined as a chain of digital signatures. With SegWit the digital signatures are kept “off-chain” and are “segregated” from the actual transactions. This separation post-SegWit means that a BTC transactions are not legally admissible because the party can legally claim to have not signed the transaction. Subsequently, the BTC devs added Taproot which also mangles and obfuscate the traceability of transactions.
BTC cannot function as money because it cannot scale. As BTC usage rises, the mempool (memory pools) fills and creates backlogs. In order to get your transaction process you have to then bid against other users in order to prioritize your transaction to be process. This raises the cost of using BTC exponentially.
BTC cannot scale to be used my millions much less billions. The same is true about ETH. ETH is limited to 15 transactions per second. As stated by Satohsi, there is no scaling limit to Bitcoin and currently BSV (the true Bitcoin) can process 100,000 transactions/sec and is targeting 1mm tx/sec for this year.
Funny that you mention AXA. AXA was an early funder of Blockstream — the group that hijacked BTC. BTC is NOT Bitcoin.
Tulips had value until public confidence evaporated, they then reverted to their intrinsic value as a flower.
Bitcoin=Tulips(before the crash)
An idea is what you are expressing, namely that btc is valuable beyond public confidence. Gold/silver/pm is valuable without public confidence, actually gains (nominally) value as public confidence in fiat/cryto flails.
Crypto^ for cryto
Deadbeat, I appreciate your comments here.
Could you help me understand cryptos as commodities vs cryptos as securities?
Did you say “Satoshi Nakamoto’s” original bitcoin is a commodity? And that all other cryptos are securities?
That’s two questions. One more is to ask your thoughts on tokens/coins that indisputably do have functions and features that no security does or, I think, wver can. So are referred to as “utility tokens” and perhaps other names.
So maybe these and other capabilities of crypto are valid reasons to distinguish cryptos from securities? If not, why?
Can you clarify for us why you think all crypto s are securities, if you do?
Don’t forget to study the Dutch Tulip Mania also.