What a way to kick off the week as we ended the previous Friday with the failure of a small banking institution, Silicon Valley Bank (SVB). On Friday afternoon, there was a run on the bank as depositors tried to withdraw their funds. The intention was to move the funds to larger institutions deemed too big to fail. Haven’t we heard that before?  Nonetheless, the Treasury Secretary convened Congress to pass the protection to depositors as payrolls needed to be paid. Click below to understand what transpired explained as not a systemic failure but one of mismanagement.

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As I mentioned in the previous writing, 68% of Americans will not be able to meet their monthly obligations if they lost their job. The fallout would have been more than devastating, therefore the deposits of $180 Billion were protected by legislation as the deposit protection fund was utilized. Withdrawals could be taken to meet payroll obligations.

The Investors were out of luck taking losses and the capitalization within the banking sector fell by over $50 Billion in asset value. That was in the United States alone. Banking around the world felt the effects because the industry is so interconnected. Even though there are regulations and regulatory bodies, they quickly fall prey to corruption. This was quite evident in the 2007/08  SubPrime lending fiasco, when the previous Chairman of The Federal Reserve, Allan Greenspan, allowed the Bankers to police themselves. The best analogy is allowing the pigs to eat at the trough without restrictions. 

This morning, the Bankers were waiting patiently for the Producer Price Index (PPI), a measurement of inflation. The annual PPI dropped to 4.6% in February vs expectations of (5.4%). This reinforces the Federal Reserve’s actions despite the collateral damage that ensued. Further, Retail Sales fell <0.4%> vs expected <0.3%> while Jobless Claims came in better at 192k vs (200k). Lastly, the Consumer Price Index (CPI) drops from 6.4 to (6.0). The Federal Reserve states that inflation is the greater evil and nothing will stand in their way. This means people will become victims and more turbulence will be witnessed as rates are poised to continue to rise.

A better solution alluded to by questions in Congress during the Fed Chairman’s testimony was the fact that if Government spending was significantly curtailed would it not help in reducing the evil known as inflation? It seems as if it was only considered an afterthought. Maybe the conspiracy theories of owning nothing and being happy are their true intentions. Making people dependent on the government rather than taking pride in their own accomplishments seems a less logical approach when Capitalism is the model by which most live.

Consequently, with the improved Inflationary data, there was a positive tone toward the USD Index as it explodes from the 103.50 vicinities toward the 105.0 level. A reaffirmation that the Fed Policy is working (my opinion differs of course). The currencies pull back significantly but Precious Metals continue to move upward with Gold testing the $1930/oz level and Silver above the $22/oz level. This tells me one of the two is not sustainable, I still believe the USD is poised to tumble and eventually the course of action will be to reverse the direction of interest rate policy.