May 1, 2023 - The Truth Central - Dr. Jerome Corsi
33:18
First Republic Fallout; Fed Ponders Rate Hikes; Stagflation Around the Bend
J.P. Morgan Chase won the bidding among a set of large financial institutions to take over the failed First Republic Bank. As banks continue to falter and some of the bigger fish are gobbling them up, are they really trying to rescue themselves from exposure to over $247 Trillion in derivatives? Meantime, the Federal Reserve will determine this week whether they will or not impose another rate hike amid a period of high inflation, economic danger and bank collapses. Will a raise in the Federal Interest Rate cause a period of stagflation?Dr. Jerome Corsi delves into these issues, their ripple effects and more on The Truth CentralVisit Dr. Corsi's The Truth Central website: https://www.TheTruthCentral.com'Follow Dr. Corsi on Twitter: @corsijerome1MyVitalC: https://www.thetruthcentral.com/myvitalc-ess60-in-organic-olive-oil/Swiss America: https://www.swissamerica.com/offer/CorsiRMP.phpPro Rapid Review: https://prorrt.com/thetruthcentralmembers/elBecome a supporter of this podcast: https://www.spreaker.com/podcast/the-truth-central-with-dr-jerome-corsi--5810661/support.
This is Jerome Corse and today is Monday, May 1st, 2023.
Again, we have lots to cover today, so we'll get right into it.
I think the big news over the weekend was that this First Republic Bank was first seized
over the weekend by the government.
The FDIC took control of the bank, and then the FDIC struck a deal.
There were about 20 banks that were interested, but JPMorgan Chase is the one that's going to assume all of First Republic's $92 billion in deposits, insured and uninsured.
It's also buying most of the bank's assets, including about $173 billion in loans and $30 billion in securities.
Now, First Republic Bank, this is the second largest bank failure in U.S.
history.
The largest, I believe, was Washington Mutual in 2008, but First Republic With $233 billion in assets at the end of the first quarter, it ranks right behind Washington Mutual as the second largest bank failure in U.S.
history.
This follows Silicon Valley and Signature Bank, both of which have failed.
I think it's the beginning of the unraveling of the financial institutions.
If you take a look at the story in any great detail, what's happening is that First Republic had a lot of loans from wealthy people, giving them these jumbo mortgages on houses at reasonably low interest rates.
Back when interest rates were zero, they were marketing to the wealthy.
And these loans are not paying.
The interest rates that are currently market rates, because again, these loans are almost at zero or very, very low, maybe 2% mortgage rates, but today the mortgage rates are more like 5 and 6%.
That means that that asset, all those loans, have to be marked to market and they have to be taking losses on because they're not producing earnings That would be equivalent to the interest rate demands in a higher interest rate environment.
Same thing with all the securities, many of which are basically treasury bonds.
These treasury bonds were issued, many of them, when Obama was president and the Fed was keeping zero interest rates or virtually zero interest rates in order to boost economic activity for a Democratic president.
The bank failures are not to be taken lightly because with this type of a interest rate environment and stagnant economic growth, a lot of banks across the country are on the edge and the ones that are going to go are going to be the regional and community banks as we're continuing to see a consolidation into these large banks that are basically too big to fail.
And we now have banks that will be JP Morgan Chase, Bank of America.
We're gonna have a half a dozen major, major banks that consolidate the industry.
And that will be all that's left, basically.
Community banks have always played an important role in developing America.
And again, I think they're in jeopardy, given the entire interest rate situation and economics that we're going into, which I continue to be very negative about.
Why?
Well, let's take a look at this second story.
Now, this is one that is a little bit more difficult to really get your heads around, but it's very, very important.
Derivatives are a type of investment.
The Bank of International Settlement usually is where these are registered.
These are very, very sophisticated bets on instruments that are Only really understood by the very sophisticated investment community.
For instance, you can buy an interest only strip of a bond, or you can buy hedges, so that you're trying on the derivatives to have a position that no matter which way the market goes, you're going to be covered and protected, because you'll have something else that's counter to the current movement of the market, When the move in the market's bad, that your hedge position will do well, et cetera.
