by Simon Black
Throughout history, whenever there has been a major shift in the world, it has usually been accompanied by a single iconic event that is associated with that change.
For example, historians often point to 476 AD as the year that the Western Roman Empire fell, when Odoacer and his barbarians forced the abdication of the Emperor Romulus Augustus— even though it was obvious that Rome was in decline way before 476.
People also often associate the start of the Great Depression with the stock market crash of 1929 (even though there were many signs of economic distress well in advance of that).
But these clean, precise dates are only chosen in retrospect. People experiencing the events at the time rarely understand their significance.
I think it’s possible that future historians may look back at Silicon Valley Bank’s collapse as one of those iconic events that signals a major shift… potentially the end of American geopolitical and economic dominance.
I’m not making this assertion to be dramatic; rather I think that anyone who takes an objective look at the facts—
- the appalling $31+ trillion national debt
- the government’s addiction to spending and multi-trillion dollar deficits
- social dysfunction and “mostly peaceful” protests
- the decline in military strength
- rampant inflation and central bank folly
- extreme government incompetence
- insolvency in major programs like Social Security
— will reach the same conclusion that the United States is past its peak and in decline.
Now on top of everything else we can add a loss of confidence in the US banking system.
Obviously I take no pleasure in acknowledging the US is in decline. But that doesn’t make it any less true. And this has been Sovereign Man’s core ethos since inception back in 2009.
Back when I started this company it was considered extremely controversial when I said the US was in decline, or that there would be larger problems in the banking system, or that the breakdown of social cohesion would only get worse.
But today these challenges are so obvious that they’re impossible to deny.
You can never solve a problem until you first admit you have one.
And most of the corrupt sycophants masquerading as political leadership are incapable of admitting problems, nor discussing them rationally, let alone solving them.
But you and I do not have that disability. We are free to exercise the full range of human ingenuity and creativity with which we have been fortunately endowed.
So while the people in charge continue to never miss an opportunity to demonstrate their uselessness, we have a whole world of freedom and opportunity at our disposal.
This is the topic of today’s podcast.
First I review the huge issues with the Silicon Valley Bank collapse. Honestly when you look at it from a big picture perspective, it’s littered with mind-numbing incompetence.
The politicians who received donations from SVB’s Political Action Committee missed it. The Wall Street hot shots missed it. The credit ratings agencies missed it. The regulators missed it. The Federal Reserve missed it.
But now the Federal Reserve has launched a new program that exposes the US dollar— and everyone who uses it— to significant risk.
Think about this from the perspective of foreign governments and central banks.
Foreigners bought boatloads of US government debt over the past few years, especially in the early days of the pandemic.
In fact foreign ownership of US government debt has increased by $1 trillion since the start of the pandemic, and now amounts to more than $7.6 trillion.
But thanks to Fed policy, these foreign institutions are in the same boat as Silicon Valley Bank— they’re sitting on huge losses in their bond portfolios. They’ve also suffered from pitiful returns, high inflation, AND exchange rate losses.
In short, any foreign institution that bought US government bonds over the past few years is sitting on huge losses.
Plus now they’re watching with bewilderment as US politicians prove completely incapable of solving their debt crisis.
And on top of everything else they’ve just witnessed multiple bank runs in America, followed by the Federal Reserve’s pledge to put the dollar at further risk.
If you were a foreign government or central bank, would you want to continue buying US government debt? Would you want to continue holding your national savings in US dollars?
Probably not. Rather, they’re probably sick to death of all these histrionics.
We won’t know until years into the future, but SVB’s collapse (and the Fed’s response) may end up being the final nail in the coffin for the US dollar’s dominance.
You can listen to the podcast here.