The US Banking System On The Brink of Another Financial Crisis
Channel: The Nomad Economist
Date: 2020-11-15

The US Banking System On The Brink of Another Financial Crisis
What’s going wrong in the US?
Have a closer look.
The US is repeating 1920s economic mistakes.
 
Policymakers couldn’t see what Glass-Steagall did, as they thought banks were financial intermediaries.
It separates the money creation side of banking from the investment side of banking, and stops bankers producing securities; they buy themselves with money they create out of nothing.
 We should focus on how to deal with the pandemic first. There seems to be a tendency to assume that this will be over in a few weeks, perhaps a few months. The Spanish Flu pandemic lasted years. I hope the coronavirus pandemic can be overcome in less time, but there's no reason to plan on it as the most likely outcome. As long as we're still in pandemic mode, there will be disruptions to supply chains, employment, economic activity, and prices. We should be thinking about how to hold things together for an extended period of time. This is a marathon, not a sprint.
Lately it has been difficult to talk about the economy because of all the noise flowing from the election and the pandemic hype. There is a growing reluctance to opine by many economic skeptics because it appears we have been wrong on recent predictions. Only time will tell if this is true due to the huge distortions now evident in the markets. Still, all this tends to diminish confidence in the ability to see what is ahead. This has forced not only me, but other economic watchers to go back and question all we hold true.

Unfortunately, other than moving a few pieces around the board, the recent actions by the Fed only continues to move back the day of reckoning. The "extend and pretend illusion" our economy remains on a sound footing is alive and well. One place this is evident is in the area corporate bond market where many bonds now hold an investment-grade BBB rating. If a company or bond is rated BB or lower it is known as junk grade, this means the probability the company will be able to repay its issued debt is seen as speculative. 

For the full transcript go to https://financearmageddon.blogspot.com
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