When your hedge position's not doing so well, the basic investments of the bank or the basic investments of your business are doing well.
But the problem is the derivatives are a huge market.
And what happened in 2008, A2009 was when the subprime market collapsed, the derivatives collapsed, and the derivatives on the real estate package deals, the collateralized mortgage obligations, when they collapsed and the derivatives collapsed, that's when the big institutions like Bear Stearns or Lehman Brothers collapsed.
These are very tricky instruments.
So what the second story is about is that The first attempt to save First Republic was that banks put up about $30 billion to rescue First Republic, but what they were trying to do, this article is exposing, was protecting their own position on derivatives.
Okay, so they're talking about the action on March 16th when 11 banks chipped in a total of $30 billion and bizarrely placed those funds as uninsured deposits in First Republic Bank Which was in full-scale unraveling mode because of bond losses and too many uninsured deposits.
So four banks contributed two-thirds of the total deposits.
JPMorgan Chase, Bank of America, Citibank, and Wells.
Now, JPMorgan Chase is the acquiring bank of First Republic over the weekend.
They put up $5 billion each.
In terms of uninsured deposits to go into First Republic to try to make it solvent or to make it last for a little while longer.
Now, according to the FDIC, December 2022, there were 4,700 federally insured commercial banks and savings and loans in the United States.
You have these 11 who are rushing to help First Republic.
Question is, why?
Well, this article, which is in Wall Street on Parade, a good column essentially to follow, pulled up the derivatives from the office of the controller of the currency, showing the 25 bank holding companies that have the largest exposure to derivatives, and each of the 11 banks that contributed to this Attempted bailout of First Republic are on that list.
So, equally noteworthy, the four banks that chipped in $5 billion each control 58% of the $247 trillion notational face amount in derivatives controlled by all 25 banks.
247 trillion notational face amount in derivatives controlled by all 25 banks.
So they've got 247 trillion dollars in derivatives. If those start collapsing,
there is no way even these 11 banks, which include some of the largest, are going to survive.
For many of these banks, the dollar amount of derivatives is exponentially greater than the total assets of the bank holding company.
For instance, SMBC America Holding has $34.6 billion in assets and $10.3 trillion in derivatives.
Now, this is insane.
On Monday, March 13th, Moody's downgraded the entire U.S.
banking system to negative from stable.
On that same date, a bank with ties to crypto customers, Metropolitan Commercial Bank, lost 44% of its market value, and a California regional bank, Western Alliance Bancorp, lost 47% of its market value.
And by Wednesday morning, Dow Futures were down more than 600 points just after 8 a.m.
in New York.
Major banks in Europe have been temporarily halted from trading after steep sell-offs and Credit Suisse, with deep interconnections to the mega banks and Wall Street, plunged to less than $2.
Well, again, Credit Suisse was taken over by UPS.
So, this is really not being very much reported.
But it is a frightening scenario when you begin to understand how fragile the financial system is in the current economic situation.
Okay, now I want to skip to a story in the Federal Reserve.
Because this is a third, and I'm gonna ask Chris to comment, but the Federal Reserve looks like it's going to raise rates one more time.
Now, again, this is gonna be another negative for the economy, but the Federal Reserve is trying to fight this inflation.
It's been doing it for 15 months.
It's raised interest rates nine consecutive times.
And it wound down its pandemic program quantitative easing.
They stopped buying treasury bonds.
Again, that's just floating.
It's like a Ponzi scheme.
Treasury issues debt and the Federal Reserve buys it.
You know, it's playing with monopoly money.
So, essentially, the problem is that if the Fed decides, and the meeting is tomorrow and Wednesday at the Central Bank's Federal Open Market Committee that meets, they could do a tenth rate hike.
Now, the challenge is that economic growth in the first quarter of this year decelerated more than was expected.
