Have You SEEN THIS!? What Worries The Fed!! ⚠️

On the same day terror collapsed the Federal reserve released its semi-annual Financial stability report which Coincidentally warned about the risks of Stable coins The financial stability report also Warned about other factors that could Cause the entire global economy to Implode and it’s safe to say this would Have some serious implications for Cryptocurrency That’s why today i’m going to give you a Bit of background about the federal Reserve break down what its financial Stability report says and tell you Exactly what it all means for the crypto Market [Music] Before we play the feds fiat fiddle i Need to make sure i secure my acquittal I am not a financial advisor not even a Little i’m just an educator and Entertainer that helps you learn and Giggle Please contact a financial advisor if Your portfolio is looking brittle If this is your first time at my crypto Desk my name is guy and i’m not like all The rest that’s because my mission is to Create high quality crypto content That’s better than the best coins tokens News reviews packed with lots of facts And a bit of jest If you’re crypto obsessed subscribing to

The channel and peeing that notification Bell is what i suggest So now that i’ve got that off my chest Let’s see what the federal reserve’s Financial stability report says If you’re unfamiliar with the federal Reserve here’s what you need to know The federal reserve aka the fed is the Central bank of the united states of America fun fact the fed is technically A private corporation and not a Government entity though it does work Very closely with the us government and Abides by whatever laws are placed on it By u.s politicians in the late 70s u.s Politicians tasked the fed with two Things ensuring price stability and Ensuring maximum employment in america Today this is known as the fed’s dual Mandate Now the fed achieves its dual mandate by Raising and lowering interest rates and I recently explained exactly how it does This in another video which i’ll leave In the description For the purposes of this video all you Need to know about interest rates is That raising them makes borrowing more Expensive and saving more attractive This reduces inflation but also runs the Risk of slowing down the economy i.e Fewer jobs Conversely raising interest rates makes Borrowing cheaper and saving less

Attractive this tends to result in Economic growth i.e more jobs but runs The risk of creating excessive inflation For context price stability means an Inflation rate of around two percent per Year and maximum employment means an Unemployment rate of around four percent Now as many of you will know inflation Has been running a lot hotter than two Percent for a while and the latest cpi Print was a whopping 8.3 percent This inflation is due to a combination Of factors including pandemic money Printing supply chain disruptions and of Course the ongoing war in ukraine and Its effects on the prices of energy and Food Unfortunately for the fed the only thing It can do to combat inflation is reduce Demand for these goods and services by Raising interest rates and that’s Exactly what it has been doing The only problem is that individuals and Institutions accumulated unprecedented Amounts of debt when interest rates were Low including governments around the World particularly those with u.s Denominated debt As such raising interest rates too Aggressively could cause something in The financial system to break at which Point many believe the fed would be Forced to drop interest rates but if That happens it could lead to

Hyperinflation now the fed’s financial Stability report basically breaks down The current economic situation and the Factors that could cause much more than A couple of experimental Cryptocurrencies to collapse As i mentioned in the introduction the Fed releases financial stability reports On a semi-annual basis specifically in November and in may well it is may and The economy is looking very different Today to how it did back in november So sit back and relax while i explain Just how messed up the economy is as Always i’ll give you my thoughts as we Go along The fed’s financial stability report Begins with a short definition of what Financial stability means quote a stable Financial system when hit by adverse Events or shocks continues to meet the Demands of households and businesses for Financial services such as credit Provision and payment services The authors go on to explain that There’s a difference between economic Shocks and economic vulnerabilities Economic shocks are sudden and often Hard to predict whereas economic Vulnerabilities build up over time and Are often easy to predict and therefore Fix in advance The authors then identify four Categories of economic vulnerability

That the fed pays attention to these are Elevated valuations such as stocks that Are trading much higher than what their Actual profits justify Excessive borrowing by households and Businesses which is self-explanatory Excessive leverage in the financial System aka excessive risk taking in the Form of say large speculative trades on A video game retailer And funding risks meaning bank runs Which is when everyone rushes to pull Their money out of a financial Institution at the same time Note that this risk includes runs on Stablecoin issuers like tether and Circle more on that later Now the authors stress that these four Economic vulnerabilities are not Mutually exclusive quite the contrary They can and often do interact and Therefore have the potential to turn What would otherwise be a small economic Disruption into a widespread economic Catastrophe The authors also stress that these four Categories of economic vulnerability are Not exhaustive i.e they don’t quite Cover all of the economic Vulnerabilities the fed is monitoring And there will likely be future changes To this taxonomy for that reason So the first part of the fed’s financial Stability report provides a brief

