Today's Scoop:

Hey friends, I said there would be no scoops on Monday or Tuesday this week, but with so much happening, I couldn't leave you hanging. Here's a brief note, and we'll return to the regular schedule on Wednesday, the 15th.🚨

If you have any specific questions, don't hesitate to reply to any email directly!

Follow my updates from a two-day event at the NASDAQ on our Instagram.

- Augustus, Founder & CEO

Now, here's what you need to know today...

1. Three banks collapsed in less than a week.

2. The Feds stepped in to make sure no customers lose their deposits.

3. Tuesday's inflation report will affect everything.

Three US banks have collapsed in less than a week. Two were crypto-focused, and the one everyone's talking about is Silicon Valley Bank (SVB). It was America's 16th-largest bank, and most of its clients were startups and tech companies. This has been the biggest financial collapse since the 2008 crisis and one of the biggest ever! Check out this video for more background on what happened and how it affects you.

Last night, the Feds stepped in to stabilize everything. They won't call it a bailout, but they're essentially extending credit to the institutions to allow all depositors to withdraw their funds. This is a big move because regulators have recognized that these bank failures are significant enough that they could create a domino effect of other problems throughout the system.

Why is the market up today if banks are collapsing? (I am writing this two hours into the trading day.) This move has given investors some comfort against fears of contagion. More importantly, these events have demonstrated the stress of higher interest rates on the financial system. Policymakers have raised interest rates faster than ever over the past year, trying to slow economic activity and control inflation. Right when investors were worried that the economy was still overheating and the Federal Reserve would ramp up interest rates even more, this situation presented a warning sign against more rate hikes. Higher rates are bad for stocks.

Watch for the inflation report tomorrow. That final key piece of information will determine the Federal Reserve's next policy move. [🤓] If inflation continues to slow, that's good for stocks. If inflation reaccelerated, policymakers would have to decide whether bringing inflation down is worth the risk of more stress on banks.

The Federal Reserve

The Federal Reserve, aka the Central Bank, aka The Fed, is in charge of our whole money system. When the economy struggles, the Fed lowers baseline interest rates to make it cheaper for consumers and businesses to borrow and spend. The Fed also pumps more money into the system by buying bonds with new dollars that it essentially speaks into existence. The additional cash keeps the pipes flowing as the borrowing and spending heat up, stimulating economic activity.

Once the economy's strong enough to stand on its own, the Fed starts to raise interest rates and pull back some of that money to ensure the economy doesn't overheat. Inflation is the Fed's heat gauge, and the gauge is reading HOT.

So everyone's watching whether the Fed can dial up the economic restrictions quickly enough to slow inflation and cool the economy but not so quickly that it completely freezes growth or stresses the financial system.

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