Skip Marvell

Mar 26 2023

Too Big To Fail?

Continuing our series — which we’ll cross-post on the SHTF Megapost — talking about the craziness of the economy. Two pieces to this one: first, we take a ChatGPT-led approach (they did most of the writing, we do the editing) to the concept of “Too Big To Fail” banks.

Second: we share a link to a very recent (March 25) video where Glenn Beck interviews David Sacks to talk about…looks around…everything.

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What Makes a Bank ‘Too Big To Fail’

We took to AI, specifically ChatGPT, with the following prompt…

Explain in a 1000-word post why the US Federal Reserve can help stop Global Systemically Important Banks (GSIBs) from going under, and how to best keep the mid-sized and regional banks from failing, too.

So we did a little light editing, and the following is what the computers spit out.

What Is a GSIB?

The Global Systemically Important Banks (GSIBs) are large financial institutions that are considered too big to fail. The failure of such institutions could have a catastrophic impact on the global economy, as they are intertwined with other financial institutions and industries. The US Federal Reserve plays a crucial role in preventing the failure of GSIBs and ensuring the stability of the financial system. In this post, we will discuss the role of the Federal Reserve in preventing GSIBs from going under and how it can also keep mid-sized and regional banks from failing.

The Federal Reserve, also known as the central bank of the United States, is responsible for conducting monetary policy, supervising and regulating banks, and maintaining the stability of the financial system. One of the most important tools that the Federal Reserve has in ensuring financial stability is its ability to act as a lender of last resort. This means that in times of crisis, the Federal Reserve can lend money to financial institutions that are facing liquidity problems and prevent them from going bankrupt.

The Federal Reserve has a number of mechanisms in place to prevent the failure of GSIBs. One of the most important is the Comprehensive Capital Analysis and Review (CCAR) program, which evaluates the capital adequacy of large financial institutions. The CCAR assesses whether GSIBs have enough capital to withstand adverse economic scenarios, such as a recession or financial crisis. The Federal Reserve can then require these institutions to increase their capital if it determines that they are not adequately prepared for such scenarios.

Another mechanism that the Federal Reserve has in place is the supervisory stress testing program. This program assesses the resilience of GSIBs to potential shocks in the financial system. The stress tests evaluate how GSIBs would perform under different economic scenarios, including severe recessions and financial crises. This enables the Federal Reserve to identify potential weaknesses in the institutions’ risk management practices and take steps to address them.

In addition to these mechanisms, the Federal Reserve also has the ability to provide emergency loans to financial institutions in times of crisis. During the 2008 financial crisis, the Federal Reserve provided emergency loans to several large financial institutions, including Goldman Sachs and Morgan Stanley. These loans helped prevent these institutions from going bankrupt and prevented a catastrophic collapse of the financial system.

What About the Mid-Sized Banks?

While the Federal Reserve has been successful in preventing the failure of GSIBs, it is also important to ensure the stability of mid-sized and regional banks. These institutions may not be as systemically important as GSIBs, but their failure can still have a significant impact on local economies and communities.

To prevent mid-sized and regional banks from failing, the Federal Reserve has implemented a number of measures. One of these measures is the Community Reinvestment Act (CRA), which requires banks to meet the credit needs of the communities in which they operate. The CRA encourages banks to provide loans to low- and moderate-income individuals and businesses, which helps to support local economic development.

The Federal Reserve also conducts regular supervisory examinations of mid-sized and regional banks. These examinations evaluate the financial health and risk management practices of these institutions. If the examinations reveal weaknesses in these areas, the Federal Reserve can require the institutions to take corrective action.

In addition to these measures, the Federal Reserve has also taken steps to promote diversity and inclusion in the banking industry. The Federal Reserve believes that a diverse workforce can help promote better decision-making and risk management practices in financial institutions. The Federal Reserve has established diversity and inclusion committees and initiatives to promote these values in the banking industry.

Summary

In conclusion, the US Federal Reserve plays a crucial role in preventing the failure of Global Systemically Important Banks (GSIBs) and ensuring the stability of the financial system. The Federal Reserve has a number of mechanisms in place, including the Comprehensive Capital Analysis and Review (CCAR) program, supervisory stress testing, and other tools to help avoid catastrophe.

Glenn and David

Wrapping It All Up…For Now

A couple thoughts:

First up, OMG, Deutsche Bank is apparently in trouble. It’s somewhere near the top of the GSIB list.

Second, also OMG, Glenn’s interview with David is really something. Probably a little scary, too. Worth a watch.

Third, revisit the original SHTF posts for a crypto-ish take on what to potentially do next.

Mar 24 2023

Bard Writes Financial Survivalist Copy

Editor’s Note: Like a good chunk of the world, we got an invite to try “Bard,” Google’s LLM AI writer thingy. We assigned it an article on “how to invest $1000 to prepare for a financial crisis.”

