What in the world was she thinking? When a bailout was hastily arranged for uninsured depositors at Silicon Valley Bank and Signature Bank, the implication was that the same thing would be done for uninsured depositors at any other banks that failed. But now U.S. Treasury Secretary Janet Yellen is telling us that is not actually what will happen. She just admitted that depositors at a failed bank will only be protected if officials determine that a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences”. So that means that depositors at big banks are likely to be protected and that depositors at small banks are much less likely to be protected. In other words, Janet Yellen just poured lighter fluid on every small bank in America.
Why would anyone keep more than $250,000 in a small bank at this point when there is a very real risk of losing all of the uninsured money if the bank suddenly fails?
Wealthy people are not stupid. They are going to move billions of dollars from small banks to large banks in the days ahead, and that is going to cause a tsunami of stress on those small banks.
Does Janet Yellen even understand what she just did?
During congressional testimony on Friday, Senator James Lankford asked Yellen the sort of question that many of us have been hoping that someone would ask…
Republican Sen. James Lankford of Oklahoma pressed Yellen about how widely the uninsured deposit backstops will apply across the banking industry.
“Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now?” asked Lankford. “Will they get the same treatment that SVB just got, or Signature Bank just got?”
Incredibly, Yellen came right out and admitted that uninsured deposits will only be protected under certain circumstances…
Yellen acknowledged they would not.
Uninsured deposits, she said, would only be covered in the event that a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”
If your bank fails in the days ahead, bureaucrats in Washington will get together and take a vote to determine if the uninsured depositors at your bank are important enough to protect or not.
Needless to say, that means that wealthy individuals with very large balances at very small banks are at great risk.
Senator Lankford clearly understood that Yellen and her fellow bureaucrats have now created a two-tier banking system…
“I’m concerned you’re … encouraging anyone who has a large deposit at a community bank to say, ‘we’re not going to make you whole, but if you go to one of our preferred banks, we will make you whole.’”
If you have not seen the exchange between Lankford and Yellen yet, you can view it here…
Here is the snippet: pic.twitter.com/85iBeXC0Wn
— Seidler (@SeidlerCorp) March 17, 2023
We are in so much trouble.
Prior to Yellen’s testimony, banks were already being forced to rely on the discount window at the fastest pace that we have ever seen…
Data published by the Fed showed $152.85 billion in borrowing from the discount window — the traditional liquidity backstop for banks — in the week ended March 15, a record high, up from $4.58 billion the previous week. The prior all-time high was $111 billion reached during the 2008 financial crisis.
The data also showed $11.9 billion in borrowing from the Fed’s new emergency backstop known as the Bank Term Funding Program, which was launched Sunday.
But now this stampede threatens to evolve into an avalanche.
There are more than 4,000 banks in the United States right now, but if our leaders are determined to only protect the biggest institutions we could ultimately see hundreds of them fail.
Unless something changes, I cannot recommend keeping more than $250,000 in any small or mid-size bank.
Of course the vast majority of us do not have to worry about such things, but those that do have lots of money are paying very close attention to what is happening.
In fact, on Friday investors once again pulled lots and lots of money out of banking stocks…
Stocks fell Friday as investors pulled back from positions in First Republic and other bank shares amid lingering concerns over the state of the U.S. banking sector.
The Dow Jones Industrial Average lost 384.57 points, or 1.19%, to close at 31,861.98 points. The S&P 500 slid 1.1% to end at 3,916.64 points, while the Nasdaq Composite was down 0.74% to 11,630.51 points.
First Republic slid around 33% to end the week down nearly 72%.
I had hoped that the banking panic would settle down a little bit after the emergency measures that were instituted.
But now there is a great risk that the panic could escalate significantly.
Many are warning that this crisis could eventually grow to be even worse than the last financial crisis. For example, Dave Kranzler believes that what we are facing “will be 2008 x five unless the Fed and the other big Central Banks print enough money to monetize the fraud in the banking system”…
I believe what is starting to unfold will be 2008 x five unless the Fed and the other big Central Banks print enough money to monetize the fraud in the banking system. But if the Fed takes that kind of action, the dollar will likely collapse. It may take bigger blow-ups for the Fed to act. In which case, I am confident that Blackrock (BLK), Citigroup (C) and Goldman Sachs (GS), among several others, are at risk.
You may not have any sympathy for the banks.
But a healthy banking system is absolutely critical for our economy as a whole.
For a moment, just imagine what our system would look like if nobody could get a mortgage, an auto loan or a credit card.
Relatively few people pay with cash or checks these days, and that is especially true for major purchases.
If banks start failing, the flow of credit will start drying up, and we will plunge into a full-blown economic nightmare.
So you better hope that our leaders can find a way to prop up our rapidly failing system.
Because economic conditions are already bad enough. In fact, earlier today we learned that leading economic indicators have now fallen for 11 months in a row.
We are already in the midst of a substantial economic downturn, but if banks start collapsing left and right we will soon find ourselves in an economic horror show.
So I don’t know why Janet Yellen did what she just did. It is madness.
She just put a target on every single small bank in America, and so now uninsured deposits will likely get pulled out of those banks at a rate that is absolutely breathtaking.
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Article cross-posted from The Economic Collapse Blog.
Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.
