The banking market in the United States is still having a hard time after the collapse of 3 significant banks. According to stats, bank loaning in the U.S. has actually come by near to $105 billion in the last 2 weeks of March, which is the biggest decrease on record. Additionally, Elon Musk, a Tesla executive and owner of Twitter, just recently talked about trillions of dollars being withdrawn from banks into money market funds, and he firmly insists that the “trend will accelerate.”
Statistics Still Show Glaring Signs of U.S. Bank Weaknesses; Musk Issues Warning
There are still a lot of indications revealing that the U.S. banking system is feeling the consequences of a number of prominent bank collapses. During the very first week of March, Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank (SBNY) shut down operations. Both SVB and SBNY were positioned under federal government control. The U.S. Federal Reserve, Treasury, and Federal Deposit Insurance Corporation (FDIC) bailed out SBNY and SVB’s uninsured depositors and made all depositors whole.
Since then, the banking contagion has actually spread out throughout the United States and globally, with banks like SVB UK and Credit Suisse failing. According to a recent report released by Bloomberg, the last 2 weeks of March saw the biggest contraction in loaning on record after the collapses. The Federal Reserve’s information on the topic just returns to 1973, and in the last 2 weeks of March 2023, almost $105 billion was eliminated.
Alexandre Tanzi from Bloomberg describes that loans included commercial, business, and property loans. Furthermore, recently saw $64.7 billion in business bank deposits eliminated from banks, which marked the 10th straight weekly decrease in deposits. Another indication of problem is the spike in Federal Home Loan Bank (FHLB) bond issuance in March. Jack Farley, a reporter and macro scientist for Blockworks, shared a chart revealing FHLB bond issuance rising last month “to just under a quarter trillion dollars.” Farley included:
This is over 6 times the post-GFC average for the month of March and it suggests banks’ scramble for money.
Moreover, the popular Twitter account Wall Street Silver (WSS) shared a video of economic expert Peter St. Onge explaining that a considerable quantity of bank deposits are transferring to money market accounts. WSS tweeted, “Trillions of dollars are draining out of the banks… into money market funds. That weakens the banks. Fear that the banks are at risk is driving this trend and thus making the banks even weaker.” The economic expert’s video declaration and WSS’s tweet stimulated an action from Twitter’s owner, Elon Musk. The Tesla executive warned:
This pattern will speed up.
This is not the very first time Musk has actually warned the general public about the U.S. banking system, as he has actually slammed the U.S. Federal Reserve on a number of celebrations. In November 2022, Musk cautioned that the U.S. would see a serious economic downturn and advised the Fed to slash the federal funds rate. In December 2022, the owner of Twitter said that an economic crisis would magnify if the Fed raised the rate of interest and the reserve bank increased the rate. Musk likewise firmly insisted in December that the Fed’s fast rate walkings would decrease in history as one of the “most damaging ever.” After the 3 significant U.S. banks stopped working in March, Musk berated the Fed’s information latency and required an instant drop in rate of interest.
What do you believe the long-lasting impacts of the recent bank collapses and reduce in loaning will be on the U.S. economy? What do you consider Elon Musk’s caution? Share your ideas about this topic in the remarks area listed below.
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