Federal Reserve Policies Leading to Economic Meltdown

Bitcoin prices gained 6.9 percent on Monday, March 4, to $66,355.43, while gold was up 1.4 percent at $2,113.28 per ounce, platinum rose 1.1 percent to $897.10 per ounce, palladium gained 0.5 percent to $960.50, and silver climbed 2.8 percent at $23.79 an ounce.

The Federal Reserve Board, on Monday, March 26, 2020, slashed reserve requirement ratios on net transaction accounts to zero percent, eradicating reserve requirements for all depository institutions. Initially hailed as a measure to stimulate lending and bolster economic activity, the action set the stage for a catastrophic banking collapse.

The tremors of this impending crisis came in Spring 2023 when smaller regional banks began to buckle under the weight of the Reserve’s policy shift. Fast forward to Spring 2024, and the ominous specter of another wave of banking collapses looms ominously on the horizon.

Then, in November 2023, the chief executives of banking Bank of America, Wells Fargo, and JP Morgan admitted to Congress their inability to transition from a zero percent reserve requirement to a 3 percent reserve balance.

Central to the impending calamity is the deposit-to-loan ratios, which render banks incapable of weathering any sustained run. Once the populace becomes aware of the precarious scenario, a rush to withdraw funds from banks seems inevitable.

Making the crisis worse is the Federal Reserve’s decision, coming Monday, March 11, to halt lending entirely and selectively extend loans. To mitigate the fallout, Congress passed the bail-in provision as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, authorizing banks to seize assets, a measure like that witnessed in the aftermath of the 2007–2008 financial crisis.

The looming catastrophe threatens to devastate vast swathes of the populace, particularly those with significant assets tied up in 401(k) retirement accounts, amounting to a staggering $27 trillion. Individuals with cash reserves in banks are also poised to suffer substantial losses, with banks already imposing restrictions on withdrawals and transfers.

Through all of the turmoil, global markets appear paradoxically buoyant, with Hong Kong, Japan, S&P, and Dow soaring to all-time highs. However, this optimism belies the underlying rot within the financial system as entities like Blackrock and Vanguard manipulate stocks to sustain earnings while jettisoning underperforming assets.