Bankers Cover Up the Biggest Bailout Since 2008 Out of Fears of a Bank Run

Bankers are likely covering up the biggest bailout since 2008 as the Swiss banking system is facing a liquidity crisis that could lead to a bank run. The dollar shortage has everything to do with aggressive central bank rate hikes that will likely lead to an economic apocalypse.

Bank bailouts have started i’m your host steve van meter and thanks for joining me today bankers are covering up the biggest bailout since 2008 out of fears of bank runs let’s go to bloomberg where he picked it a story up with a headline swiss banks seek most dollars since 2008 it bid for easy profit or perhaps desperation in wednesday’s auction conducted by the

Swiss national bank 17 institutions took up 11.09 billion that’s the most since october 2008 when the global financial crisis was raging in the wake of lehman brothers collapse according to economists at credit suisse swiss bank swapped the dollars into franks in order to generate a profit so i wanted you to understand here what you’re hearing from credit suisse

Which mind you i don’t think has a lot of credibility i’m not sure what you think but i don’t think they do and the sense that they’re saying is look we’re not in trouble we don’t need dollars this is just an arbitrage opportunity are you kidding us and i want you to see through this because i think there’s something deeper going on here the lenders can even

Sell the cash back to the swiss national bank using this reverse repo auctions or deposit it at the institution to benefit from a positive interest rate again an arbitrage trade not a demand for liquidity we do not believe that the increased demand for u.s dollar liquidity by domestic banks reflects any liquidity issues in the swiss banking system according to

Again accredited suites economist so notably you know they come out in their report and say look we’re just running an arbitrage opportunity here we don’t need liquidity we’re not in trouble we don’t need dollars and i’ll tell you what it certainly seems like something big is brewing underneath the swiss national bank and credit suisse the dollar swap facility

This of the fed was created during the fight financial crisis that began in 2007 as a lifeline to provide safe access to greenback liquidity while the swiss national bank’s cash-taking repo options are designed to drain excess liquidity from the market and here you can see that these loans are not free and here we go to the new york fed website and notably we do

Not have they have not updated with that latest 11 billion but you know there is a seven day loan at an annual rate of 3.33 percent so what i want you to understand here is the fact that the swiss national bank is having to borrow this money because the banks in its system need it it means people cannot access dollars for any less than 3.33 percent apr that’s a

Significant issue here because the fed again this is an emergency backstop that the fed created it’s not some window where you go to run arbitrage opportunities but notably i want you to keep in mind this is how it’s being spun because if they can get through this problem then no one’s a wiser if it blows up well we knew where it started the swiss national bank

Does not disclose which banks borrow dollars now switching over to the wall street journal the use of the fed’s dollar swap lines is often seen as a sign of stress in the financial system and some are worried that swiss banks were having problems and that is again a key point because there’s a stigma with using the fed window a lot of banks don’t like to use it

Because it tells people that hey you’re in financial stress this is no different than going to the doctor because you have a cold if someone said hey i have a cold but i’m going to the er it’s probably something more serious in this case the feds window is the er not just a normal place you need to go to get dollars but banks can borrow those dollars for a week

From the swiss national bank via the swap line the swaps those dollars for swiss francs but only has to pay around 20 basis points it can then give those franks to the swiss national bank through one week repurchase auction which pays the bank’s 45 basis points leaving the bank a profit of perhaps around 25 basis points some domestic banks can even make more if they

Have the capacity to park the extra francs overnight at the swiss national bank where the policy rate recently went positive 250 basis points and again all this is is saying hey there’s just an arbitrage opportunity you know nobody goes out and tries to run these kind of things for 20 basis points or 0.2 percent a year this is ridiculous i think there’s something

Brewing underneath the covers here in the swiss banking system what do you think we’ll look to the comments to see do you buy it do you think they just are running arbitrage or is there a massive liquidity crisis brewing now coming up on friday jeff snyder tracy shuchar and i are joining the traders summit group for their rec upcoming event will be live on sunday

At 10 45 eastern to talk global macro and take your questions here’s a great thing the whole conference is free again it kicks off at noon on friday and go to tradersummit.net sign up again toll-free totally free and we’ll look forward to seeing you there but are there some signs out in the global economy that perhaps would indicate that there really is stress in

The system and a dollar shortage well to that we turn back to the fed the fed’s board sees 2023 shift with the end of front loading hikes and there’s a problem because the fed has aggressively raised rates here faster than they ever have before and you do not have to think about what the reasonable level is bullard said he says our goal is to move some meaningfully

Restrictive level that will push inflation down but it doesn’t mean you have to go up forever in 2023 i think we’ll be closer to the point where we can run what i call ordinary monetary policy if anything they do is but ordinary you’re now at the right level of the policy rate you’re putting downward pressure on inflation and then you can adjust as the data comes in

In 2023 but bullard has noted that he’s more or less priced into the market for a 75 basis point hike although he’d prefer to wait until the meeting decide if it’s preference for the size of the move perhaps has changed and i think that what we’re going to see is this might be the last hike the fed does i have a hunch that go in december we’re going to start to see

