Fed's 'Emergency rate cut' by June to precede 'controlled implosion' of banking sector, only 6 banks left as CBDCs rolled out by 2025 - Edward Dowd
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(Kitco News) - The Federal Reserve will be forced to make an "emergency rate cut" by June, according to Edward Dowd, former BlackRock portfolio manager and Founding Partner of Phinance Technologies. He predicted that a "controlled implosion" of the banking sector would follow over the next 24 months, leaving the United States with only six major banks.
The Federal Reserve raised the Fed Funds Rate by 25 bps on March 22nd to the 475-500 bps range after a series of prominent bank failures, including those of Signature and Silicon Valley Bank, which involved the Fed, U.S. Treasury, and Federal Deposit Insurance Corp (FDIC) bailing out depositors.
But despite Fed Chair Jerome Powell saying that "rate cuts are not in our base case" at the FOMC Press Conference, while trying to assuage market participants about the "stability" of the U.S. banking sector, Dowd expects an aggressive pivot by June.
"After the announcement, and after he [Powell] spoke, the Fed Funds futures curve, which is the overnight lending rate, is pricing in four interest rate cuts [this year]," Dowd told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News. "I see an emergency rate cut some time in the next three months, at a bare minimum."
Dowd, who has more than three decades of experience in the financial industry, said that "shotgun marriages," such as the sale of the beleaguered Credit Suisse to UBS in Switzerland, along with more bank failures, would slowly unfold over the next two years.
A "serious problem," said Dowd, is implied by the fact that 186 U.S. banks "may have risks similar to Silicon Valley Bank," as reported by The Wall Street Journal.
"They [the authorities] are going to continue to play what I call "whack-a-mole," he said. "They plug their finger in the dike, everybody breathes a sigh of relief, and then there's another problem… I'm hoping that's the case because to be honest, I don't want to see a fast panic. That's not good for any of us."
The result of this, forecast Dowd, is that only six banks would be left standing, making it easier for the government to introduce Central Bank Digital Currencies (CBDCs), programmable tokens issued and controlled by central banks, and which operate as fiat currency. He claimed this would all occur by 2025 at the latest.
He also predicted that, based on the year-over-year growth rate of the M2 money supply, a "hard recession" will soon manifest, prompted by "continued economic deterioration," "more bank failures," and a possible global "sovereign debt crisis."
To find out why Dowd thinks the upcoming recession he forecasts may be comparable to the Great Depression, watch the video above.
Central Bank Digital Currencies
"If you wanted to introduce central bank digital currency, wouldn't it be better to have only six banks in the U.S., all systemically important, basically run by the government?" Dowd suggested.
CBDCs are controversial, with proponents claiming that they would improve financial inclusion and increase the efficiency of transactions. Opponents of CBDCs claim that they are a threat to privacy and could bolster government overreach.
To date, 114 countries are developing CBDCs, and 11 have already fully implemented them, including the Bahamas and Nigeria.
Dowd warned about the potential for CBDCs to be wielded as a political weapon.
"If [your money] is in the central bank and you happen to be a dissident, talking about an issue that the state doesn't want you talking about, you can be targeted and have your ability to transact stopped," said Dowd.
He also suggested that the government could use CBDCs to enforce behavior aligned with Climate Change goals, such as "restricting the amount of meat" people consume to limit methane emissions.
"If I were a central banker, and wanted to introduce a central bank digital currency, I would do it at the bottom of a crisis, when everyone's begging for relief and everyone's in fear, and then offer the solution," said Dowd. "I'm not in the room, but you could speculate that it's by design, and you wouldn't be crazy for saying so."
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Resistance to CDBCs
Dowd does not view CBDCs as inevitable, and said he is "hopeful" that a "grand awakening" of people would reach critical mass, and resist the introduction of the new monetary technology.
"I have a lot of hope that it's not inevitable, but it takes a mass awakening of all sorts of people," said Dowd. "It's being discussed now at the political level."
On March 20th, Florida Governor Ron DeSantis announced legislation that would prohibit the use of a CBDC in Florida, citing the idea that CBDCs would be exploited to infringe on privacy and "promote government-sanctioned surveillance."
Previously, South Dakota Governor Kristi Noem vetoed a state bill which would have paved a path for CBDCs in her state.
On a federal level, House Majority Whip Tom Emmer (R-MN) is spearheading the CBDC Anti-Surveillance Act, which would ensure that any CBDC upholds "American values of privacy, individual sovereignty, and free market competitiveness," and opposes CBDCs' use as a "dangerous surveillance tool." On March 22nd, Senator Ted Cruz (R-TX) proposed a federal bill which would ban a retail CBDC.
Dowd advised that Americans also use cash as a way to slow down the introduction of CBDCs, which rely upon cashless transactions.
"This move to cashless [transactions] is a first step before digital currencies," he said. "I'd love to see everybody start to use cash. Whenever you go out, have the cash, forget the credit card."
To find out how Dowd's investment thesis is based on unfolding risks, watch the video above
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