Overview of the precarious economic Situation america and by extension the World finds itself in Right out of the gates the authors state Quote since the november 2021 financial Stability report uncertainty about the Economic outlook has increased That is putting it mildly if you ask me As far as the four categories of Economic vulnerability go the authors Rightfully point out that asset Valuations continue to remain high Despite recent drawdowns especially in The housing sector The authors also note quote asset prices Remain vulnerable to declines in Response to negative shocks Regarding borrowing by businesses and Households the authors apparently found That debt-related vulnerabilities aren’t Currently a cause for concern though They do say that various macro factors Such as supply chain disruptions could Make it difficult for individuals and Institutions to pay back debts Now this doesn’t sound quite right Considering that household debt recently Hit a record high of 16 trillion dollars In the united states but to be fair These figures came out after the fed Published this financial stability Report In terms of leverage in the financial Sector the fed doesn’t seem to see any

Risks there either now this is actually Consistent with leverage related Statistics like margin debt which has Been on the decline since last autumn When it comes to funding risks however The fed cautions that stable coin Issuers and money market funds could Face a bank run now for anyone wondering A money market fund is kind of like an Institutional stable coin for government Bonds that earn interest while Maintaining a stable value The first part of the fed’s financial Stability report concludes with the Results of a survey of market Participants conducted by the fed’s Affiliates As you can see most of them are worried About the war in ukraine inflation a Market crash foreigners selling off u.s Assets and higher energy prices That second to last one caught my eye Because i can’t help but think that it Relates to the seizure of the russian Central bank’s assets in response to its Country’s invasion of ukraine and the Implications it has for foreign Individuals and institutions holding u.s Assets You can learn more about the sanctions Against russia and how they could affect You using the link in the description But i digress The second part of the fed’s financial

Stability report is a deeper dive into The first of the four categories of Economic vulnerability which is asset Valuations After reiterating what they mentioned in The overview the authors imply that the Housing market will continue to rise Even if it does see a slight correction And that quote such a shock is unlikely To be amplified by the financial system In other words the housing bubble will Continue to grow but at least it won’t Blow up the financial system like it did In 2008. The authors then touch on the rise in Interest rates for various durations of Government bonds i.e government debt and Admit that this increase in rates could Reduce valuations in asset markets Across the board What’s funny is the authors failed to Comment on the fact that the yield on The two-year treasury briefly exceeded The yield on the 10-year treasury at the End of march and the two continue to be Uncomfortably close This is despite the fact that it’s Literally in the infographic the authors Provided Now if you’re wondering why this is so Important that’s because the two-year Treasury yield being higher than the 10-year treasury yield is called a yield Curve inversion and it’s seen by many

Market participants as a sign that a Recession is coming That’s because under normal economic Conditions interest rates on longer-term Debt are higher due to the increased Risk and opportunity costs involved When interest rates on short-term debt Are higher something is broken under the Bonnet In an info box a few pages later the Authors bring up another very important Factor and that’s the deterioration of Market depth across all assets You can think of market depth as being a Measure of how many people are actively Participating in any given market by Putting up buy or sell offers When market depth is shallow it leads to More volatility and the authors found That market depth is still extremely low Relative to volatility This suggests that liquidity providers Aka institutions with all the money are Being extremely cautious and this means There’s an even higher risk of volatile Prices Interestingly the authors end the info Box by saying the lack of market depth And liquidity is fine since there don’t Seem to be any negative side effects at Least not yet After the info box the authors turn to Corporate bonds i.e corporate debt and The main thing they’re paying attention

To there is the spread i.e the Difference between different types of Corporate bonds Put simply if corporate bond spreads are Wide then that’s a bad sign and if Corporate bond spreads are narrow then That’s a good sign The authors note that corporate bond Spreads are still at historical lows so All is well on that front Even so the authors found that many Corporate bonds run the risk of being Downgraded i.e designated as high risk Or low quality which is where the term Junk bonds comes from After giving a brief update about the Ongoing transition to a new standard for Calculating bank to bank lending rates The authors examined the slow decline of The stock market and don’t seem all that Concerned This might have something to do with the Fact that the fed is intentionally Crashing the stock market as a means of Combating inflation or so i’ve heard From various market experts As for real estate quote commercial real Estate valuations remained somewhat on The high side and the cost of farmland In the united states has been rising too Now if you’re wondering why the cost of Farmland is skyrocketing search for the Largest farmland owner in the united States on google spooky stuff

