Hey guys, Raf here from The Endgame Investor and today we’re going to talk about, as you may know if you follow The Endgame Investor on Substack, link in the description below. I follow several different metrics or indicators or possible triggers, I’m not sure what exactly to call them, that may be the primary domino that triggers the next banking crisis. I don’t know exactly what it’s going to be, but there are a few things that I’m following on The Endgame Investor on Substack and you might have caught some of them here. One of them is the $3 trillion level in bank reserves.

And now the bank reserves are all the zombie debt, the dead debt that has been accumulating since 2008. Once that debt could no longer be paid off, the federal reserve had to buy all of it and hence its balance sheet expands to buy all that debt. And that dead debt has to be rolled over in the form of bank reserves because the money supply can never be allowed to shrink or you have the collapse of the entire banking system. So once we get below a cushion of about $3 trillion, we’re probably going to have banking crisis joining that for absolutely certain.

No, I don’t, but I do know that the regional banking crisis was triggered at a $3 trillion reserve level. And you’ll see on the chart, and I’ll show you in a second, that crises occur after quantitative tightening. So we’re going to look today at what happened in the previous cycle of quantitative tightening of QT when reserves fell, how much reserves fell as QT was continuing, and what was happening with reverse repos at the time. We have a similar interplay now with RRP’s reverse repos about to zero out as they did in 2018. And we’ll see what happened to reserves relative to quantitative tightening once those RRP’s ran out back then and what we can expect this time and when we’re going to reach that hopefully magical $3 trillion line or the final banking crisis will be triggered and we’ll get to the final Fed pivot and printing round, which should destroy the dollar in my estimation.

And one quick word, if you want to support this channel, then buy a dirty man safe with the code endgame10 at checkout link in the description below for 10% off. You’ll support this channel and support your friends and family in the endgame by having real money to survive the next banking crisis, which will lead to a hyperinflationary round of printing. We’re going to go with these slides again. As you can see, I was an art major in college and I learned the art of asceticism. One art, please. What a clever impersonation of a stupid poor person.

We have here the latest update on the reverse repos, 135.858 billion left. They are gently sloping down and hopefully they’ll be out this month. But whether they’re at this month or next month, they are still heading downward and when they go down, we’re going to see what happens and we’re going to use the recent past as a guide before we get to the effect of reverse repos on the bank reserves level. You can see here these are the level of bank reserves and each time that there’s a crisis, I pointed out with my little arrows here, crisis, crisis, crisis and the labels that say crisis mean crisis.

So we had the 2008 crisis over here. As you can see here, I doubled the horizontal black line with the second line of the arrow. That’s just me saving space because I’m an ascetic. And we have here the crisis of the repocalypse of September 2019 when the Fed had to start expanding its balance sheet again. QT happened over here and you’ll see that in the next chart. Crisis level over here. And here was the regional bank bailout crisis when the bank system nearly collapsed in March 2023. That’s at the three trillion dollar mark here. And we can expect that the similar level of three trillion dollars is around where the crisis level is now.

And once the RPs run out, there will be no more money supporting bank reserves. And we’ll see that in the next chart here. This is the chart from 2011, actually, to 2020. And you can see here the interplay between, I call this the bank reserves, our QT interplay of happy fun love. It’s happy. It’s fun. It’s happy fun ball. I don’t know. Happy fun love sounds good to me. So we have bank reserves here in the whatever color this is. I really don’t know. Is it green, orange? Is this one red? I know this one’s blue, but they look different.

I just don’t know what to call them. So this one is QE3, right? This is the asset. So this is basically the Fed’s balance sheet. You can see it goes up in QE3 of 2013. And as QE3 rises, you can see the bank reserves in this other color that isn’t blue or red, it rises as well. It goes up and up and up. And then as QE3 stops, you can see that the Fed’s balance sheet is steady over here. The reverse repos suddenly show up around the middle of QE3, and they start to drain reserves from the system.

And as reverse repos continue, you can see it gently sloping down of reserves. Then bank reserves stay steady from about 2016 to about 2018. And then all of a sudden, QT begins. They start shrinking the balance sheet. And what happens to reserves? They fall with QT at around the time when QT begins. And what happens to RPs? They basically fall to zero at the beginning of the QT process in 2018. And then we have the apocalypse going on September 2019. So as RPs had emptied out at the beginning of QT last time, you can see bank reserves fall.

Now we’re going to zoom in on that and see how much they actually fell. I did the calculation on the interactive chart at the Fed website. And the numbers came out from the beginning of QT, which is over here, to the apocalypse, which is over here. When this line stops going down, that’s their apocalypse. And that’s when they start expanding the balance sheet again. $597 billion in quantitative tightening. That’s the amount of money that the Fed retired on its balance sheet, no longer existing. And in that time, $817 billion of reserves went out of existence. So you have a ratio of about 1.37 reserve dollars to $1 in QT.

So therefore, given that we have about $3.2 trillion in reserves, and RPs, reverse repos, are about to run out. Let it be soon. These things are really annoying me. Let’s go already. Once that happens, we have about a 1.36 to 1 ratio of quantitative tightening to reserve shrinkage. Shrinkage. Significant shrinkage. But I do expect, or I hope, that once we pass the $3 trillion reserve threshold, we will encounter a apocalypse, some problem in the repo market. And from there, the Fed is going to have to intervene very bigly. And remember, a noble banking crisis embiggens the smallest currency supply.

A noble spirit embiggens the smallest man. This is Ralph, your VN Game Investor, and I’ll see you guys for… I don’t know. [tr:trw].

See more of Rafi Farber on their Public Channel and the MPN Rafi Farber channel.