A Man-Made, Completely Avoidable Crisis Is Now In the Works…

In October 2019, the Johns Hopkins Center for Health Security in partnership with the World Economic Forum and the Bill and Melinda Gates Foundation hosted Event 201 – an exercise to discuss the global response to a simulated coronavirus pandemic. Since then, we’ve seen similar events simulating global attacks on the Internet, EU public service announcements encouraging citizens to prepare for nuclear war, and dire warnings regarding the growth of artificial intelligence.

This has prompted many people to speculate about the next global crisis. What will it be? Will it be simple misfortune or will it be planned?

No one can know exactly what the next crisis will be. However, we can see one such crisis coming right now, and it’s an easily avoidable crisis. Nevertheless, the people in charge are moving full speed ahead in their preparations to spark the crisis. Therefore, we must assume it’s part of their plan to set off a global crisis.

You Can Thank the EU Technocrats…

When this crisis arrives, you can thank the technocrats in the European Union, especially those driving policy at the European Central Bank (ECB). Why do I say that?

Because the ECB is doubling-down on its efforts to launch a digital euro. Just this past March, ECB President Christine Lagarde announced her intent to oversee the launch of the digital euro this October.

What does the launch of the digital euro have to do with the coming crisis? Everything. Because the crisis isn’t something that will coincidentally arrive alongside the digital euro, it’s a feature of the digital euro. Widespread use of the digital euro is the very thing which will make the crisis inevitable.

And that means this is a man-made, completely avoidable crisis.

Because the best way to diffuse the crisis – which Christine Lagarde and every other technocrat in Europe can easily see coming – is to end all plans to launch a digital euro. It’s that simple. Yet, unsurprisingly, instead of rethinking the digital euro, they’re moving forward at lightning speed.

Again, knowing this, we can only assume it’s part of their plan to set off a global crisis.

So what is this coming crisis?

Banks on the Brink

The coming crisis involves a systemic failure of the European banking system, and by default, the entire global banking system. The European banking system is already facing a number of headwinds, but widespread use of a digital euro will prove catastrophic. Why? Because it will lead to massive deposit flight out of European banks, leaving them vulnerable to collapse.

ING Financial Sector Strategist Marine Leleux noted this possibility in a February article titled, “The Digital Euro Project is Making Progress, European Banks Should Pay Attention.” In her article, she writes:

“While this has not been observed with the three existent CBDCs, a Central Bank digital currency could attract depositors in masses. This is especially true during periods of uncertainty as it represents a nearly risk-free currency through its direct claim to the Central Bank. A large and sudden outflow of deposits from the banking sector to CBDC personal accounts would have a significant negative impact on the banking sector in the EU.”

A digital euro will be housed in a digital wallet at the European Central Bank rather than in an account held with a traditional bank. This means most citizens who start using the digital euro will be withdrawing funds from a bank account and transferring them into a digital wallet directly held at the ECB – completely bypassing the traditional banking system.

As Leleux notes, a large and sudden outflow of bank deposits to CBDC wallets will have “a significant negative impact on the banking sector in the EU.” Such a scenario will decrease bank liquidity, profitability, and resilience:

“Firstly, it would imply a drop in credit institutions’ liquidity levels which consequently hardens banks’ task to reach their liquidity requirements. This would also imply a general increase of liquidity risks in the sector. Additionally, the impact of a large-scale deposit outflow could also spill over to the real economy as a result of banks’ limited lending capacity. Overall, a deposit outflow could lower banks’ liquidity levels, profitability and ultimately also their resilience. Considering the potentially severe magnitude of these adverse outcomes, the European regulator stressed its willingness to implement adequate safeguards.”

This means any banks already nearing the brink of failure will suddenly fail, likely triggering runs on other banks rumored to be in trouble. Once those banks also fail, a system-wide bank run will take place as citizens race to pull their funds out of the bank and put them into a digital wallet at the ECB. Why?

