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“WORST NIGHTMARE” Stagflation Back With Vengeance, More Bank Failures, Yen Plunge & USD Devaluation

Blog May 2, 2024

Taylor Kenney catching you up on the latest headlines! Unpacking the most important financial news, each and every week! From the Republic bank failure signaling potential banking crises to concerns over rising deficits and stagflation fears with insights into the economic landscape. Plus, learn about the Yen’s plunge and its implications for the U.S. dollar’s stability

TRANSCRIPT:

Hello. Welcome back. I’m so glad you’re here. People ask me all the time, Taylor, what’s really going on in the news? So today we’re breaking down some headlines. Starting with Republic First seizure signals more bank failures to come, expert warns.

So in case you missed it, we had our first bank failure of the year. Republic first. And it confirms a couple of things that we’ve been saying for a while, starting with the fact that banks have massive unrealized losses. That’s the reason they’re going down. Treasury, securities, and commercial real estate loans. They don’t have the capital. And that’s confirmed in this article. I’ll read you another quote here. It says investors have worried about a possible contagion in the sector.

They are concerned that enough people are going to wake up and realize that their deposits aren’t safe in their banks, that all these banks are suffering from the same unrealized losses. And if enough people go to their bank and try and withdraw their funds, the banks don’t have the capital to cover it. They’re unrealized losses become realized. And at that point, the banks collapse. Which is why experts warn more bank failures to come. Especially against the backdrop of what else we’re seeing. Another article from Bloomberg, U.S. lifts quarterly borrowing above forecasts.

Which means that we’re going to continue to increase the deficit. For those of us who are hoping that maybe we would move away, we’d make progress. Doesn’t look likely. I can’t say that I’m shocked, but again, disappointing. More debt, which probably is why U.S. customer confidence slumps to lowest level since July. People are feeling the pain. They are hurting out there. You know, we were told for a long time soft landing, soft landing, but that is no longer the narrative. In fact, they can’t even pretend anymore.

Just yesterday, Fed says progress on inflation has stalled, keep rates steady. We got the latest from Jerome Powell that we are going to have higher for longer. In fact, we have no idea when a rate cut is even coming at this point. But what really grinds my gears here is progress on inflation has stalled. They make it seem like everything’s okay. We’re just trying to figure this out. No, that’s not the case at all. In fact, you might have seen more and more people talking about stagflation.

Stagflation fears come back with a vengeance. Fears about stagflation are mounting in the US. It’s every central bankers worst nightmare. Now, of course, stagflation is a situation where economic growth slumps or is stagnant. Combined with high and rising inflation and a high and rise in unemployment. We know that inflation is continuing to rise, and after last week’s GDP numbers, we know that economic growth is slowing. And if I had to bet money on it, I have a feeling that unemployment is going to start to tick up. We’re already seeing a lot of signs, and it is a lagging indicator, which means that it follows.

Now stagflation. There’s a lot to unpack here, so if you have questions about or you want to learn more, this is why I’m going to be doing a deep dive about this topic next week. But it’s definitely something not even that I think that we need to be concerned about. I think it’s something that’s already here, and we’re going to see more of that and follow more of that as we continue on.

And lastly, arguably one of the biggest stories of the week, the yen’s plunge and dollar devaluation. So this week, the yen dropped significantly in value to 160 yen to the dollar. But this is not just a story about Japan and the yen. If anything, this is a warning to the United States over what could happen to the US dollar. Even more wild as it came out that the Bank of Japan suggest that Japan intervened Monday to support the yen.

Essentially, what that means is that they artificially propped up their currency because so many people lost confidence in it, but it was in a downward spiral. Now, when this happens, it’s really tough to recover from the essentially a doom loop. As people lose confidence, more people move away from it. As more people move away from it, more people lose confidence and the value just goes down.

But here’s the thing. It could be argued that the same thing is happening or could be happening soon to the U.S. dollar. We know that countries are moving away from the U.S. dollar because they’re losing confidence in the United States ability to be the global reserve currency. We also know that all of this debt that we’re seeing debt and deficit continue to grow is meaning that inflation is going to continue to grow, which means that our dollar’s worth less, we’re losing our purchasing power.

And who knows at what point are we at the point where we’re seeing headlines like this about the U.S. dollar plunging and the Federal Reserve intervening to bail us out? It’s a future that we could see sooner rather than later. Of course, I hope not. Only time will tell.

If you have questions about any of these things that I talked about today, we have a link below. Feel free to click on it and talk to one of our expert analysts, who can help you be protected against everything that’s going on.

As always, I’m Taylor Kenney with ITM trading. Thank you so much for being here. Until next time.

SOURCES:

https://www.bloomberg.com/news/articles/2024-04-30/boj-data-may-help-show-whether-japan-intervened-in-forex-market?srnd=economics-v2

https://www.wsj.com/articles/japanese-yen-falls-bank-of-japan-kazuo-ueda-monetary-policy-c9d68338

https://www.cnn.com/2024/04/25/economy/stagflation-us-economy-gdp/index.html

https://www.foxbusiness.com/economy/stagflation-fears-come-back-with-a-vengeance

https://www.barrons.com/livecoverage/fed-interest-rates-jerome-powell-speech-live

https://www.bloomberg.com/news/articles/2024-04-30/us-consumer-confidence-slumps-to-lowest-level-since-july-2022?srnd=economics-v2

https://www.bloomberg.com/news/articles/2024-04-30/us-consumer-confidence-slumps-to-lowest-level-since-july-2022?srnd=economics-v2

https://www.bloomberg.com/news/articles/2024-04-29/us-lifts-quarterly-borrowing-to-243-billion-above-forecasts

https://www.foxbusiness.com/markets/republic-first-seizure-signals-more-bank-failures-to-come-expert-says

Sources & References In This Article

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