Hugh Hendry, a macroeconomics expert and hedge fund manager, recently issued a dire warning regarding the US banking sector and the US economy as a whole.
Hendry claims that the recent widespread panic and capital flight from the US banking industry is perfectly justified in a new interview with Bloomberg Markets.
According to Hendry, a further drop in the M2 money supply, which partly measures the amount of cash in liquid checking accounts, might persuade the US government to intervene and stop people from withdrawing money from the banking system.
“Occasionally, it relates somewhat to panic. You should panic, in my opinion. Right now, you’re witnessing M2’s largest waterfall decline. Deposits, not loans, make up M2. Deposits are leaving the system in this manner and entering money market funds.
It could get to the point where the Treasury and the Fed are forced to intervene and impose restrictions on your ability to withdraw money from US banks as a citizen.
According to Hendry, the issue of capital flight from US banks is not entirely related to worries about the FDIC’s ability to cover deposits worth more than $250,000. He also claims that a general guarantee on deposits would not be the answer.
The banking industry is experiencing deposit flight and capital flight in search of yield. I worry that the Federal Reserve Act of 1934, and I don’t say this lightly, led to the confiscation of gold from US citizens.
We’ve reached the stage where the Fed and Treasury authorities will undoubtedly need to think about installing a lock or gate on US bank deposits.
Hendry suggests US Treasuries and possibly Bitcoin as safe havens for Americans to put their money in the face of uncertainty.
It’s time to invest in the most despised financial instrument in existence: ultra-long Treasury bonds. I am aware that you are all concerned about inflation. It was a supply shock, and a supply shock requires the appearance of continually increasing bank loan printing to move forward. We are experiencing the inverse. Trading two to three standard deviations below the ETF are the super longs.
Although I don’t have the bug, I could see Bitcoin as an asset class that may trade three or four times higher in the following five years. No other asset class exists for which I could make that judgment.
