“We must move forward in a time-bound manner on reforms in global institutions such as the UN Security Council, multilateral development banks, and the WTO.”
– Narendra Modi, at the 2024 BRICS Summit
October 24, 2024 – The evidence is right there, in Vladimir Putin’s hand.
It may just look like a scrap of paper…
That specific scrap of paper may not hold any real value…
But it signifies the ongoing demise of the U.S. dollar. If you’ve been following the script, the picture paints more than a picture. In digital terms it pixelates a new reality.
Some context:
The BRICS summit wraps up today in Kazan, Russia. Dignitaries from over three dozen countries are repacking their overnight bags, rather their valets are, shuffling legions of minions, including security details to board private jets.
While only some of the event was shown in the media, and almost none of it was covered the U.S., here’s what we know now:
The BRICS countries are openly working together towards common goals. That includes closer trade relations to investment funds, as we noted yesterday.
There’s also a framework for BRICS members to better trade and store grains and other goods.
The developed world analogy fits. The BRICS are working toward a the developing world version of a G20 summit, with a smaller subgroup acting like the G7 and taking the lead.
The image of Putin holding a BRICS “bill” as they call it, copying our moniker for it no doubt, is symbolic at this point. But strong enough, in our humble opinions, to capture the financial press’ collective imaginations.
Over time, this closer unity in the developing world could become a strong bloc to challenge the dominant Western powers. And in time, that could mean any number of Grey Swan events.
Hence why Russian President Vladimir Putin was even given a mock-up of a “BRICS Buck” as a souvenir for the event.
Here’s a close-up of the BRICS Buck mock-up:
Of course, this is just for show. This “bill” won’t be mass-produced. BRICS nations are working on their own currency, officially dubbed the “unit,” which will allow them to trade digitally.
China is taking the lead on creating a BRICS payment system. Such a system would likely incorporate a central bank digital currency (CBDC) type of program.
Given that personal freedoms take a backseat in major BRICS nations like Russia and China, it’s a much easier sell than in the United States.
And much easier to incorporate a “social credit” system, much like the one China has today, and which mostly exists in the United States as episodes of Black Mirror.
We’ll look into the program’s details as soon as they’re released.
Either way, the die is cast.
Here we quote the Grateful Dead from their gambling diddy, Jack Straw:
And now the die is shaken, now the die must fall
There ain’t a winner in the game, he don’t go home with all
Not with all...
We have to say, we are intrigued by the historic narrative unfolding in our time.
The ten nations that are the core of the BRICS are moving forward. And they’re picking up allies along the way. 36 countries sent their own representatives to the Kazan summit. Any number of them, and a dozen more could join the accord signed there.
There are as many potential participants in the trade agreement as the 44 countries who’ve joined in the common economic block we know as the European Union.
The nearly 50 countries affiliated or potentially affiliated with the BRICS will be able to join into a national union much like the European Union. And it will come with its own digital currency.
Given the billions that live in these nations, and their high growth rates, what we witnessed this week likely has as much import for the global monetary system as the Bretton Woods Conference in 1944.
Meanwhile, Western nations design their own future mechanism and imagine a world they believed they call the shots in.
They’ll continue to enjoy their existing global framework. For now.
But they may not have as many developing countries to try and “help” out with loans from the International Monetary Fund, which often come with considerable strings attached.
As BRICS countries are meeting this week, interest rates in the United States ticked higher. Since the Federal Reserve cut interest rates in September, the 10-year U.S. Treasury yield has risen to as high as 4.25% yesterday, up from 3.6% last month.
If you’re a bond trader, that’s a massive move higher in rates – meaning a massive drop in bond prices.
And, of course, it’s come at a time when many banks paying interest to customers followed the Fed’s lead and cut depositor’s rates.
Looking more closely at how Western banks have made out like bandits over the past few years is friend of Grey Swan Lau Vegys, writing at Doug Casey’s Crisis Investing.
The Great Bank Heist
Lau Vegys, Doug Casey’s Crisis Investing
Remember when your parents told you there’s no such thing as free money? Well, they clearly never ran a bank during the Federal Reserve’s high-interest rate era.
New data shows that for the past two and a half years, U.S. banks have been gorging themselves on a feast of free cash, courtesy of your friendly neighborhood Fed.
How much cash, you ask? Oh, just a cool trillion dollars. That’s right, with a “T”.
Pocketing the Difference
As you may recall, in 2022, the Fed made a sharp turn, slamming on the brakes with aggressive rate hikes to fight inflation (which, of course, they’d caused in the first place with their money-printing spree).
Between March 2022 and July 2023, Chair Powell and his merry band of money manipulators cranked the federal funds rate from a rock-bottom 0%-0.25% all the way up to 5.25%-5.50%.