The data showed that basically the Feds abandoned this 2% inflation target and inflation is not being stopped, especially when we're going through another energy crisis which has been triggered by the Ukraine war and Russia's response to the sanctions the EU placed on Russia trying to dry up Russia's foreign reserves, Russia's trade in the EU,
and Russia's banking in the EU, Russia's ability to buy gold etc. in the
EU banks. What happened is that Russia withdrew its natural gas and we're
now seeing that that's destabilized the entire energy system.
With the OPEC production cuts that were announced a few weeks ago, we're going to see rising gasoline prices in the United States as we enter into the summer months.
This is also going to slow down the economy, because as hydrocarbon fuels cost more, That affects everything in production.
Still about 85% of the world's energy is hydrocarbon fuels, despite all this nonsense about green energy.
We're in a situation right now where the energy prices are gonna combine, like they did in 1973 with the OPEC oil embargo.
We've got an energy crisis going on.
At the same time, we've got a 2008-2009 crisis going on.
With the, then the banks were failing because of the subprime mortgages were failing.
Today, it's a combination of just too much credit and the bank assets having been valued in low interest rates, whether the bonds or loans, which today are not yielding what the banks need yielded on its asset position to remain solvent.
Now again, it's a little bit complicated in terms of the economics, but what it means is that we are positioned for a massive, and I mean massive, economic downturn that could occur suddenly.
In other words, this could be a catastrophic breakdown, like a perfect storm, where all these factors combine at the same time, and the system just cascades downward, and quickly.
That's going to be a huge impact especially combined with the de-dollarization going on and the fact that the BRIC nations led by Russia and China are moving away from the dollar as a reserve currency.
We're in an extremely weak economic position right now and I don't think a crash is avoidable.
Stock market crash.
So for those who have Investments, this may be a good time to consider how crash-proof you are, especially if people are near retirement age.
A significant downturn in the stock market could be disastrous for people's asset positions.
Again, I'm not giving investment advice.
I'm simply doing an economic analysis Which to me indicates that today, basically, you're faced with a high inflation continuance with economic slowdown.
That stagnant economic growth and inflation is a very, very bizarre phenomenon.
Because usually inflation means the economy is overheated.
Demand is strong, not that the demand is weak and the economy is going into stagnation.
People are not going back to work after the pandemic.
Commercial office buildings in the downtown areas are largely empty, some 40 to 50 percent vacancies, and commercial real estate could be what triggers this crash.
The banks also hold the loans on commercial real estate.
If the buildings are not producing revenue because they're empty or largely empty, The banks will have to refinance those buildings and losses will be taken because those buildings are now not worth what they were originally financed for and someone's going to take that loss.
And typically, the banks will take a lot of it, and at least initially, they may go after some of the owners of those buildings for the losses, but that's going to take time.
The crashed commercial real estate could trigger a massive bank failure in the United States.
This is probably not a great way to start off a Monday morning, but Chris, do you have some comments?
Well, as the Boomtown Rats would say, I don't like Mondays, and this is probably the reason why.
You were discussing how the Federal Reserve was possibly going to raise rates this week, and it looks like they are.
From any observer, it looks like it's going to keep happening.
I'm going to go back to the days where you're listing everything that's happening, what's been happening to stunt growth in America, whether it be by chance or somehow politically engineered.
Let's go back to the Obama era, where the president at the time, Well, Barack Obama said the days of 3.0 GDP growth, 3.0% GDP growth, excuse me, are over.
Well, let's see.
The policies that were engineered at the time did stunt the growth.
You can look the numbers up if one is watching, listening, and is quite skeptical about that.
Growth happened again, that kind of growth under the Trump administration.
What's happening now?
These high, these These policies, like the Inflation Enhancement Act, from the day... I'm exaggerating, but from the month... Wasn't that the Inflation Reduction Act?
Well, yeah, but I call it the Inflation Enhancement Act.
That's what's happening right now.
Hey, as soon as it's passed, gas is higher again.
You saw that.
The fact is, is this being engineered to that particular idea where growth is going to be slower?
I think what you've got is, you've got, first of all, We have massive deficit spending.
We're $33 trillion in debt right now, national debt, when in the George W. Bush era it was $10 trillion, and even that had been excessive.
