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US banks tremble: 500 billion losses and BRICS offensive!
BRICS strengthens banks while US banks struggle with $500 billion loss. Pressure on dollar grows as US debt rises.
US banks tremble: 500 billion losses and BRICS offensive!
Economic tensions between the United States and the BRICS alliance are increasing significantly. In the past three years, 15 U.S. banks have failed, sparking fears of financial instability in the country. Meanwhile, the BRICS community is actively advancing its dedollarization efforts, especially after expanding its membership. The development increases pressure on the US dollar as the country's banks face unrealized losses of over $500 billion, according to a recent report.
A financial expert from Florida Atlantic University has revealed that the US's unrealized losses on bonds and securities at the end of the second quarter of 2024 are over $500 billion. While this represents a slight decline compared to the first quarter, it is still a significant loss for one of the world's strongest economies. Banks are now burdened with more than half a trillion dollars on their balance sheets, while the central banks of the BRICS countries are massively accumulating gold to hedge against the US dollar.
Volatility and inflation threaten US banks
Rebel Cole, Ph.D., Lynn Eminent Scholar Chaired Professor of Finance in FAU's College of Business, said that despite the slight decline in unrealized losses between quarters, U.S. banks are far from off the hook. "The 10-year Treasury yield has been exceptionally volatile over the past two years as inflation has risen. Banks are also at risk from their exposure to uninsured deposits, so the combination of unrealized losses and this exposure can be particularly dangerous." This mix can be fatal as the US dollar suffers from both inflation and pressure from the BRICS.
Increasing debt as a further burdening factor
The United States' debt has reached a new record high this year, with the national debt burden topping $35.7 trillion. In the last three days alone, the debt burden has increased by a remarkable $345 billion. The US government currently pays $3 billion in interest on debt every day. This growing debt coupled with unrealized losses is putting additional pressure on the US economy, much to the discontent of US investors but to the delight of BRICS partners.
If the unrealized losses on balance sheets become liabilities when banks need liquidity, the U.S. banking system could be under significant pressure. Pressure could mount as BRICS continues to sell US Treasuries and the dollar. At the same time, the alliance is driving de-dollarization by encouraging developing countries to move away from the dollar. This constellation could result in further burdens for US banks and thus for the entire US economy. For more information, see the latest coverage on watcher.guru.