China’s Banking System, Deglobalization,
and Cash on the Sidelines
More cash is accumulating in money market accounts than ever before. For now, these highly liquid interest-bearing financial assets generate the type of yields that everyday savers could have only dreamed of in the past 15 years, but there are hidden costs attached to this juicy return.
Funds held in money market accounts keep banks from originating loans. When the banks see these withdrawals, they limit the size of their balance sheets and tighten them even more.
It’s yet another sign of the deglobalization that high interest rates create. Governments are captive to foreign investment, and if they want to finance projects, they’re committing to the highest interest rates in ages.
This is what’s causing many central banks around the world to dump dollars and focus on their own currencies and gold, which isn’t suspectable to the whims of the global de-dollarization needs of central banks.
Look at this truly unprecedented rush to park trillions in money market accounts:
Courtesy: Zerohedge.com
This is only half of the story, though.
While the public is in love with the yields of money market accounts, pension funds, university endowments funds, insurance companies, and other institutional players that can hold Treasuries to maturity are gobbling up the bonds that Washington is issuing because the yield that they get today is nothing to be ashamed of.
Courtesy: Zerohedge.com
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Think about the big picture of what’s happening here!
Foreigners are dumping dollars and Treasuries, and American institutions are buying them up. This is the recipe for an increased amount of debt… the same process Japan went through!
CHINA’S INSANE REAL ESTATE COLLAPSE
China’s tumultuous collapse has led to deserted malls, half-empty apartment complexes, and abandoned construction sites.
When interest rates were dropping in the 1990s, the Chinese urbanized and had to privatize their housing sector.
The boom that began was extraordinary, especially in a country whose stock market is regarded as being too volatile and where houses are seen as 100% stable.
People paid developers in advance, and they used it to buy land for their next project before even building the one in front of them.
It worked until COVID-19 busted the bubble.
China’s saving grace was their healthy banking system. It lifted them out of what might be their worst financial crisis ever because 25% of their GDP is tied to housing (compared to 8% in the U.S. during the subprime nightmare).
Courtesy: Zerohedge.com
It’s truly the most telling chart about where gold is going next. Debt is exploding, and China must recover. It’s a recipe for much higher gold prices!
Biden is showing the world that oil reserves do not interest America in an effort to please his voters, but his ESG game theory will cost Americans at the pump.
Look at the previous times extremes were reached. Every time the U.S. had low reserves, gold rallied right after.
Courtesy: Zerohedge.com
Keep in mind that we’ve never seen how the dollar performs in an environment of high inflation and high interest rates except for in the 1970s, and that was an incredible decade for gold.
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FutureMoneyTrends.com
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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