Take More Cash Out of Markets and Banks-Nomi Prins…”So, if they pull the artificial stimulus from the banks, Prins says the whole system crashes.”
By Greg Hunter
USAWatchdog.com
07/22/2015
Best-selling author Nomi Prins says the only thing propping up the system is money printing. The tip of the iceberg was the Greek debt crisis. Prins says, “Before it happened, there was a lot of concern at the central bank level. That wasn’t really discussed very much in the press . . . but I believe behind the scenes there were a lot of fearful conversations about the financial system, not just the relationship of the euro and Greece politically, which was a part of it, but you don’t want any chips to fall off your table. Anything could open the door for a run on liquidity (cash), which is also why I talk about what individuals should do more and more now is try to preserve their own liquidity and to take more cash out of the markets or out of banks to just have on the side before this period of volatility, before we have the actual crash. This is a tenuous situation. I am afraid of things that look like a bail-in up to the level of a bail-in.”
Prins, who was a top Wall Street Banker, says the too-big-to-fail banks are much bigger and will be much harder to save in the next crash. The stats Prins comes up with to illustrate this are stunning. Prins says, “43% more deposits are held by the big six banks in the United States since before the crisis (in 2008). 84% more assets are held by the big six banks and 400% more cash. . . . The point is the big six banks control more deposits, more assets, more trading, more cash than they did before. That’s a fact.”
Prins says, now more than ever before, central bankers are fearful. What are they afraid of? Prins contends, “Their fear is the liquidity that they put into the system through epic unprecedented methods . . . all the money they dumped into the markets to make them appear healthy and the banks controlling much of them, the fear is if they pull that plug, if that liquidity somehow falters . . . that things start to tank and implode very quickly. The only think keeping these markets up, the only thing keeping these banks up is either the artificial funding or the purchasing of bonds. Basically, the central bank interventions is the only thing keeping this going.”
So, if they pull the artificial stimulus from the banks, Prins says the whole system crashes. If they keep going, we still get a crash but just a little later. Prins explains, “You cannot sustain a policy that is so artificial forever. It has been sustained for 7 years. That’s a really long time. If they were to take it away right away, there would be an implosion right away, but they are not doing that and haven’t done that. What they are doing is kind of testing. We’ll give a little, we’ll take a little. It will implode, it is just a question of timing.”
What about all the talk of the Fed raising interest rates this fall? Prins explains, “They have backed themselves into a corner. If you raise interest rates 50 basis points, the market will drop 500 points that day. That’s what you are dealing with. That’s just the reality of the situation that has been created. I think if the Fed does raise rates to save face, it will be by a very small amount. The markets will tank . . . and completely stop raising rates going forward, or they don’t do it at all, which is kind of what’s been happening. . . . If they do raise rates, they create a very big knock on effect.”
So, the Fed is trapped in a never ending money printing policy, and Prins goes on to say, “Yes, they are in the tough spot that they created. They fed into this Frankenstein banking system. . . If they raise rates meaningfully, it will cause a tremendous crash in the markets.”
Join Greg Hunter as he goes One-on-One with Nomi Prins, best-selling author of “All The Presidents’ Bankers.”
