Best Twitter threads of the day – April 25th
Money Supply contracts again in March
Money Supply contracts again in March. 📉
This is a massive economic warning. Money Supply contraction hasn’t happened in 90 years.
Only other times it has happened we had Depression / Major Banking Crisis. pic.twitter.com/eOvsyoWrFy
— Nick Gerli (@nickgerli1) April 25, 2023
1) Other periods of Money Supply Contraction other than 2023:
-Great Depression 1929
-Depression of 1921
-Panic of 1893
-1870s Banking CrisisAll previous situations had unemployment rate north of 10%. And massive bank failures. pic.twitter.com/GAlXQUINKx
— Nick Gerli (@nickgerli1) April 25, 2023
2) What’s amazing to me is how NO ONE is paying attention to this.
Fed is sucking money out of the system through QT. Just while banks are at beginning of a credit crunch.
And stock/real estate investors are still “risk on”. Insane.
— Nick Gerli (@nickgerli1) April 25, 2023
3) Look at First Republic’s earnings report to see how this money supply contraction works in practice.
First Republic’s deposits were down -36% YoY. 📉
But their loans were still up +23% YoY. 📈
That’s not sustainable. pic.twitter.com/oqWs7UuYm7
— Nick Gerli (@nickgerli1) April 25, 2023
4) So now First Republic is having to severely CUT BACK it’s loan portfolio.
To bring their balance sheet back into balance to account for lower deposits.
Which means fewer available mortgages, business loans, and overall money in economy. pic.twitter.com/LxMqsvyISB
— Nick Gerli (@nickgerli1) April 25, 2023
5) What’s so problematic about this money supply contraction is that inflation is STILL an issue.
So businesses will have less access to capital just as they need it most to pay for expenses and payroll expansion.
Yikes. That’s a recipe for mass bankruptcies and layoffs.
— Nick Gerli (@nickgerli1) April 25, 2023
6) Especially because of the massive Corporate Debt Bubble that has been fueling the economy for the last 10 years.
$20 Trillion in Corporate/Business Debt at end of 2022.
Double the level in 2008. pic.twitter.com/SBqgcrp681
— Nick Gerli (@nickgerli1) April 25, 2023
7) What happens to all those levered Corporations / Businesses when money supply contracts?
Doesn’t take a rocket scientist to figure it out.
Big layoffs. And big shutdowns.
— Nick Gerli (@nickgerli1) April 25, 2023
8) But most people are writing off these possibilities.
Simply because “they haven’t happened yet”.
Which I understand to some degree. “Recession” has been discussed for a year. And it hasn’t gotten real yet.
But that doesn’t mean it won’t.
— Nick Gerli (@nickgerli1) April 25, 2023
9) The ignorance of the Fed to these realities is shocking.
They rarely, if at all, discuss money supply. Just interest rates.
But I suspect that will change over the next 3-6 months. Because if money supply keeps contracting, there will be big problems.
— Nick Gerli (@nickgerli1) April 25, 2023
10) Of course – I don’t have a crystal ball. Just evidence from history about what happens to economy when money supply contracts.
Maybe I’m wrong and banks will get aggressive with lending again in 2023.
And Fed will pivot earlier than expected, thereby “saving the day”.
— Nick Gerli (@nickgerli1) April 25, 2023
11) But based on current chess board, it seems like Fed is determined to hike/tighten until inflation is down to 2%.
Just as banks are getting scared. And cutting back on lending.
Tough combo for a debt-bubble economy to handle.
— Nick Gerli (@nickgerli1) April 25, 2023
What you should know about Coinbase’s Suits against SEC
1/ Here’s what you should know about the @Coinbase suit against the SEC.
This will move fast–unlike the @Ripple case.
This case begins in the appellate court, not the trial court.
There will be no discovery (depositions and document exchange), just briefing and a hearing.
— MetaLawMan (@MetaLawMan) April 25, 2023
2/ @Coinbase has an All-Star legal team led by Eugene Scalia–former Sec. of Labor and son of deceased Supreme Court Justice Antonin Scalia.
Scalia has experience defeating government agencies, including the SEC, in court.
The Petition filed yesterday is quite persuasive.
— MetaLawMan (@MetaLawMan) April 25, 2023
3/ Coinbase is seeking a Writ of Mandamus which is a Court order compelling the SEC to do its job and announce a decision on Coinbase’s request for rule-making.
This action does not necessarily affect the SEC’s timing for suing @Coinbase as it has threatened to do.
— MetaLawMan (@MetaLawMan) April 25, 2023
4/ I expect major industry players to pile in with amicus briefs supporting @Coinbase’s position.
We might also see the House Financial Services Committee, or individual members, come in with briefs in support of @Coinbase.
— MetaLawMan (@MetaLawMan) April 25, 2023
5/ The SEC Commissioners will have to approve any response to Coinbase’s action.
There’s a tiny chance the SEC will blink and agree to engage in rule-making.
If just one Commissioner withdraws their support for @GaryGensler’s “regulation-by-enforcement” strategy, he’s done.
— MetaLawMan (@MetaLawMan) April 25, 2023
6/ While Coinbase’s action does not directly affect pending SEC cases against @Ripple/ $XRP, Bittrex and others,
It does a great job of shining a spotlight on the SEC’s contradictory positions about of its authority to regulate digital assets.
Other judges will take note.
— MetaLawMan (@MetaLawMan) April 25, 2023
Today, we filed a narrow action in the U.S. Circuit Court to compel the SEC to respond “yes or no” to a rulemaking petition we filed with them last July asking them to provide regulatory guidance for the crypto industry. 1/4 https://t.co/rlsS1DIFfl
— paulgrewal.eth (@iampaulgrewal) April 25, 2023
The SEC is required by law to respond to petitions “within a reasonable time,” but they have not yet responded to our petition from last July, which is why we filed our action in court today. 2/4
— paulgrewal.eth (@iampaulgrewal) April 25, 2023
It’s obvious that there’s a lack of clarity among our regulators regarding crypto, as even the chair of the SEC has declined to say which crypto assets are securities. 3/4 https://t.co/6HZak3dzk9
— paulgrewal.eth (@iampaulgrewal) April 25, 2023
The crypto industry, and its users need clear laws and rules to follow that are built for a new technology. Enforcement actions based in inapplicable securities law aren’t the answer. 4/4
— paulgrewal.eth (@iampaulgrewal) April 25, 2023