The article follows. Again, not investment advice, and do your own research.

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Here are some tips on how to invest $1000 to prepare for a financial crisis:

1. Build an emergency fund.

An emergency fund is a savings account that you can use to cover unexpected expenses, such as a job loss, medical bill, or car repair. It is important to have an emergency fund in place before a financial crisis hits, so that you don’t have to go into debt or sell your assets. A good goal to aim for is to have at least 3-6 months of living expenses saved up in your emergency fund.

2. Invest in assets that are likely to hold their value or appreciate in a financial crisis.

Some assets that are considered to be safe havens during a financial crisis include gold, silver, and bonds. You can also invest in stocks of companies that are considered to be essential services, such as utilities and healthcare companies.

3. Diversify your investments.

By investing in a variety of different assets, you can reduce your risk of losing money if one particular asset class crashes. A good way to diversify your investments is to invest in a mix of stocks, bonds, and cash.

4. Rebalance your portfolio regularly.

As the market changes, your portfolio should also change. This means selling some assets that have gone up in value and buying assets that have gone down in value. Rebalancing your portfolio regularly can help you stay on track with your financial goals and reduce your risk of losses.

5. Be patient and stay calm.

Financial crises can be scary, but it is important to remember that they are temporary. If you stay calm and stick to your investment plan, you will be more likely to come out ahead in the long run.

Mar 18 2023

Five Tips You Can Use to Become a Financial Survivalist

In an increasingly uncertain world, it’s wise to prepare for financial survival. Whether you’re concerned about economic collapse, inflation, or other financial emergencies, there are several steps you can take to safeguard your wealth and ensure your survival.

Here are five ideas for becoming a financial survivalist:

1. Invest in Gold and Silver

Gold and silver have been used as a form of currency for thousands of years, and they continue to be a popular investment for those concerned about financial survival. One of the reasons gold and silver are so valuable is that they are physical assets that can’t be created out of thin air like paper currency or digital assets. They are also a hedge against inflation, as their value tends to rise as the value of paper currency falls.

There are several ways to invest in gold and silver, including buying physical coins or bars, investing in exchange-traded funds (ETFs) that track the price of gold or silver, or investing in mining companies that extract precious metals from the ground. Keep in mind that the price of gold and silver can be volatile, so it’s important to do your research and understand the risks before investing.

2. Consider Bitcoin and Other Cryptocurrencies

Bitcoin and other cryptocurrencies are digital assets that are decentralized, meaning they are not controlled by any government or financial institution. They offer several advantages over traditional currency, including lower transaction fees, faster transaction times, and greater privacy.

One of the reasons bitcoin and other cryptocurrencies are popular with financial survivalists is that they are not tied to the traditional banking system, which can be vulnerable to economic instability or government intervention. However, it’s important to note that the value of cryptocurrencies can be highly volatile, so it’s important to invest only what you can afford to lose.

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3. Keep Some Cash on Hand

While gold, silver, and cryptocurrencies offer advantages over paper currency, it’s still important to keep some cash on hand for emergencies. In the event of a natural disaster, power outage, or other emergency, ATMs and credit card machines may not be available, making it difficult to access your funds.

Keeping some cash on hand can also be useful in the event of a bank run or other financial crisis. However, it’s important to keep the cash in a secure location, such as a fireproof safe, and to rotate it regularly to avoid deterioration or damage.

4. Learn to Live Frugally

One of the best ways to ensure financial survival is to learn to live frugally. This means living within your means, avoiding debt, and finding ways to save money on everyday expenses.

There are many ways to live frugally, such as shopping for bargains, cooking at home instead of eating out, and cutting back on unnecessary expenses like cable TV or expensive hobbies. By living frugally, you can build up a financial cushion that can help you weather financial emergencies and avoid being caught in a cycle of debt.

5. Invest in Self-Sufficiency

Finally, investing in self-sufficiency can be a valuable tool for financial survival. This means learning skills like gardening, canning, and food preservation, as well as basic DIY skills like carpentry and plumbing.

By investing in self-sufficiency, you can reduce your dependence on outside sources for food, water, and other essentials. This can be especially valuable in the event of a natural disaster or other emergency that disrupts supply chains and makes it difficult to access basic necessities.

In conclusion, becoming a financial survivalist requires a combination of investment in tangible assets like gold and silver, digital assets like bitcoin and other cryptocurrencies, and cash, as well as learning to live frugally and investing in self-sufficiency. By taking these steps, you can increase your chances of surviving and thriving in an uncertain financial future.

DISCLAIMER: THIS IS NOT INVESTMENT ADVICE. DO YOUR OWN RESEARCH.