Looking back and ahead, there’s more than meets the eye
By Sherry Bunting, Farmshine March 31, 2023
The Federal Reserve policy shift to raise interest rates and restrict the money supply after more than a decade of ultra-low rates and two years of pumping money into the economy opening a Pandora’s box of unrealized losses and liquidity problems in areas of the banking system as consumers and businesses rifle through savings in the face of record inflation, and now rising interest rates.
Ongoing global banking stress, central bank interest rate hikes, tightening credit conditions, and continued inflation are affecting both the U.S. and Europe against the backdrop of two important geopolitical developments in late March.
First, the UN Secretary General accelerated ‘net-zero’ climate commitments for the U.S. and EU to 2040 instead of 2050, while China and India have until 2060 and 2070. Second, leaders of authoritarian regimes in China and Russia made a pact to “shape the new world era by cooperating on a range of economic and business areas.”
At the same time, the second largest bank failure in U.S. history — then backstopped by the federal government and run by federal regulators — re-opened as Silicon Valley Bridge Bank. Within days, it had regained its status as the darling of the tech-elite. Venture capital startups came back to it “in droves,” according to several business news reports.
Looking back two years in my reporter’s notebook, I found harbingers of these current events from the World Economic Forum’s 2021 meeting in Davos, and the global transformation — the Great Reset — that underlies it.
Let’s review, and look ahead:
At the leading edge of the ‘banking crisis’ that emerged in March 2023 was the Silicon Valley Bank (SVB) collapse and subsequent Biden backstop for all of its deposits over and above FDIC-insured levels.
Known as the venture capital bank for the tech sector, SVB doubled its deposits from $115 billion to $225 billion from 2021 to 2022, according to a lengthy Feb. 2023 report in Forbes that eerily discussed the ramp up in ESG-investing in 2021 facing off with 20 states moving to restrict it in 2022.
In 2021, there were huge venture capital investments, and high-profile public offerings for climate-focused startups such as those in SVB’s ‘Clean Tech’ division for alternative energy, food, and biotech.
As interest rates rose in 2022, venture capital investment slowed, and these startups started eating into their deposits backed by long-term securities, leaving insufficient upfront liquidity. Many of the food tech startups banked by SVB are pre-market, others are plant-based imitations with lackluster sales and bottom line losses.
Food Dive reporters described the scene at a food tech expo when a tweet about SVB broke the news. Startup owners went into a bit of a panic, transferring, or attempting to transfer, funds from their phone apps.
They say the Biden backstop makes these depositors whole, but not the investors. That is misleading. The deposits consist mostly of investor funds now being used for payroll and cost of business.
Why was SVB deemed ‘systemic’ enough to elicit a rapid and complete federal backstop? It’s the epitome of ESG / climate investment funding models.
In fact, one of the executive orders signed by President Biden in Jan. 2021 repealed the Trump rule that had previously restricted retirement fund managers from using ESG (Environmental, Social Governance) factors. Then, just this week on Monday (March 20), Biden vetoed legislation passed by Congress to undo his Jan. 2021 executive order, seeking to restore those restrictions.
It’s worth noting that the climate agenda focus on ESG-investing-on-steroids over the past two years may have distracted the financial sector from minding the books.
Is it a ‘bubble’? Is it the tip of the iceberg? Will there be fallout for agriculture?
The good news, wrote American Farm Bureau chief economist Roger Cryan on March 17 is that regional banks are in a strong position, and farmers – mostly – have strong balance sheets coming out of 2022.
An article about the SVB and Signature Bank failures was shared with farmers during a Lancaster County, Pa. meeting Thursday (March 16), noting that, “As of now, these issues don’t appear to be systemic.”
The author, Matthew Brennan, senior investment strategist and portfolio advisor for Fulton Bank, wrote: “These aren’t questions of solvency, these are questions of liquidity. While we expect the measures put in place by the government should go a long way towards providing stability to a sector that was beleaguered last week, volatility is expected to remain high.”
Meanwhile, the entire financial sector braced for the Federal Reserve meeting March 22, anticipating a 0.25% rise in interest rates as the consumer price index announced March 14 for February showed inflation was 6% higher than a year ago with core inflation on a month-to-month basis the highest of the past four months.
So, how did we get here, and is there more than meets the eye?
As mentioned, venture capital investment for climate-tech startups in energy, food and cellular ag ramped up in 2021 amid low interest rates, expansion of the monetary supply, and government incentives.
Inflation, which followed, actually helps these alternative sectors by making their higher-cost products align better with the cost of conventional fossil energy and traditional ‘real’ foods in the meat and dairy sectors that experienced the highest inflationary surges.
As the Biden Administration and the Federal Reserve were both late to react to rising inflation, all of this money pumped into the economy created an ESG investment runway. But as startups now eat into those deposited investments, while consumers go through prior government funds and are now borrowing to keep up with inflation, reality hits home.
Analysis by experts across the financial spectrum vary from blaming ‘woke’ ESG-investing, to calling the bank failures ‘unique’ and not likely to spread, to describing these failures as ‘tips of an iceberg’, to suggesting a designed consolidation to globalized central banking.
