2023-05-21 07:52:00
Investing.com – In an interview with Stansberry Research published on Friday, Hugh Hendry, a hedge fund manager, addressed the issue of the US banking system, sharing some worrisome predictions.
He explained that the Fed’s tight monetary policy has increased the likelihood that bank customers will one day face restrictions on the amount of cash they can withdraw.
“If we were to go back to a year ago, the probability of you attributing this would be close to zero. All I’m saying is that probability, like mercury, is increasing,” he said.
He attributed the rise in this probability to what he calls “the Fed’s madness”, with “the fastest and largest” rate hike in history.
“We no longer live in an environment where it seems prudent to have all your money in the banking system, and certainly not gathered around a single lender,” he added.
Thus, Hendry predicts that the US banking industry will likely face further deposit flight, as we now live in a world where a customer can withdraw their funds at the push of a button.
He also points out that the Fed’s rate hikes over the past year have created an environment that encourages depositors to withdraw their money from banks and invest it in money market funds, which is making the situation worse for banks.
“The combination of these very uncompetitive rates and the tyranny of money flying out so fast… What’s taking the money out is the Fed offering too much through the money markets,” he said. he explained, accusing the central bank of encouraging “more and more money to leave [les banques]”.
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