Now last but not least we have regular Housing whose prices quote continued to Increase at a rapid pace and price to Rent ratios remained high relative to Historical levels The charts here say it all If you’re wondering why regular housing Keeps going up one of the reasons is Blackrock and you can learn all about That monster using the link in the Description The third part of the fed’s financial Stability report is a deeper dive into The second of the four categories of Economic vulnerability which is Borrowing by households and businesses The authors start by saying that the Risks here are fairly moderate with the Ratio of debt to gdp continuing to Decline and many individuals and Institutions are taking the necessary Measures to reduce their excessive debts More importantly the issuance of risky Corporate debt has been on the decline The authors also note that the amount of Debt held by publicly traded companies Has likewise declined to pre-pandemic Levels except for those companies that Are involved in the industries that were Most affected by pandemic restrictions Such as airlines hotels restaurants and The like However the authors warn that a decline In profits for all publicly traded

Companies combined with rising interest Rates could make it much harder for them To pay off their existing debts and if You add increasing energy costs to the Equation companies in some industries Could face serious hardships Note that this is the current economic Situation for big businesses For small businesses the economic Situation is much more severe because of The rapidly rising costs of labor and Raw materials It’s too bad the authors didn’t spend More than a paragraph on small Businesses Instead the authors pivoted to Households where debt levels remain Moderate as far as economic Vulnerabilities go Better yet most of the debt is being Taken on by individuals and institutions With low credit risks so it’s totally Fine trust me i’m the fed Jokes aside the authors then quickly Cover all the different types of debt Including student debt auto loan debt Credit card debt etc and say that there Is no cause for concern there either Now this is crazy because the debt Bubble has become unsustainably big and You can learn more about that using the Link in the description Anyways the fourth part of the fed’s Financial stability report is a deeper

Dive into the third of the four Categories of economic vulnerability Which is leverage in the financial Sector Here the authors begin by saying that no Economic sector seems to be too over Leveraged save for life insurance more On that in a second The authors also seem to hint that the U.s financial sector could face Unforeseen issues because of its Indirect exposure to russia via european Financial institutions which are Themselves exposed to russia Speaking of the financial sector it Seems the big banks are doing great Despite a slight decline in profits in The first quarter of this year so that’s Good news right In all seriousness the authors note that Banks have been gradually lowering their Lending standards for over a year Because burdening you with unnecessary Debt is how banks make their money The authors say that this lowering of Standards isn’t an issue but i imagine It could be if this trend continues But back to life insurance According to the authors life insurance Companies in the united states have been Buying up boatloads of corporate debt to Get those high yields Now for what it’s worth the authors Believe that rising interest rates will

Reduce this risky behavior as they Improve life insurance company Profitability what i’m wondering is Whether this risky behavior is really Coming from the fact that the population Is aging and that means life insurance Companies could soon be paying out more Than what’s coming in The same goes for other sectors for that Matter In any case hedge funds are engaging in Similarly risky behavior and the authors Note that the sec found most of the Largest hedge funds had exposure to Russia which is really no surprise when You consider headlines like these The fifth part of the fed’s financial Stability report is a deeper dive into The fourth of the four categories of Economic vulnerability which is funding Risks and you’ll recall this category Relates to cryptocurrency The authors don’t hesitate to drop a Crazy statistic and that’s that the Amount of liabilities that a vulnerable Two bank runs is over 19 trillion which Is 80 percent of the gdp of the united States As far as i understand the implication Here is that a run on these assets would Collapse the u.s economy as always the Banks are looking fully funded as far as The fed is concerned and the authors Specify that banks have started rotating

Some of their holdings into lower risk Investments to protect their back ends So to speak After warning about the potential risks Money market funds pose the authors Finally turn their focus to stable coins Which they correctly note as having Grown exponentially in market cap over The last year or so The authors reiterate that there could Be issues if everyone tries to redeem Their stable coins for dollars from the Likes of tether circle and paxos and if You’ve watched my video about the assets Backing stablecoins you’ll know it’s Because they’re all backed by some kind Of debt not all of which is liquid What’s annoying is that the authors Don’t say much more about stable coins And instead direct the reader to a Report put together by the president’s Working group on financial markets from Late last year which i actually covered In another video that will be in the Description Another crypto related thing the authors Touch on is the recent executive order About cryptocurrency issued by the u.s President and how the fed will be Examining whether the volatility of the Crypto market as a whole poses a risk to Financial stability in accordance with The executive order The fed will also continue exploring the

Possibility of issuing a central bank Digital currency or cbdc And it discusses the prospect of a Digital dollar in depth in the info box On the following page of the report A few things to point out here For starters the author specified that Quote the federal reserve does not Intend to proceed with issuance of a Cbdc without clear support from the Executive branch and from the congress Ideally in the form of a specific Authorizing law This is simply because the issuance of a Cbdc could actually flip the financial System on its head and you’ll already Know this if you’ve watched my video About the federal reserve’s digital Dollar report which the authors also Reference in this report As detailed in that report a digital Dollar would have to preserve privacy While simultaneously tracking every Transaction which means no privacy Ensure that the big banks don’t get cut Out of the equation and ensure that this Digital dollar is interoperable with all Existing financial infrastructures Shortly afterwards the authors seem to Imply that the primary benefit of a Digital dollar is that it could be used To fight quote new types of digital Money including stable coins and Cryptocurrencies and this wouldn’t be

