MORE BANKS ARE COLLAPSING (How To Prepare)

Let's talk about the banking failures, what this means for the entire industry, why the US Dollar is no longer the leader for certain transactions, and how GDP could affect the next interest rate hike - Enjoy! Add me on Instagram: GPStephan

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THE BANKING CRISIS:

On Monday, April 24th, First Republic reported that their deposits declined by 40% in the first quarter - which, was much worse than expected. On top of that, this also included their $30 billion dollar cash injection from larger banks - which meant, according to CNBC, “If those deposits were excluded, First Republic’s deposits would have fallen by more than 50%.

At the same time, their stock continued to plummet - while talks about a “rescue deal” began to surface after their statement that the bank “was reviewing strategic options to help reshape its balance sheet.”

Advisors to the bank were also alleging trying to “sell the banks on the idea that letting First Republic fail would be even more expensive if it led to higher regulatory costs and fees” - and, there’s also been the idea that they would issue more stock to dilute shareholders as a way to raise additional capital.

Because of this volatility, US Banking Regulators were considering DOWNGRADING the entire bank, which - would result in reduced borrowing capacity from the Federal Reserve, and - would further hurt their chances of successfully turning around. It also appears as though the Government is no longer willing to step in, either….with sources saying that they refuse to intervene.

At this point, the bankers involved are reportedly still expecting a government takeover…but, the government is hoping that First Republic “can hash out a deal to ensure the firm doesn’t fail and take some of their money with it.” Essentially, this is becoming a game of chicken to see what happens first: a government takeover, a cash injection from other banks, or - a collapse - and…as of now, it’s too early to tell exactly what’s going to happen.

THE US DOLLAR:

As of the other month, the Yuan has just overtaken the US as the most used cross-border currency. Since 2010, China has been on a path of slowly reducing its reliance on the US dollar. It’s speculated that, around this time, the United States launched the first $600 billion dollar round of Stimulus, which - caused the dollar to depreciate, and applied pressure to keep the value of their currency stable.

Over time, this resulted in China relying less - and less - on our own currency, until it came to a head in 2020, when they created a financial alliance to ditch the dollar altogether. More recently, Brazil and Argentina also hopped on the bandwagon to transact with China using the Yuan - which, makes sense, with “Brazil being the largest recipient of Chinese investment in Latin America.”

Essentially, all of this is simply referred to as “de-dollarisation,” which - in basic terms - suggests replacing the US dollar as the world’s reserve currency…or, at least reducing its dominance by introducing more competition - and, in terms of whether or not its cause for concern - it really depends on how you look at it.

On a global scale, the reality is: not much has changed and the Yuan is still ONLY used in 4.5% of all transactions, worldwide. But, it is a sign that their dominance is growing, while the US dollar is shrinking - and, that is something to be mindful of - even though, it could be a complete non-issue in the big picture.

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