Silicon Valley Bank failed, Signature Bank shuttered, and First Republic crumbled. Every time the White House or the Federal Reserve attempts to reassure the public that everything is fine in the financial system, there is distress – and then another institution is on the brink of calamity. Is it surprising that more Americans are worried about the safety of their bank deposits? This could explain why deposit flight persists in the US economy and might accelerate if the banking crisis does not end.
Are Bank Deposits at Risk?
A new Gallup poll found that 48% of US adults are concerned about the safety of their money in banks, including 19% who say they are “very” concerned and 29% who report feeling “moderately” worried. By comparison, 30% are “not too worried” and 20% are “not worried at all.”
When the survey is broken down, there is more consternation among Republicans, independents, middle- and low-income adults, and respondents without a college education. Democrats and high-income polling participants were less worried about the safety of their bank deposits. Researchers discovered something fascinating about politics playing a role in how Americans feel about their money.
“Partisans’ levels of worry about the safety of their money in the banking system also diverged in September 2008, but in the opposite way,” Gallup stated. “Republican President George W. Bush was in the White House when the financial crisis unfolded, and the views by party were nearly the reverse of those today. At that time, 55% of Democrats were very or moderately worried versus 34% of Republicans.”
Meanwhile, it is worth pointing out that the poll was conducted between April 3 and 25, before the failure of First Republic and stress among the field of regional banks. Will additional chaos in the banking system exacerbate worries? Consumers are certainly acting out of an abundance of caution. The latest data from the Federal Reserve H.8 – a weekly report that examines the assets and liabilities of US commercial banks – show that bank deposits slipped 0.1% to $17.167 trillion. Since the beginning of the banking turmoil, deposits have plunged 2.5%, or roughly $432 billion.
Fact-Checking Biden’s Debt Limit Claim
Treasury Secretary Janet Yellen recently projected that the US government could run out of cash by June 1 because of less-than-expected tax revenues. This is astounding considering the trillions of dollars Washington receives every year from taxpayers and how much the Federal Reserve prints to monetize the debt. But this is the reality of the situation, forcing President Joe Biden to go as far as fibbing to get his way on the debt ceiling.
The newest claim uttered by the current administration is that the United States has never failed to cover its obligations in the past. “America is not a deadbeat nation,” Biden recently wrote. “We have never, ever failed to pay our debt.” But is this true? Indeed, the US has never defaulted on its debt, except for the four times that it did.
In 1862, the US government defaulted on its demand notes because the Treasury had to pay for the Civil War. In 1933, Uncle Sam shirked on its gold bonds. In 1968, officials failed to honor a promise to redeem silver certificate paper dollars for silver dollars. In 1971, the Bretton Woods Agreement ended the promise to redeem foreign governments’ dollar holdings for gold (then-Treasury Secretary John Connally famously said, “The dollar is our currency but it’s your problem.”)
In the meantime, the White House keeps accusing Republicans of not doing their job to lift the debt ceiling. However, the House GOP already passed legislation to increase the debt limit in exchange for tepid spending cuts. Ultimately, the ball is in the Democrats’ court to get this done.
All About China
What’s the deal with the Chinese economy? After Beijing abolished most of the COVID-era public health restrictions, it was almost certain that the country would become an economic powerhouse again. Investors had priced this expectation into many impacted asset classes, including energy commodities. But the latest data suggest trouble.
The Caixin Manufacturing Purchasing Managers’ Index (PMI), a general direction of a sector of the economy, weakened to 49.5 in April, down from 50 in March – anything below 50 indicates contraction. This came in below the consensus estimate of 50.3. In addition, the Caixin Services and Composite PMIs eased to 56.4 and 53.6, respectively. Despite the abysmal readings, sentiment has strengthened amid new product releases, an increase in capital expenditure investments, and fiscal and monetary stimulus.
The numbers have captured the attention of President Xi Jinping, who told a central planning meeting that the nation must concentrate on “the real economy,” such as manufacturing and technology, to grow the world’s second-largest economy. Xi explained to the Central Financial and Economic Affairs Commission that too much investment in finance and real estate can result in bubbles. “[We need to] push for the transformation and upgrading of traditional industries, instead of letting them retreat to become ‘low-end industries,'” he said. “[We should] focus on improving the overall quality of the population and strive for an appropriate birth rate and population size.”
That said, the slowdown in China has been good news for President Biden and motorists. West Texas Intermediate (WTI) crude oil prices cratered below $70 per barrel before firming above this level again. The national average for a gallon of gasoline has also tumbled nearly 2% in the past week to $3.547. But the technical data show that the selloff was overdone and that the oil fundamentals remain strong for the bulls. In other words, the relief might be short-lived.
All opinions expressed are those of the author and do not necessarily represent those of Liberty Nation.
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