The idea we're going to balance budgets when An increasing percentage of the federal budget is not discretionary.
In other words, you've got payments to Medicare, to Social Security, which only increase, especially as the population gets older.
And there's no way to cut them off.
These programs will soon, especially Social Security, we'll be hearing about bankruptcy and Social Security.
But the problem is, this amount of spending has massive debt service.
And the economy is dragged down by all this debt.
The inflation is, the higher cost of energy, all this is anti-growth.
And does it happen by plan or design?
I mean, I think that can be argued, but the basic point is, regardless of what the, we're in a situation where we've got these massive federal regulations.
We've got the huge increase of the federal bureaucracy under Obama.
We've got laws being made and written by bureaucrats who don't have any legislative basis behind them.
Got Lindsey Graham who's sponsoring a bill he doesn't even understand.
That was pretty ridiculous.
And, you know, again, we're out of control in a government that is not we the people any longer.
It's we the bureaucracy.
That's why, again, I'm cautioning people.
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you could see the issue of the gold doubling.
And I'm reading, again, people saying that gold could double to get as high as $4,000 an ounce before we're finished with all this crisis.
Okay, let's switch gears a little bit and go into the electric cars.
There's some very interesting stories I've been reading over the weekend.
There's quite a bit coming out about this right now.
There was a report from the Manhattan Institute we covered last week.
But what the truth is is that We have this push by the Biden administration to have electric cars.
And the bureaucrats have written the regulations so that essentially by 9 or 10 years from now, 67%, two-thirds of all vehicles are going to have to be electric because these tailpipe emission standards are going to require electric vehicles.
Now the problem is that these are really not Carbon-free.
They're not net-zero emissions, you know, because it's burning electricity.
You think, isn't this great?
We're not emitting any carbon from hydrocarbon fuels.
But that's all been transferred.
It takes an enormous amount of mineral and rare-earth minerals to produce these batteries.
Tons of these rare-earth minerals have to be mined in order to get A few batteries produced, and China has a lot of the rare earth minerals required.
So China is rapidly becoming the leader and will control the international car market if everyone goes electric.
There really isn't enough of these materials, minerals, to have the whole world switch into electric vehicles.
First of all, I think it's a complete hoax.
Fossil fuels are not dinosaur-based.
They are natural products of the Earth, created on a constant basis.
The hydrocarbon chemical formulas are easily understood.
They were developed in the Weimar Republic by the German chemists who knew Germany needed to have oil if World War II was gonna be fought.
They knew this even in the 30s.
Germany had a lot of coal, but it didn't have very much oil.
So these chemists learned what the equations were for forming hydrocarbons, and they produced synthetic gasoline, synthetic diesel fuel, aviation fuel for the Nazis, and it works.
The conditions simply require that you take something with hydrogen, something with carbon, and in the right temperature and pressure with a catalytic reaction, you produce hydrocarbon chains.
The mantle of the Earth does this constantly.
They're natural products.
And we've had much more carbon dioxide in the Earth going back in geological time.
So this idea that we can suddenly switch To electric is really not based on economic reality.
I was taking a look at the what the Ford CEO is saying recently.
Ford CEO was on Fox last week and basically Ford is going to, has been taking billions of dollars of losses in its electric vehicle production.
And again the The CEO of Fox, a guy named Jim Farley, said that they are
expecting a $3 billion loss to the Model E investments, geared to rapidly boost production of
electric vehicles to an annual rate of $600,000 globally by the end of 2023 and $2 million
in 2026.
But again, Model E lost $2.1 billion in 2022, and a cumulative loss 2021 through 2023 is projected
Now the transformation of these industries, this transition to green and solar, can't just simply be willed in.
These technologies aren't robust enough.
The electric vehicles not only take rare earth minerals to produce, they actually take hydrocarbon fuels to generate the electricity.
So they just transferred the emissions into the mining or into the production of the electricity.
The emissions are still there even though the vehicles themselves are electric.
To get them to work, to produce them, has required a lot of hydrocarbon fuels.
