Is Our Money Safe?

The recent failure and bailouts of Silicon Valley Bank and Signature Bank, plus the politically motivated indictment of President Trump, have our nation on edge.

They should–especially the banking problem. It affects everyone–possibly disastrously. 

Is our money safe?

Is Our Money Safe?

I will let a favorite columnist of mine explain the the truth about inflation and the bank failures.  I will conclude with some analysis and some practical suggestions. 

Democrats Deserve Plenty of Blame for the Bank Crisis

By David Harsanyi – National Review

The United States recently suffered the second-largest bank failure in the country’s history. The consensus view is that Silicon Valley Bank made a huge mistake by borrowing short term and then parking money in long-term bonds. When interest rates rose, assets lost value, and Silicon Valley Bank was put in a perilous position.

President Joe Biden promises there will be a “full accounting” of the situation and that everyone will be held “accountable.” But that would mean the president’s taking responsibility for the reckless governance that helped create the environment that made this possible.

The Federal Reserve Bank wouldn’t have been compelled to aggressively raise interest rates if Biden had acted more like a responsible statesman rather than a cynical partisan.

Let’s recall that virtually the entire left-wing political infrastructure—media, politicians, and expert class—was activated to dismiss the concerns of those who warned that inflation was a threat. The reason was obvious: Democrats wanted to cram through as many long-term spending proposals as possible while they held both houses of Congress. That had to be done in two years’ time. And it had to be done with the support of Sen. Joe Manchin, D-W.Va., who would occasionally feign concern about spending.

In 2021, Biden signed the $2 trillion so-called American Rescue Plan, indiscriminately sending checks to millions even as COVID-19 lockdowns were winding down. This, after issuing presidential edicts limiting affordable fossil fuels. (With some Republican help, Democrats would later pass a $715 billion green “infrastructure” bill.)

The Fed, meanwhile, kept rates at zero, pumping an already hot post-lockdown with billions. Inflation began spiking.

That’s when the word “transitory” began making an appearance.

The president argued in the summer of 2021 that “there’s nobody suggesting there’s unchecked inflation on the way—no serious economist.” Then-White House press secretary Jen Psaki claimed that “no economist,” serious or otherwise, was projecting higher inflation due to more government spending. (The politicization of economics departments is a disaster, but that’s another story.) Treasury Secretary Janet Yellen promised there was “small risk” of inflation, but that it would be “manageable.”

When prices started creeping up, Biden’s then-chief of staff, Ron Klain, called inflation a “high-class problem” before Democrats inevitably pivoted to blaming corporate greed and arguing that conglomerates had suddenly conspired, after forty years of keeping prices relatively in check, to screw over consumers. Piece after piece dismissed the “weird” and hawkish ideas of people who were warning that spending would spur inflation.

Rather than slowing down, Biden argued we should pass another $5 trillion in spending to alleviate price spikes: “If your primary concern is about inflation, you should be even more enthusiastic about this plan. We can’t afford not to make these investments.”

Then, Democrats simply renamed the Build Back Better spending bill as the Inflation Reduction Act—though the new iteration had as much to do with inflation as the Patriot Act had to do with patriotism. It was just another long-desired leftist wish list and some tax hikes. Among the “investments” in the bill was another $369 billion dumped into green boondoggles, a slush fund for Democrats and donors, the kind of market distortion that fueled the Silicon Valley Bank collapse.

Americans were soon dealing with forty-year high inflation. The Fed was forced to raise interest rates because retarding economic growth is the prescription. In the ’80s, years of persistent inflation were shaken off only when then-Fed chief Paul Volcker raised rates to 20%—and the country experienced a deep recession. The thirty-year fixed rate mortgage hit 18.63% in 1981. You think houses are unaffordable now?

Democrats and other populists are going to blame greed and deregulation. They never let a crisis go to waste. It is true SVB and Signature Bank—another failed bank—were heavy investors in crypto, green energy, tech startups, and IPOs with unrealized profits.

Comfort with risk is a vital part of the American finance system. It separates us from other nations as top innovators and entrepreneurs. But is it really “risk” if certain types of investors never can lose? If SVB’s 40,000 accounts aren’t made whole, will it lead to contagion?

And if big banks come in and act as white knights to regional ones, aren’t we only making too-big-to-fail bigger, and injecting even more moral hazard into our system?

Those are complex questions. But one of the biggest reasons we find ourselves here is clear: a lack of basic governing competence.

I agree with Harsanyi, and though this problem has been brewing for generations, it appears more dangerous now than ever before.

I’ve been concerned about consumer debt, and especially out-of-control government spending for the past forty years. My library contains many books on the subject including The Day the Dollar Dies (1973), Inflation: The Ultimate Golden Image (1982), The Coming Economic Earthquake (1991), The End of Prosperity (2008), Meltdown (2009), Aftershock (2010), and Broke (2010).

Most were written by reputable economists or commentators. They were right about the principles involved in the erosion of the American economy (and its influence on the world).

But most missed the timing of looming economic disaster.

The book that influenced me most on a foreseeable financial Armageddon was William Simon’s A Time for Truth published in 1978. When Simon appeared before a House Committee in April, 1976, as acting Secretary of the Treasury, the U.S. deficit stood at 620 billion dollars (just a little over half a trillion).

It now stands at 31 trillion dollars. 

Here’s what he said: 

“We all know that neither people of business can spend more than it takes in for very long. If it continues, the result must be bankruptcy. In the case of the federal government, we can print money to pay for our folly for a time. But we will just continue to debase our currency and then we’ll have financial collapse…That, Mr. Chairman, is why for me the last few years in office have been like a bad dream. I am leaving Washington next January. I am going home to New Jersey a few frightened man.”

Bill Simon died in 2000 at the age of seventy-three. He was also wrong about timing.

So was I.

Yet, none of our treasures on earth are really safe. In some nations and societies they are more secure than others. American’s money policies were once “sound as a dollar” when the banking system was built on conservative principles, and the culture generally revered God and lived by the Ten Commandments. 

Most of those pillars are gone, we are thirty-trillion in debt, and big banks are failing again.

If your money safe? Only God knows–and he never tells.

What should we do? 1) Get out of debt personally ASAP, 2) Prepare for possible difficult days with wise food storage and self-sufficiency, 3) Share in community with a strong local church, 4) Invest in “tangibles” above the $250,000 limit that the F.D.I.C. insures.

Most importantly, store up treasures in heaven through prayer, discipling others, and fulfilling your part of the Great Commission. 

Only your treasure in heaven remains eternally safe.

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