• US Senator John Kennedy of Louisiana criticized banks, calling them „sophisticated Ponzi schemes“.
• He believes that banks are more vulnerable due to the rapid spread of information via social media.
• Kennedy also discussed the Federal Reserve’s inflation rate, believing it needs to be increased to 8%.

US Senator Calls Banks “Sophisticated Ponzi Schemes”

Republican Senator John Kennedy of Louisiana has recently called banks “sophisticated ponzi schemes” in an interview on CNBC. He believes that these financial institutions are made more vulnerable due to the advanced communication technology present today which enables panic and runs on deposits to be spread quickly. This vulnerability is illustrated by the recent seizure of Silicon Valley Bank (SVB) by the Federal Deposit Insurance Corporation (FDIC).

Banking System Vulnerability

Kennedy stressed that banks rely heavily on trust, however in this era of advanced communication technology, a single person can cause a herd mentality resulting in a bank run and consequently make anyone go broke. He used SVB as an example, pointing out how they had faced a $1.8 billion loss from selling off their bond portfolio and were then bailed out by both FDIC and Federal Reserve after their depositors had been paid back fully.

The Inflation Rate

The senator also discussed the current state of inflation in America and how he believes it needs to be brought up at least 8% for cooling down purposes. The Federal Reserve have already implemented some measures such as quantitative easing in order to reduce unemployment rates but have been met with criticism from some sectors who believe it is not sufficient enough or too extreme.

Hedged Accounts & Crypto Assets

In attempt to protect oneself against potential banking crises, people have opted for hedged accounts with higher interest rates as well as purchasing crypto assets like Bitcoin (BTC). With crypto-supportive financial institutions such as SVB being taken over by FDIC, it is clear that investors need alternatives solutions like these ones if they want their investments protected when another crisis occurs.

Conclusion

Senator John Kennedy has commented on US banking system’s vulnerability due to social communications technology and how he believes an increase in inflation rate is necessary for cooling down purposes. When bank runs become more frequent, hedged accounts with higher interest rates or cryptocurrency investments may become attractive solutions for protecting one’s investments against another potential banking crisis.