I think that's one of the major fallacies in this entire Idea that we can just transition by spending more money into a wind and solar environment.
I solidly believe that the climate hysterics, the people who have engineered this, the UN Intergovernmental Panel on Climate Change, they know the science is not legitimate.
But they don't care because this is more about engineering a, essentially, engineering an economic slowdown.
The fundamental basis of the climate movement came out of World War II with the Malthusians who said there's just too many people.
When John Ehrlich got together With the Malthusians they decided that the real scare would be if we could say not just there's too many people we're using up the resources of the earth, but to say if we don't stop doing something we're going to all die.
Well the idea came up with hydrocarbon fuels emitting carbon dioxide and at first they thought that would be leading to a ice age and that didn't happen so they changed it to global warming.
Now the point is We need these greenhouse gases in order for the Earth to remain habitable.
I've written a book.
Please take a look at it.
It is the book on the truth about energy, global warming, and climate change.
And that book will, I think, show you that, in fact, the science is not legitimate.
We've had much more carbon dioxide geologically, even through ice ages.
The sun is the real knob of the thermostat of the Earth's heat and the like.
And when we understand that, we can see that the basic idea of what we can get from the sun The basic fundamental principle is at nighttime the sun doesn't shine and all the irradiance can escape the earth into the upper atmosphere.
What we have is a need from greenhouse gases to keep some of that heat trapped in the earth so the earth doesn't freeze at night.
This is fundamental to the climate system of the Earth, and water vapor is 70% of all greenhouse gases.
Carbon dioxide is a minuscule 0.004%.
It's really a trace molecule in the atmosphere.
And yet to say it's the most powerful greenhouse gas is nonsense.
And the climate scientists who are behind this know it.
It's where I think my second book, which is now in press, On this global warming sequence, it's about neo-Marxism, cultural Maoism, and the anarchy.
This is, in other words, why the left is professing science they know is not true.
They've evolved to a point with this neo-Marxism, wanting to end capitalism.
The real point, what the Green Movement is really aiming to do, Is to cut the standard of living, to cut capitalism, to make it more difficult for the industrial states to operate.
And that's the point of what we're going through as a whole.
When we say, why are these globalists doing what they're doing?
Well, they're allowing this neo-Marxist agenda to be the negative force which will destroy capitalism and the globalist plan to take over.
The globalists are using this neo-Marxist movement for their own purposes, and it is basically to destroy the family, to destabilize the family, etc.
Now, I want to cover one more story before we switch for a second to the sponsors again, because I want to focus on a couple more things we've done with the website over the weekend, but I want to cover this last story about Russia and Ukraine.
Because over the weekend, Russia launched another series of missile attacks on a wide range of cities across Ukraine, and the missiles were launched also against Kiev.
That's the capital of Ukraine.
The Ukrainians are saying they're going to have a spring offensive.
Well, it looks to me like the Russians are equipped to fight that.
Ukraine has been largely, its cities are largely turned into rubble.
Take a look at the picture that we have posted of Ukraine.
Essentially, each one of these towns are being shelled.
They're not habitable.
There's no gas, electricity.
There's no water.
People have fled.
And the infrastructures of these places have been just destroyed.
It's a destructive war that is essentially, Russia's not going to lose.
And it has the potential to trigger into a nuclear war at any time.
It's very, very dangerous and extremely upsetting, but I want you to know it is not one in which Ukraine is winning.
Ukraine keeps asking for more weapons, keeps asking for more money, and essentially the NATO countries and the U.S., included with the NATO countries, the EU, were fighting a proxy war with Russia.
Our weapons, our money against Russia through Ukraine.
And these proxy wars are extremely dangerous.
We're in a much more volatile world with political tensions in Sudan, with Taiwan, et cetera.
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So I want to wrap it up today.
Today, this is Dr. Jerome Corsi.
And today is Monday, May 1st, 2023.
In the end, God always wins.
God will win here, too.
I think we are in an extremely difficult time, and yet God will win.
We need to be on God's side.
This is Drone Course.
We will be back tomorrow.
We're broadcasting every weekday for about a half an hour.
