Get the scoop on finance - sign up for mobile alerts
Futuremash
| On
May 20, 2023

Probability That US Banks Will Restrict Cash Withdrawals Is ‘Rising Like Mercury’, Says Macro Guru Hugh Hendry

By Henry Kanapi

Macro guru Hugh Hendry is expanding his views on the US banking system amid lingering turmoil in the financial sector.

In a new interview on Stansberry Research with Daniela Cambone, the hedge fund manager says the Fed’s tight monetary policy has increased the probability that banking customers could one day face restrictions on the amount of cash they can pull out.

ADVERTISEMENT

“If we went back a year ago, the probability you would assign to that would be almost zero. And all I’m saying is that probability, like mercury, is rising.

Why is it rising? It’s rising because we have experienced, I call it the Fed folly. One can say factually that this Fed hiking is the fastest and of the greatest magnitude. They’ve never done this before…

We no longer live in an environment where it seems prudent to have all of your money in the banking system, and certainly not congregated around one lender.”

Although blanket limits on bank withdrawals are unknown in the US, such restrictions were implemented in Greece and Cyprus during the debt crisis of the mid-2010s.

ADVERTISEMENT

Cash withdrawal limits are currently in place in Nigeria, where individuals are allowed to withdraw 20,000 naira, worth about $43 dollars, per week. Leaders in the economically-troubled nation say the move is designed to pull cash out of the system ahead of a planned move to a fully digital economy.

Hendry says America’s banking industry will likely witness further deposit flight as we now live in a world where a customer can pull out their funds with a press of a button.

He also points out that the Fed’s rate hikes over the past year have created an environment that makes it attractive for depositors to take their money out of banks and invest it in money market funds.

A combination of being stuck with these very uncompetitive rates and now the tyranny that money can just fly so quickly… The thing that’s pulling money out is the Fed’s offering too much via money markets. I mean you could go to the Fed directly.

So what’s the Fed doing? It’s encouraging more and more and more money to leave [banks].”

ADVERTISEMENT

At time of writing, the average annual percentage yield (APY) for savings accounts stands at 0.25%. Meanwhile, money market funds offer as high as 4.75% APY, closer to the Federal Reserve’s 5% to 5.25% benchmark rate.

Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Check Price Action
Follow us on X, Facebook and Telegram
Surf The Daily Hodl Mix
&nbsp
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Generated Image: Midjourney