In the face of the sudden banking crisis, the Fed’s “rescue” cost a lot. According to the latest data from Bloomberg, in the past four short weeks, the Federal Reserve’s emergency “rescue” has expanded its balance sheet by US$370 billion (about RMB 2.6 trillion). This level of liquidity injection is relatively rare in the history of the Federal Reserve, even comparable to the 2008 financial crisis.
What deserves vigilance is that the current big banks in the United States are under the pressure of a large outflow of deposits. According to the latest H.8 report released by the Federal Reserve on March 31, in the week ended March 22, the deposits of the 25 banks with the largest total assets fell from US$10.74 trillion to US$10.65 trillion. 90 billion U.S. dollars (about 620 billion yuan).
In addition, the latest warning from “Wall Street legend” Robert Kiyosaki has attracted market attention. When participating in a program, he warned that the Bank of Japan may be the next global superpower to fall. It explained that the Bank of Japan has been providing financing for derivatives. Today, the global derivatives market is as high as $1,000 trillion and is facing serious problems. The close connection between the Bank of Japan and the derivatives market puts it in a more vulnerable position. , and could have a greater impact on the global economy.
At present, many areas in the United States are continuously being hit by tornadoes. According to CCTV news, at least 29 people have died and large-scale power outages have been caused in many places in the United States. On April 2, local time, according to a statement issued by the White House, US President Biden declared a state of emergency in Arkansas and ordered federal assistance to help areas in Arkansas that were affected by severe storms and tornadoes on March 31. Do recovery work.
2.6 trillion “rescue”
The outbreak of the U.S. banking crisis put the Federal Reserve in a rare embarrassing situation: on the one hand, it was curbing inflation and tightening currency; on the other hand, it continued to inject a large amount of liquidity into the U.S. banking industry.
According to the latest data from Bloomberg, in the past four weeks, in response to the outbreak of the banking crisis, the Federal Reserve’s emergency “rescue” has expanded its balance sheet by US$370 billion (about RMB 2.6 trillion). This level of liquidity injection is very rare in the history of the Federal Reserve, even comparable to the 2008 financial crisis.
In addition, according to the official data disclosed by the Federal Reserve, in the first two weeks of the outbreak of the crisis, the size of the Fed’s balance sheet once expanded by nearly 400 billion US dollars, which is almost equivalent to nearly 2/3 of the size of the Fed’s balance sheet reduction in the past six months. 3.
Ding Yifan, former deputy director of the World Development Institute of the Development Research Center of the State Council and a senior researcher at Taihe Think Tank, pointed out that after the collapse of Silicon Valley Bank, the Federal Reserve launched a new tool – the Bank Term Financing Plan (BTFP), “almost equivalent to to direct interest rate cuts”.
In the past week, things finally seem to be getting a little “better”. According to the latest balance sheet data released by the Federal Reserve, as of the week of March 29, the size of the Fed’s balance sheet fell from 8.734 trillion US dollars in the previous week to 8.706 trillion US dollars, a modest decrease of 27.8 billion US dollars week-on-week.
Balance sheet details provided by the Federal Reserve showed U.S. banks reduced borrowing from two of the central bank’s credit facility facilities in the latest week, suggesting liquidity needs may be stabilizing. Borrowing balances at U.S. financial institutions totaled $152.6 billion in the week ended March 29, down from $163.9 billion the previous week.
620 billion deposits fled
According to the latest H.8 report released by the Federal Reserve on March 31, as of the week of March 22, the decline in deposits of U.S. commercial banks has not been stopped. It is worthy of vigilance that the current large U.S. banks are under the pressure of a large outflow of deposits .
The data showed that in the week ended March 22, the deposits of all commercial banks in the United States decreased by another US$125.7 billion, the ninth consecutive week of decline. That leaves total U.S. banking deposits nearly $860 billion below the April 2022 record high.
