The Global Financial Crisis 2? With Lyn Alden - WBD640

Lyn Alden is a macroeconomist and investment strategist. In this
interview, we discuss the recent run of bank failures: the
causes, the impacts on the banking sector, federal support and
exposure, and the likelihood of continued stress in the system.
We also discuss a coming decade of recurring inflation and the
emergence of reserve currency competition in a multi-polar world.


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“The vast majority of commercial banks that have ever operated in
the U.S. have disappeared… the slow and steady decline in bank
numbers continues.” This 2021 analysis by a St Louis Federal
Reserve economist is as applicable now as then. Whilst the
dramatic decline in bank numbers (from over 30,000 in 1921 to
circa 4,000 now) mostly occurred in the 1930s, the past 3 decades
have been characterized by a continued contraction that shows no
sign of stopping.


There are obviously inherent risks in banking centralization. As
we have seen in recent years, governments are delegating more
regulatory authority to private banks, bypassing democratic norms
in the process. As banks require central bank permission to
operate, they have no incentive to resist such demands.
Nevertheless, banking centralisation is a symptom of a more
fundamental issue: a fiscal spiral that’s creating an
increasingly volatile economic environment.


Unsustainable levels of debt are hampering central banks' ability
to address growing inflation. Restraining economic growth
decreases the ability of governments to reduce deficits. Further,
the political cycle results in difficult but necessary policy
decisions around fiscal constraints being deferred. The result is
a yo-yo-ing of rate rises and bailouts. This increases the risk
for all types of investment, even traditional safe havens. Banks
struggle, and depositors run.


A situation that begins with investors seeking safer banks, if
not resolved, can lead to investors seeking to divest themselves
of sovereign currencies. This is where capital controls kick in.
The fundamental issue is that governments will seek to protect
the system, not the individual. The denial of licences for narrow
banks is part of the same toolbox that includes gold seizures and
potential restrictions on Bitcoin. Prepare accordingly.