We're doomed

The 'unholy trinity' of central banks

From Tuomas Malinen’s Forecasting Newsletter.

Now that we have entered the GFC 2.0 (Global Financial Crisis 2.0), I will adjust my entries accordingly, as will GnS Economics. Essentially this means that we will concentrate on serving our clients and subscribers.

This is for two reasons. First, our allegiance lay with our customers. We will thus concentrate on guiding them through this crisis.

Secondly, this is the first banking crisis in the era of social media, and we also have responsibility towards the society at large. In the coming weeks, we will publish analyses on individual banks to reek out the ‘bad apples’ in the European and U.S. banking sectors. This information will not be made public, because we do not want to be the ones that create or accelerate a bank run in the current, fragile situation. That’s why the information we obtain will be made available only to our clients and subscribers of GnS Economics Newsletter.

However, in this entry, I will explain the dire situation from where our main financial authorities, central banks, found themselves. They are now confronted by the coincidental appearance of an inflation crisis, a banking crisis and a recession. Essentially, the situation is a world-first in the era of modern central banking, as they have not faced such an “unholy trinity” before.

When warnings are not heed

We have been warning on the risk of a another global banking crisis for over three years (see, e.g., this, this and this). Authorities were able to postpone it until 10 March, 2023. The failure of the Silicon Valley Bank was a symptom of a much wider problem, which I explained in my two previous posts effectively confirmed by Treasury Secretary Yellen through her public ‘joggling’ with the idea of a wider (temporary) deposit guarantee scheme. The U.S. banking system is fragile, like we warned earlier.