Out of the question given that many Other countries are developing cbdc’s For this purpose Thankfully all the fed is doing for now Is collecting feedback from so-called Stakeholders which is probably everyone On wall street next the authors Extensively cover all the margin calls That occurred shortly after russia’s Invasion of ukraine particularly in the Commodity markets As it so happens this is something which I also covered in a recent video i’m on A roll today aren’t i description for Favor Anyhow to wrap up the section the Authors take a second to touch on life Insurance companies again and what they Said seems to confirm my suspicion that Life insurance companies aren’t seeing Enough money coming in compared to the Money going out The final part of the fed’s financial Stability report talks about the Near-term risks to the financial system And how they relate to the four Categories of economic vulnerability if It all Note that these risks are based on both Cold hard data and the fed’s own survey Of market participants Naturally the first short-term risk to The financial system is the ongoing war In ukraine which the authors warn could

Risk collapsing the global financial System if the war goes on for too long This is because it would raise interest Rates in most countries tank the European economy and bring down european Banks which have lots of leverage and Are highly exposed to russia This economic contagion would inevitably Spill over into other regions around the World including america The second short-term risk to the Financial system is inflation because if It continues it will force the fed to Continue raising interest rates which Will crush individuals and institutions Alike particularly those with lots of Debt and especially if economic activity Is on the decline which it arguably Already is The third short-term risk to the Financial system is china due to a Combination of the slow collapse of its Housing market and its frankly Unscientific lockdowns that are Literally destroying the country’s Economy Like the war in ukraine what happens in China will find its way around the world The fourth short-term risk to the Financial system is one that’s been Overlooked and that’s the effects all of The above could have on developing Countries The authors identify indebted developing

Countries which import most of their Food and energy as being the most at Risk and yes i have a video about the Upcoming global food shortage which the Bank of england is warning will be Apocalyptic that will be in the Description too And now for the moment you’ve all been Waiting for what the hell does all of This mean for cryptocurrency well Besides all the absolutely terrifying Macro factors that could f almost Everything right up there doesn’t seem To be anything crypto specific to be Concerned about in the fed’s rhetoric Yes there are concerns about stable Coins but so long as they don’t pose a Threat to financial stability they will Continue to be on the back burner Never mind the fact that the u.s Government benefits from having billions Of de facto digital dollars spreading Around the world as foreign currencies Succumb to inflation You might recall that the fed is also Interested in examining the financial Stability risks posed by the crypto Market as a whole but it looks like There isn’t too much cause for concern There either i say this because the Fed’s financial stability report is Meant to be complemented by another Financial stability report published by The u.s department of the treasury and

Treasury secretary janet yellen recently Said herself that crypto does not pose a Threat to financial stability Now this could change in the future and At the rate that crypto adoption is Occurring it’s something the regulators Probably want to get ahead of and that’s Certainly something janet is thinking About Then again there are so many other more Pressing things the fed the treasury and Every other department of the us Government is dealing with The war in ukraine inflation supply Chain issues food shortages social Unrest and as of last week ufos Seriously check out the live stream of The ufo hearing it’s pretty cool There are also the upcoming midterm Elections in the united states which Could have huge implications for crypto Regulations the side that looks the most Likely to win is the one that’s pro Crypto and i think you know which one I’m talking about In sum the fed doesn’t see crypto as a Threat to financial stability but the Things the fed is concerned about are Probably things that we should all be Concerned about too and take even more Seriously if the second half of this Year is going to be anything like the First half it’s going to be one hell of A roller coaster you can rest assured

I’ll be sitting right next to you Screaming about crypto all the way And that’s it for today’s video about The fed’s financial stability report if You found it informative smash that like Button to let me know Don’t forget to subscribe to the channel Too and ping that notification bell Before you go If you want more from the coin bureau Check out coin bureau clips for my live Stream shows you can also tune in to the Coin bureau podcast if you want to do a Deeper dive into crypto I’m active on twitter tick tock and Instagram 2 and push detailed crypto Updates on telegram just for you If you want to find out what cryptos i Hold as part of my portfolio subscribing To my weekly newsletter is what you Should do i’ll also remind you that There’s only about one week left to Participate in our one whole bitcoin Giveaway and you can find all the Details down that away Thank you for watching everyone it’s Been fun but this guy’s gotta run [Music] You