Economic experts are sounding the alarm about a potential second wave of banking failures that could have a devastating impact on the global economy. One prominent expert, George Gammon, in his recent Youtube video update, has shared some key indicators that point to this looming crisis.
The surge in Borrowing from FHLB and BTFP
The analyst finds it amusing that Banks in trouble often need quick access to funds. While, initially, they prefer to borrow from other banks or the FHLB, these options can be expensive and come with strict conditions. Whereas the analyst notes that recent data shows a significant increase in borrowing from both the FHLB and the newly established BTFP. This suggests that more banks are experiencing financial difficulties and are seeking alternative sources of funding.
Discount Window, A Sign of Trouble?
The Federal Reserve has an emergency lending program called the discount window, which offers short-term loans to struggling banks. Gammon advises keeping an eye on this indicator. If there is a sudden surge in banks resorting to the discount window, it could be a clear sign that they are in serious trouble.
“How we kind of time when we get the next wave of this crisis is by combining those two [FHLB and BTFP] charts with a chart of the discount window.”
What to Expect Next?
By closely monitoring the charts of FHLB and BTFP borrowing, along with the discount window data, experts hope to predict when the next wave of the crisis will hit. If the use of the discount window spikes, it may indicate that more banks will fail in the coming weeks or months. This could potentially lead us into a situation that is as severe as, or even worse than, the global financial crisis of 2008.
The implications of such a crisis could be significant, affecting not only banks but also individuals and businesses around the world. It is important to stay informed and monitor the situation as it develops.
