Gold and Oil go bid as a hedge against systemic risk. The Fed bails out the banking system ala 2020 bailouts and underwrites the Crypto market. Eyes on the Fed's balance sheet and inflation fight and how long they will keep cheap funding open to banks while they (Fed) increase interest rates. Or will the Fed pause?
The Federal Reserve has decided to open up an emergency financial backstop for ALL banks to borrow at its discount rate ala COVID-19 2020 measures. Which is a bailout of the whole banking system, while letting Silicon Valley Bank fail. Although, undoubtable SVB will be able to swap its deprecating assets for Fed funding, to cover staff payouts and management payments. Deposits under $250k were always insured by the U.S. government. So, the bailout is purely a financial backstop of its speculative/bets losses on crypto and Venture Capitalist write-downs. And it was reported that bonuses were paid to top tier management before the bank had declared insolvency.
All and all, the Fed will take on commercial and other 'banks' liabilities once again, tired to crypto related collateral which will add to the their already bloated balance sheet. That in turn will add to U.S. Dollar selling pressure and falling yields, which in turn will cause their inflation fight to be a very difficult continuation, possibly moving to a secondary issue as they attempt to rebalance everything with smaller rate hikes, while absorbing bank losses on those rate hikes. What a mess, as inflation maintains its pressure on zapping purchasing power across the board.
Anyway, Gold and Oil have become a hedge against (refer to Chart 1 and 2) market chaos as the extent of hidden write-downs on speculative colleterial (crypto), that may indeed lead to a contagion of crypto's unstable market spilling over and affecting the overall market. It will be interesting to see, how the Fed will overstretch with both its inflation fight and shoring up the financial sector with cheap loans.
Ultimate question: Will the Fed pause its interest rates in March 2023?
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All markets: chiasmusmagazine.blogspot.com/search/label/markets
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