As the monopoly supplier of euros, the European Central Bank is the only bank capable of literally printing the currency. Theoretically, that means the ECB is the only bank incapable of failing. So in a panic situation, most citizens will go with the relative safety of holding digital euros in the ECB vs. holding non-digital euros in a traditional bank.

By its very nature, such a scenario will trigger “a large and sudden outflow of deposits from the banking sector.” But don’t worry, the ECB has a solution. What’s their solution?

Digital euro holding limits.

That’s right. The main impediment to the immediate roll out of a digital euro right now is not the debate over whether or not to have a digital euro. It’s a debate over what the holding limits should be.

These limits will put a cap on the amount of digital euros one person can hold, and thus, significantly decrease the threat to the European banking system:

“The ECB therefore proposes the implementation of digital euro-holding limits. These constraints would be set to limit individual holdings and prevent European citizens from using the digital euro as a store of value. The European regulator explored several levels of holding limits ranging from €1,000 to €5,000. Through a balance sheet optimisation model, they analysed the effect of a deposit outflow on banks under each of those individual holding limits. The model forecasted how credit institutions would manage the overnight deposit outflow while also minimising funding costs and managing their liquidity risks.

Estimates show that with the loosest limit, at €5,000, the household overnight deposit outflow could reach a maximum of 12%. With a €3,000 holding limit, European banks would see the outflow would not surpass 9%. At the current stage of the project, the regulator is considering enforcing the €3,000 personal holding limit.”

“The ECB scenarios consider that when facing high household deposit outflow, banks would first compensate with their excess reserves before turning to other funding options such as interbank and central bank funding. Using data from the second quarter of 2023 and under the different holding limit scenarios, the central bank concludes that the impact on the sector’s liquidity risks and funding structures would be contained. Only an outflow of over 15% would make European banks reliant on central bank funding. In all other cases, banks own funds and the interbank market would suffice to cover the change.

That being said, the sector’s liquidity metrics would be expected to decline once citizens adopt the digital euro. However, results from the ECB model highlight that it would remain well above the regulatory minimum threshold.”

So even at a €3,000 holding limit, European banks could lose up to 9% of their deposits. But this should raise a number of red flags, especially when considering the ECB’s track record of broken promises.

After all, what’s the point of having a digital euro if you’re going to limit the amount of digital euros one person can hold – especially at a relatively low limit of just €3,000? Undoubtedly, the ECB eventually envisions all transactions taking place with digital euros. That’s the whole point of the digital euro – surveillance and control.

As Leleux states:

“While these results show reasons to believe individual holding limits can effectively constrain a negative impact of the digital euro on the European banking sector, the final threshold hasn’t been set yet and the establishment of such a ceiling remains a complex task. Indeed, setting a too-strict limit might dissuade citizens from making use of the new digital currency and would also be counterproductive for the ECB.

To limit the impact of the holding limit on the payment functionality, the Commission also proposes the implementation of different mechanisms such as ‘waterfall’ and ‘reverse waterfall’ functions. The waterfall mechanism would imply that when a payee receives a digital euro payment resulting in a total balance above the holding limit, the excess amount would automatically fall to the user’s linked private payment account.”

Imagine this… The digital euro is launched with a €3,000 holding limit. European banks lose approximately 9% of their current deposits. Some of those banks fail, leading to runs on additional banks. The public, concerned over the possible loss of their hard earned savings, demands the ECB raise the holding limit so they can park more of their funds in the “risk-free” digital wallet – where the fear of institutional failure is zero.

The ECB willingly complies, eliminating the digital euro holding limit in order to “restore order” and “eliminate the panic.” But far from doing either, eliminating the digital euro holding limit simply leads to more deposit outflows from the European banking system, making the problem markedly worse.

As more banks fail, more deposits flee the banking system for the perceived safety of digital euros held at the ECB. In doing so, the entire European banking system collapses, taking down several “systemically important” banks with significant global ties. Contagion spreads throughout the global banking and financial system, and the world experiences the greatest financial crisis in human history.