The economy hit a wall but this aggressive rate heist by central banks would put stress on the system that’s why we see the dollar going higher so does it make sense that indeed that swiss national bank is borrowing these dollars for its member banks because there’s a dollar short absolutely tells you and it reeks of a liquidity crisis but are there other signs

That the economy is hitting the wall and there’s a shortage of dollars absolutely because one way dollars get around the world is through global trade and that’s crashing here we can see with this headline from freight waves that container imports to los angeles and long beach are plummeting in la as september imports are down 15 percent versus august now some

Of this is due to negotiations with the union there and some traffic is being rerouted to other ports but is still down significantly even when factoring that at the port of los angeles reported total throughput down 21.5 year over year experts up 2.6 percent year over year and how about this port of long beach executive director mario cordero blamed the import

Decline on consumer and retail concerns about inflation leading to warehouses filled with inventory and fewer product orders from asia well it’s not fears of inflation mario what the issue is they don’t have the money to buy all this stuff inflation isn’t just a fear it’s a reality and of course what we’re seeing is as all these warehouses start to fill up what

It means is these shipments are going to stop and the economy is going to hit a wall dollar goes higher and of course maybe something in the swiss banking system blows up but fewer ships are also being docked you may recall back during the pandemic there were over a hundred ships at some times waiting to birth now in recent weeks the numbers have shrunk to much

Lower levels the average through from september 1st was 19 ships there were 18 there on tuesday and there were only 10 alongside september 12th keep in mind these are very very low numbers but one thing that isn’t doing that bad and staying fairly low is initial claims but one thing that isn’t going down is the ongoing claims we see state claims up 21 000 to 1.385

Million meanwhile initial claims are staying relatively low at 214 000 but will we see initial claims start to take higher well we will because there are other signs that we’re seeing now that perhaps this dollar shortage is real there is a liquidity crisis brewing into that return to the philly fed and here we know in their manufacturing activity report the region

Continued to get this decline overall this month according to firms the survey’s indicators for general activity and new orders remain negative that means heading lower the shipment index was level changed we’ll assume that’s going to head lower at a low but positive reading the firms continue to report higher employment so notably firms are hiring but that too as

We’ll soon see will change in both price indices indicate overall increases in prices not only received but had the survey’s future general activities suggest a survey firms expect declines in the next six months and here you can see in this wonderful chart the current activity in orange is headed down following future activity and what this means is manufacturers

Are predicting today that activity is going to slow let’s go back and look at that chart again because it’s a really good predictor of where current activity is headed and you can even note during the pandemic activity crash down but future demand went higher higher and current activity swung up this is a leading indicator of again stress in the system and that we

Are indeed heading to a recession now we’ll take that philly fed data of new orders which we know is still in contraction and what will overlay now with the gross domestic product or gdp on a year-over-year rate change as we see new orders head down it means the economy is indeed slowing down and that would validate again that the swiss are seeing a liquidity crisis

Firms continue to report price increases as prices paid and prices receive rose modestly this month holding steady declines for the summer but what does this mean for inflation and bond prices well it actually means that the bond market is not following economic fundamentals because if it was rates should be headed down not up check this out here you can see again

Current prices paid from the philly fed overlaid with u.s treasury securities 10-year yield i have this on a year-over-year rate of change on the red line and notice that they the two are fairly well in sync there’s a nice relationship here that as price has paid goes down then yield on a year-over-year rate also head lower here you can note very unusual you see

Prices paid coming down the bond market not following economic fundamentals suggesting that at some point yields have a long way to go down to catch up to the economy and how about what this means for inflation well the cpi also following of course prices paid tells us prices paid or heading lower means also we should start to see inflation head down at least

In the coming months perhaps that will be the thing that puts the fed on pause but future indicators are deteriorating they know the future general activity fell from -3.9 to minus 14.9 its fifth consecutive negative reading suggesting as i pointed out earlier the economy here is slowing the shares of firm expecting decreases in activity over the next six months

37 percent exceeded the share expecting increases a mere 22 percent the firm expects overall increases in employment but i think that’s going to change but future employment index did only decline to 12.2 let’s check this out because when we see a collapse in new orders here in blue showing the philly fed data again you see at some point there is an increase in

Initial claims now looking at the four-week moving average and why is that because if there is a cancellation or decline in new orders guess what you don’t need that’s right you don’t need people to build them and that is why we should start seeing somewhere here in the weeks to come and increase in unemployment but is this bullish for the stock market market well

Not so much here you can see again taking the diffusion index for new orders overlaying the wilshire 5000 or the total u.s stock market in red and what we note is it should still trend down it’s not until the stock market starts to rally and push higher that it can actually signal a reversal in the economy but those reversals unless new orders turn around will be

Rejected with lower stock prices and so all this points to is it looks to me that the people at credit suisse are trying to cover up that there is a severe collateral and dollar shortage going on the swiss banking system something that could lead to a massive liquidity crisis and they’re just hoping they can skate through it but i don’t think they will i’m steve

Vanmeter thanks for watching thanks for being fans bye now

Transcribed from video
Bankers Cover Up the Biggest Bailout Since 2008 Out of Fears of a Bank Run By Steven Van Metre