As the Fed jacked up rates, banks started raking in higher yields on their deposits at the Fed.
In tandem, however, they decided to keep the interest payments for depositors—like us—shockingly low, pocketing the difference.
Recent data from the Federal Deposit Insurance Corporation (FDIC) shows that by the end of the second quarter of 2024, the average U.S. bank was paying depositors a mere 2.2% in annual interest.
Now, 2.2% might sound pretty good if you’ve gotten used to the near-zero rates we’ve had for the last decade. But remember: during that same time, these banks were collecting a fat 5.5% from the Fed.
Do the simple math, and you’ll see that banks were pocketing a nice 3.3% for themselves. Roughly speaking, of course, since those rates fluctuated, but you get the idea.
But hold on, it gets worse.
If you happened to have your money with the big guys like JPMorgan Chase (JPM) or Bank of America (BAC), you were really getting the short end of the stick. These banking giants were only paying out a paltry 1.5% and 1.7%, respectively, to their depositors.
Now, here’s where the heist part comes in…
It turns out those low payments to depositors generated an eye-popping $1.1 trillion in revenue for the banks. And when I say “eye-popping”, I mean it’s completely unprecedented in excess interest revenue. In fact, it’s roughly half of the total money banks made during that same two-and-a-half-year period.
The Rigged Game
Now, you might be thinking, “So what? Banks are private financial institutions and have the right to set deposit and borrowing rates. It’s free market capitalism, right?”
Wrong.
The whole fractional reserve banking system, with the Fed at its forefront, couldn’t be further from free market capitalism. And, as this story shows, the banks are essential beneficiaries and accomplices of this rigged game.
It’s actually a perfect storm of financial manipulation.
Think about it. You have the Fed paying banks interest on the money they keep parked at the central bank through something called “interest on reserve balances” (IORB).
Traditionally, banks are supposed to make money by lending out deposits to businesses and individuals. You know, actually contributing to economic growth. But why deal with all that hassle when you can simply rake in a risk-free 5.5% from the Fed?
That’s how the Fed encourages banks to hoard money instead of lending it out to grow the economy. This means less money available for businesses to expand, for entrepreneurs to start new ventures, or for you to get a reasonably priced loan.
All in the “noble” effort to fight their own self-inflicted inflation, of course.
Okay, so it’s definitely a big problem, but it wouldn’t be so bad if you could at least get some of that money back in the form of interest on our deposits, right?
Unfortunately, as this story shows, you just don’t.
While some banks raised rates on certain savings accounts in line with the Fed’s hikes, reports show that more than 4,000 U.S. banks just kept the extra cash for themselves to boost their profit margins.
The result? The staggering $1.1 trillion in excess profits for banks I mentioned earlier.
That’s money that could have been in your pocket or fueling economic growth. Instead, it’s lining the vaults of banks—with the Fed’s stamp of approval.
What Can You Do?
While banks were raking in billions, what were you getting on your savings account? Probably an amount that wouldn’t even cover a bag of groceries by the end of the year.
So, what’s an everyday investor to do in the face of such blatant cronyism? Here are a few thoughts:
- Don’t be a sitting duck: If your money is languishing in a low-interest savings account, it’s time to shop around. Online banks and credit unions often offer much better rates than the big banks.
- Consider alternative investments: With banks playing these games, it might be time to look at other options for your money. Gold, silver, and other hard, unprintable assets can be a good hedge against both inflation and financial shenanigans.
- Stay informed: The mainstream media might not be telling you the whole story, but that doesn’t mean you have to remain in the dark. Knowledge is power. And in a world where the deck seems increasingly stacked against the average person, being informed is your best defense.
The game might be rigged, but that doesn’t mean we have to play by their rules. ~~ Lau Vegys, Doug Casey’s Crisis Investing
So it goes,
Addison Wiggin,
Grey Swan
P.S. Friend of Grey Swan David Tice just shared with me a new gold project he’s working on, called Glint.
Glint is a gold-based payment system. It’s a way to avoid the drama unfolding in the U.S. dollar amid the rise of BRICS Bucks.
And a way to profit from the continued move higher in gold at a time when traditional banks are offering paltry yields on your deposits.
Sounds like a win-win. While still in its early stages, Glint has already amassed over 200,000 members. And with states leagalizing the use of gold as legal tender for payments, getting set up on Glint now could put you ahead of the curve against the next monetary disaster.
Check out Glint here. I’ll have a chance to discuss this and other Grey Swan opportunities with David Tice in the near future.
Full disclosure: David has asked me to serve on Glint’s advisory board. So while I’ll be doing my due diligence in the days ahead, please take a look over Glint yourself and share your thoughts with me, right here: addison@greyswanfraternity.com
Please send your thoughts on banking bandits, BRICS Bucks, and gold-payment systems to: addison@greyswanfraternity.com