It’s not far fetched at all.

In fact, Tether CEO Paolo Ardoino says the European financial system is already at great risk – before a digital euro ever rolls out.

As reported in ZeroHedge, Ardoino isn’t overly positive about the European banking system:

“Tether CEO Paolo Ardoino has issued a dire warning to about Europe’s financial system, predicting that “many” of the continent’s banks are at risk of catastrophic collapse.

In an interview with the Less Noise More Signal podcast, Ardoino highlighted how stringent regulations and risky banking practices could precipitate a wave of failures, drawing parallels to the collapse of Silicon Valley Bank in 2023.

Ardoino’s concerns center on the European Union’s regulatory framework for stablecoin issuers, which he argues exacerbates systemic risks rather than mitigating them.”

Tether (USDT) is a cryptocurrency stablecoin pegged to the U.S. dollar. Tether is the largest cryptocurrency in terms of trading volume, holding 70% of the global market share among stablecoins and boasting a user based of 350 million worldwide. Being pegged to the dollar, Tether should generally track the value of the dollar in a “stable” manner and not, as do many cryptocurrencies, wildly fluctuate in value. Yet, at least in Europe, Tether may not be as “stable” as many users believe:

“The regulation was pushing us to keep 60% of our reserves in uninsured cash deposits in Europe,” the Tether CEO told host Pascal Hügli, describing a scenario where stablecoin issuers are forced to park billions in vulnerable bank accounts. “Imagine that you have 10 billion euros in market cap of your stablecoin in Europe. Then 60% needs to be kept in uninsured cash deposits in a bank. Uninsured cash deposit means that the bank insurance in Europe is only 100,000 euros. If you have 10 billion, 100,000 euros is like a spitting on a fire.”

The math, as Ardoino laid out, is grim. With 60% of a stablecoin’s reserves—equivalent to 6 billion euros in his example—held in uninsured deposits, banks’ fractional reserve practices amplify the risk. “They can lend out 90% of it to people that want to buy a house, that want to start a business, and all that,” he explained. “So 5.4 billion euros will be lent out by the bank and 600 million euros will be cut.” In the event of a 20% redemption demand, or 2 billion euros, Ardoino warned that banks would fall short of cash. “You go to the bank and you tell the bank, well, I want 2 billion euros. And the bank says, well, I only have 600 million euros.”

Ardoino predicts that the fallout would be catastrophic for stablecoin issuers. “As a stablecoin issuer, you go bankrupt. Not because of you, because of the bank,” the Tether CEO said. “So the bank goes bankrupt and you go—like, so is—I mean, and—and, oh, sure, the government will say, ah, told you so, stable coins are very dangerous.”

In other words, a stablecoin issuer in Europe could theoretically see its stablecoin lose 60% of its value overnight in the event of a widespread banking crisis. This makes such cryptocurrencies anything but “stable.”

According to Ardoino, European banking regulations inevitably force stablecoin issuers like Tether to partner with more risky banks, amplifying the potential for crisis:

Ardoino’s critique extends to the broader European banking ecosystem, which he believes is ill-equipped to handle stablecoin operations. Major institutions like UBS, which he described as “systemic risk banks,” refuse to work with stablecoin issuers, forcing companies like Tether to rely on smaller, less stable financial institutions. “They need to use very small banks,” he said, warning that these institutions are particularly vulnerable. “Mark my words, as happened with Silicon Valley Bank that, by the way, almost killed them in 2023, they will face the same issues.”

“Four banks blew up last—in the last two years in the US,” he added. “Many banks will blow up in Europe in the many years—in the next few years.”

Based on his personal experience, Ardoino thinks “many banks will blow up in Europe.” And he isn’t even factoring in the launch of the digital euro and the prospect of a 9% deposit outflow from the European banking system!

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