What is the Fed not telling us? The numbers clearly indicate that big trouble is brewing in the banking system. I wish that I could specifically tell you which banks are in the most trouble, but at this stage we simply aren’t being told anything. They probably figure that the best approach is to try to keep everyone as calm as possible. But they won’t be able to keep a lid on what is going on indefinitely, and when word finally gets out people could start to panic.
In recent weeks, bank reserves have fallen to alarmingly low levels.
In fact, last week they fell to the lowest level that we have seen in more than four years…
US bank reserves have crashed to a four-year low, plunging to about $2.8 trillion, according to the latest Federal Reserve data, sending fresh warning signals across Wall Street and Washington. The steep decline marks the second straight week reserves have stayed below $3 trillion, a critical threshold analysts say could test the banking system’s liquidity strength.
By itself, this doesn’t necessarily signal that we are facing a major crisis.
But everyone agrees that what we are witnessing is certainly unusual.
What is causing far more alarm is what occurred on Friday.