The latest report shows that the top 25 banks in the United States have become the “hardest hit areas” of deposit outflows. In the week ended March 22, the deposits of the 25 banks with the largest total assets fell from 10.74 trillion US dollars to 10.65 trillion US dollars. trillion U.S. dollars, a total reduction of nearly 90 billion U.S. dollars (about 620 billion yuan).
Insiders on Wall Street have warned that there may be risks behind the rise in deposit outflows from big banks.
The global asset management giant Barclays warned in its latest report that the U.S. banking crisis will see two waves of capital outflows, which are putting pressure on banks’ balance sheets, and the current first wave is likely to be “coming to an end.” “. The real trouble may come from a second wave of deposit outflows, as U.S. savers realize that money market funds can offer higher interest rates, and more deposits may continue to flow into this pool of funds.
It is worth noting that after the release of the Fed’s latest report, the rating agency S&P Global has downgraded the rating outlooks of Bank of America, JPMorgan Chase, PNC Financial Services Group, and Truist Financial from “positive” to “stable.”
Plus, the current banking crisis is hitting U.S. business lending. According to the Federal Reserve’s latest H.8 report, as of the week of March 22, overall loans of U.S. commercial banks fell by $20.4 billion, the largest drop since June 2021. Among them, commercial and industrial loans, which measure corporate behavior and activity, fell by nearly 30 billion U.S. dollars, the most significant decline, and the largest decline since June 2021.
Analysts pointed out that the overall sharp decline in the size of bank loans is mainly due to the tightening of credit by large banks. The 25 largest banks in the United States have issued about 60% of the loans in the United States. The lessons learned by Silicon Valley Bank and Credit Suisse are making American banking giants become more cautious.
The next supergiant to fall?
Recently, Wall Street financier and author of “Poor Dad, Rich Dad” Robert Kiyosaki warned that the Bank of Japan may be the next global super giant to fall.
Kiyosaki explained that the Bank of Japan has not only maintained interest rates at zero for a long time, but also provided huge funds for the global derivatives market. As Warren Buffett said, the derivatives market is a weapon of mass financial destruction.
He further added that the Bank of Japan has been providing financing for derivatives, and now the global derivatives market is as high as $1,000 trillion and is facing serious problems. The BOJ’s close ties to the derivatives market put it in a more vulnerable position and could have a greater impact on the global economy.
It is worth mentioning that Robert Kiyosaki became a “Wall Street legend” because he accurately predicted the bankruptcy of Lehman Brothers in 2008. After the bankruptcy of Silicon Valley Bank in the United States, he warned on March 13 that Credit Suisse would become the next “Silicon Valley Bank”. Just 2 days later, Credit Suisse’s “thunderstorm” set off another “bloody storm” in the global financial market.
Meanwhile, the world is closely watching the Bank of Japan’s change of governor. On April 8, Kazuo Ueda, the new governor of the Bank of Japan, will officially take office, succeeding Haruhiko Kuroda, the current governor who has been in office for ten years.
There are reports that although the Bank of Japan is still more than a week away, global investors have begun to prepare for it. Because Kazuo Ueda took office, it may mean that Japan’s 10-year era of ultra-low interest rates is coming to an end, and once the Bank of Japan tightens policy, it may “further amplify fluctuations in the global bond market.”
Some analysts warned that because of the ultra-loose monetary policy in the past decade, 3.4 trillion US dollars of domestic funds in Japan were invested in overseas markets, and now the funds will flow back to Japan.
On March 31, local time, the International Monetary Fund (IMF) issued a report recommending that the Bank of Japan “should avoid a hasty exit from the existing monetary policy”, reiterated the need to maintain the flexibility of long-term yields, and expected to provide forward guidance on interest rates, Strengthen communication with the market.
The report believes that the Bank of Japan is about to undergo the first change of governor in a decade, and the sudden change in the policy framework will bring risks to the economy and is not conducive to a smoother transition and protection of financial stability.