How it all began ...

In the banking system, it is rare for a bank to go bankrupt on its own. When a large bank goes bankrupt, it drags down other large banks. To understand how the current financial system is a kind of pyramid, we need to understand how we got to the current state.

It all started in 1907 in the United States with JP Morgan saving several smaller banks from bankruptcy, along with the Rockefellers, making a pool of money to avoid a total collapse and restore confidence in the system. But it went wrong, and days later the North American stock market fell 50% because there was no more financing. Once again, JP Morgan managed to meet with his friends and raise more money to save the stock market. The conclusion at the time was that a central bank was needed where they could turn to if the situation happened again. In other words, banks can now make risky operations that already have a place to turn to if things go wrong. In 1913, the FED was created.

In 2008, the global Lehman Brothers crisis occurred. A few years earlier, banks had been buying high-risk assets, roughly speaking, they were mortgages that were unlikely to be paid and loans to people who could not honor their commitments. Once again, they turned on the printer and saved the banks.

This year, the same thing is happening again, but in a different way. Unlike the 2008 crisis, banks are going bankrupt not because they have high-risk assets, but because they have US Treasury bonds, supposedly the safest investment in the world. Old US Treasury bonds have lost value because interest rates have risen. In 2020 and 2021, the 10-year interest rates in the US were at 0.08%, but to contain inflation after printing more than 50% of the dollars in circulation in 2020 and 2021, interest rates were gradually raised to 5%. This means that anyone who wanted to sell the 0.08% titles cannot find anyone to buy them because now the titles are paying much more. The only way to sell them is to sell them at a large discount, and that is what Silicon Valley did, in addition to suffering from a run on deposits.

What irony, the toxic assets are now US Treasury bonds. All the regulations and stress tests were done by Silicon Valley, but it still fell. Once again, the magic printer was turned on to save the dear banks, but they say it is not a bailout because they are lending money and receiving the property of the same as collateral. And what is that property? They are the US government's own Treasury bonds. Confused, isn't it? All in the name of confidence in the FED to protect the system.

The Bank Term Funding Program was just created, which in summary is a standard repurchase operation, that is, loans guaranteed by the US Treasury. But with a small difference from the old repurchases, the FED is lending at face value, that is, institutions can exchange devalued assets for money at the value they bought in the past. There is no loss or punishment for anyone, the FED has assumed the devalued bonds that the banks had, giving them liquidity. Almost everything the same as quantitative easing but with a new, more modern narrative. You can go and confirm the central bank's balance sheet, which has grown by more than 300 billion dollars in these recent bailouts. The FDIC has 128 billion, but banks have deposits of 17 trillion (American notation), you can already see what happens if Americans start withdrawing money from the bank. I don't even want to imagine.

What the FED is doing is assuming the risk and in a way assuming that the fault was theirs and this is nothing more than breaking the valuable confidence in the current system. But after all, who will bail out the FED if things go wrong? When the FED prints money, what they are doing is passing all the risk to the creditors, that is, who use the dollar. With this, the US is exporting all of its problems to those who use the dollar. And nowadays almost all international business is done in dollars. They are not stupid, are they! All of this without asking anything of those who use the dollar. The FED is insolvent, and I'm not the only one to say that. You can confirm the FED's unrealized losses.

This is the biggest financial pyramid in the world, but it has to continue otherwise ...