Bank Failures: Is Everything ‘Fine,’ or About to Collapse?

Whoever loves money never has enough; whoever loves wealth is never satisfied with their income. – Ecclesiastes 5:10, NIV

In the past week, there’s been an enormous amount of virtual ink spilled on the banking crisis. I confess I’ve read dozens of articles and columns without a much clearer grasp of what’s happening than before I started. (Ironically, one of the best explanations can be found within the dry humor of “Awaken with JP.” Watch his hilarious “Banking Collapse Explained for Dummies.”)

Why these banks are failing is beyond both the scope of this column and my personal comprehension. Some have speculated it was focusing too much on “woke” investing rather than shareholder returns. On the other hand, it doesn’t look like the bankers have a much better grasp of finance than I do, based on some of the videos emerging. “Is it surprising that Signature Bank failed?” notes this Twitter post. “Their executive team spent millions of dollars to produce music videos & TV shows about themselves. Try not to cringe as you watch this.”

Whatever the reasons behind the crisis, literally billions of dollars have been wiped out. Supposedly even Prince Harry, Meghan Markle and Oprah got caught in the carnage. While those on the inside engaged in suspicious activities (selling stock and handing out bonuses), the vast majority of depositors were taken completely by surprise. The whole thing fell in about 48 hours.

And see, that’s what concerns me. How many other financial institutions may face similar disasters? How many other banks are just fine – until they’re not?

As of this writing – and in the spirit of never letting a crisis go to waste – we learn Moody’s Investors Service downgraded its outlook for the U.S. banking system, that Biden is effectively nationalizing the deposit base of the entire U.S. financial system, that financial regulators are being asked to censor social media to prevent bank runs and that bank fears are going global. Some say the feds are using the bank meltdowns to kill off regional and local banks and consolidate power. Some claim – with justification – that this is an orchestrated situation designed to push America toward digital currency.

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So instead of writing a clever and witty summary of events (something I’ll reserve for more financially literate people), I’m writing this from the perspective of an ordinary housewife watching the problems with America’s financial system.

I’m seeing the cascading effects of high-level banking and government intervention combined with millions of terrified Americans who fear they’re going to lose their life savings and retirements. A banking crisis is frightening enough for economists and those in the know. Imagine how much worse it is for those NOT in the know – the ordinary people who have worked hard their entire lives and managed to maintain a modest financial cushion, who must now attempt to decipher the conflicting reports (“Everything’s fine!” “No, everything’s about to collapse!”), wade through the finger-pointing and blame game, and try to salvage whatever rainy-day cushion they had.

As an example, consider this heart-pounding Twitter thread of someone who had two companies, his personal savings and his mortgage with Silicon Valley Bank as he tries to save his finances.

Needless to say, rumors are flying thick and fast. On one side, our politicians are assuring us the economy is sound, banks are safe, and everything’s glorious. On the other side, the more paranoid types are warning this is the start of another Weimer Republic, and by golly, if you don’t already own a mountain of gold, you’re doomed. In all likelihood, the reality is probably somewhere in the middle.

But one thing is becoming crystal clear: There are big winners and big losers in this game. Spoiler alert, your average Joe Sixpack is not one of the winners.

Ironically, before Silicon Valley Bank was even on the national radar, I had ordered a book called “When Money Dies” by Adam Fergusson. First printed in 1975 and reprinted in 2010, it’s a well-researched history of the hyperinflation that took place 100 years ago in Germany. I only received it a couple days ago and have barely had a chance to crack it open.

But the Prologue was sobering enough. “The German people were the victims,” Fergusson writes. “The battle, as one who survived it explained, left them dazed and inflation-shocked. They did not understand how it had happened to them, and who the foe was who had defeated them.”

The story of the dramatic hyperinflation, continued the Prologue, “is one which the great authorities have sometimes seemed to lose touch with: the effect of inflation on people as individuals. … Disaster itself was devalued: in contemporary documents the word was used year after year to describe situations incalculably more serious than the time before.”

Fergusson concludes his Prologue by writing: “This is, I believe, a moral tale. It goes far to prove the revolutionary axiom that if you wish to destroy a nation you must first corrupt its currency. Thus must sound money be the first bastion of a society’s defense.”

Sound familiar?

Everything is happening so fast. By the time this column is published, who knows what new information may come to light, what other financial institutions may have collapsed, or what nefarious financial schemes may be orchestrated?

No one knows how this banking crisis will end. For us personally, we have our money spread out among three separate credit unions, and have for several years. At this point in the Biden economy, that seems like a wiser move than having all our eggs in one basket.

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