It’s contagion all over the place already. So many are asking if the wipeout of two banks, including the nation’s 16th-largest, is a sign of contagion that the worries have caused US Treasurer Janet Yellen to assure the nation again and again that the banks are more solid than ever and that the Treasury and the Fed and the FDIC are working to make sure there will be no contagion from the crashes into insolvency that sprang up last week.
The more they say they are working to make sure there won’t be any contagion, the more you know there will be. The fact is there is already contagion and lots of it. That is what brought both Silvergate and Silicone Valley Bank (SVB) down — contagion from last Summer’s Cryptocrisis when many financial writers assured us there would be no contagion.
You cannot necessarily see the fall of any one part coming in an event like this, but you can certainly see coming the fact that many parts will be falling. That’s how it was was with Silvergate directly from the Cryptocollapse and then with Silicone Valley Bank, as the leader of a larger-scale banking collapse where crypto also played a major role because many of SVB’s big clients were crypto companies.
While the financial media and the Fed heads and the treasurer all assured us there would be no contagion from the Cryptocrisis last summer, which continues into the present, I began pointing out warnings to the contrary. So, before I get in to explaining crypto’s role in the SVB collapse last week, let’s go back over what, in fact, could be seen coming — at least as a high risk if not a definite prediction so no one can say the Fed couldn’t possibly have seen any of this coming.
Bringing cryptos current
I haven’t written a lot on crypto currencies because, frankly, I don’t understand how blockchain works, and I have never wanted to invest time into figuring it out. So, what I have written has all been in the form of warnings to be careful. I never saw the moment cryptos would crash last summer, but I was fairly cautious about them leading into the summer and even going back further. Because they function like a black box, I saw the likelihood of surprise perils and pointed those out as cautions going into the crisis.
Here is a synopsis of those warnings along the way to give some sense of the degree to which the Cryptocrash and contagion from it to major banks was always on the table as a high likelihood and should never have been minimized by the likes of Powell and Yellen and all the parrots in the financial media that mindlessly regurgitate whatever those two “experts” say. Let’s start with my earliest warnings about crypto about two-and-a-half years ago and work toward the most recent:
Cryptocurrencies could rise by more than enough to help you through this winter, but they can (and often have) just as easily crashed by 50% like the stock market, so don’t use crypto as the resource you can depend on for the winter. It may rise after it crashes, but that won’t help you if supplies are short when crypto comes up short, too. From a retirement standpoint, the crypto currency you’ve invested in may not even exist when you’re ready to retire — so I’d keep crypto a side bet.
“This is Stagflation, and Here is an Easy, Practical Idea to Prep for it” Oct. 11, 2021
For those with some money to play it was a gamble many did well with; but one should never gamble with essential funds or with their retirement.
Then, half a year before the big summer bust of 2022, I gave the following warning as something I considered fairly evident:
The next obvious stage of the present ongoing crash … will likely also pull down a great number of crypto currencies with only a few survivors (as we saw in dot-com companies around the year 2000 that had huge valuations but no real profitable use).
“Economic Predictions for 2022” Dec. 20, 2021
As the year of the big Cryptocrash began, I gave a stronger warning but with no specific timing:
Already in another one of their own bear markets, cryptos have proven to be highly speculative vehicles. Many of them, like those promising tech companies that made no actual profits or merchandise back in 2000 will nova into their own collapsing cores. A few companies survived the rumble and the tumble in 2000 and went on to do very well, but most disappeared in the dust of time and space. The same will likely be true this time for the hoard of crypto currencies.
“How Bad Is the Stock Market Rout Now, and How Bad Will its Collapse Get?” Jan. 7, 2022
That big bust came in the summer of 2022, but I won’t claim I saw the timing of that coming — not in the sense of saying it would hit that summer or even that year — but only that I did consider that it would come at some point as being evident.
