- Norinchukin Bank was forced to sell $63 billion in sovereign bonds due to losses and is now considering buying CLOs
- Pressure on the system is growing, and the US Federal Reserve needs to cut rates to prevent a new wave of bank failures
- Perhaps a more accelerated global adoption of Bitcoin is needed, and it could sharply increase demand and price
Currently, the global banking system is on the verge of collapse, threatened by the US Federal Reserve raising interest rates. Due to market volatility, this has become an apparent problem for major banks, including Norinchukin Bank in Japan, which has been forced to sell $63 billion worth of sovereign bonds.
Why it May be Important for the Global Economy?
The inversion of the yield curve caused by these changes creates additional problems for financial institutions, including other banks in Japan. In response to the losses, Norinchukin Bank started selling U.S. bonds to reduce risks and stabilize its position. Japanese investors are also actively getting rid of U.S. bonds, which could lead to serious systemic problems.
In turn, Norinchukin Bank is considering risky transactions to offset losses, including the possibility of buying debt related to commercial real estate. Quantitative easing policies in 2020 have had negative consequences, and pressure on other banks, also forcing them to take greater risks in search of profits.
If such a trend were to ruin the entire Japanese financial system, it might be possible to go further and do the same for other local economies. While volatility in stock markets in the New York Stock Exchange might start from Japan alone, a few local economies affected similarly would create a global dimension. Given how fast information moves today, we could find ourselves in 2008 much sooner than last time.
Any Solutions?
The U.S. has also seen a rise in the number of troubled banks, whose $517 billion in assets have suffered significant losses due to the current economic difficulties and rising interest rates. This situation adds pressure to the financial system and the Fed needs to react quickly by lowering rates to prevent a new wave of bankruptcies and stabilize the market.
One of the critical points in resolving the crisis is an urgent cut in interest rates by the US Federal Reserve, which will help reduce the tension in global markets and prevent further losses.
Of course, Bitcoin, as a decentralized and global asset, may further interest investors as a means to mitigate risks associated with specific regional or national economic issues. But if Bitcoin and crypto in general do not get faster global adoption, we will repeat the same scenario.