A Stanford University report on March 20, pegs the banking sector’s ‘unrealized losses’ as high as a collective $2.2 trillion. Therefore, as Fed monetary policy has tightened, the ‘paper’ losses become real losses if depositors use or move even 10 to 20% of their funds.
Parallel to these financial unravelings, a United Nations report March 20 from the Intergovernmental Panel on Climate Change (IPCC) shortened the climate ‘crisis’ timetable in dramatic style.
Calling the report “a guide for defusing the climate time-bomb,” the UN Secretary-General promptly announced for September’s Climate Summit an “acceleration agenda for first-movers”, specifically calling upon the U.S. and EU to shave 10 years off their commitments to reach net-zero by 2040 instead of 2050, while China and India meet their commitments by 2060 and 2070.
That’s a 20- to 30- year difference, and China is already positioned to be a prime supplier for digital transformation of energy and food for us all to become dependent upon. Recent agreements made by China and Iran and by China and Russia this week make these stark climate-commitment differences even more geopolitically important.
China already has significant investments in U.S. food and agriculture, including food and energy tech startups that were just bailed-out with U.S. funds in the collapsed SVB.
Beyond EV batteries, wind turbines and solar panels, largely made in China, China is investing heavily in lab-created protein alternatives and is already the world’s largest concentrator of soy, pea, oat, and other proteins that are the mainstay of plant-based imitation meat and dairy.
China and Russia have both invested in infrastructure, along with Singapore, to ramp up cellular protein via biotech, DNA-altered fermentation products as dairy analogs and gene-edited stem-cells with no growth endpoint as cell-cultured meat analogs.
To be clear, a recent Bloomberg business report confirmed alternative cellular protein to be based on ‘immortal cells’ in the same way as cancer cells have no growth endpoint, but somehow scientists reassure us — without proof — that this will not harm us when we are expected to dutifully consume climate-saving cancer-like blobs of immortal cells, made in China. (No, I’m not a conspiracy theorist, but I am a realist. It’s looking more and more like China is attempting to call the shots for the American consumer. I’m not the only one pointing out the need to return to ‘reality.’)
In a CNBC interview over the weekend, one business analyst said what is needed in the face of disruptor-tech-gone-wild is investment in real companies making real products for real people.” (Sound familiar?)
True to form, however, what sector of the stock market is rallying this week? The tech sector and artificial intelligence. Which sectors are seeing their values fall? The staples, the real essentials. This is counterintuitive unless we recall that it’s a page directly out of the World Economic Forum (WEF) playbook that has been written in Davos for decades.
Let’s go back to the WEF-Davos meeting two years ago and have a look…
It was January 2021 when the World Economic Forum (WEF) launched its annual meeting ‘virtually’ in Davos with a transformation agenda centered on the post-Covid ‘reset.’ During that week, two things caught my eye and ears.
First, China’s president Xi Jinping was given the status of opening the Davos 2021 ‘reset,’ talking about four global governance ‘tasks’: digital, health, climate and economic. He spoke of China’s ‘superior’ role in global digital governance and global health governance. Then he stated: “China will get more engaged in global economic governance.”
Xi had the audacity to scold any nation or region that may try to reverse globalization or to decouple supply chains. He described such moves as “arrogant.”
Never mind the fact that Covid supply chain disruptions made the world keenly aware of the dangers in over-reliance on made-in-China medical essentials or centralized, globalized food systems.
Also in my notes are comments from business news analysts, admitting Environmental, Social, Governance benchmarks for investing (ESGs) and the UN Sustainable Development Goals (SDGs) are “not well-defined” and could be “a bubble”. Some even warned ESG venture-capital in tech startups (food and energy) “will fail.”
Nevertheless, more than 60 corporations covering tech, food, pharma, energy, finance, and accounting signed the ESG agreement in Jan. 2021 to outline what is measurable and pledging to “implement and enforce ESG and SDG at the supply chain and stakeholder level to drive consumers to a ‘net-zero’ consumption level.”
Think of this as the high-speed high-occupancy lane for pass-holders on the beltway — bypassing the methodical traffic of regular folk into and out of, well, Washington D.C., for example. Move all the climate-tech startups into that bypass lane, infuse them with trillions of dollars in capital — while the steady-eddy slow-going lanes are the shunned real asset essentials.
Also in my Jan. 2021 notes, are recorded comments by BlackRock and Bank of America CEOs who led the 60-plus global corporations in signing that ESG agreement in Davos. They talked about “following and auditing” the ESG and UN Net Zero SDG “decarbonization” investments.
A week later, President Biden took office and signed a stack of executive orders, followed by congressional spending packages that, together, created a cascade of ‘green new deals’ per the WEF ESG agreement signed in Davos.
Reading the next lines in my notes from the 2021 WEF-Davos, I had to catch my breath. In quotes are the words of Bank of America CEO Moynihan at the time. He said: “It will take $6 trillion per year investment for world consumption to be Net Zero by 2050. Governments and charities cannot do it without the corporate finance sector shepherding loans and investment funds in that direction with carbon performance measurement.”
Chilling to think that two years later, we could now be witnessing a cascade of government, corporate and monetary policies aimed at essentially achieving this investment infusion like a snowball rolling downhill.
We could be seeing the first fallout, the first sign of the ESG ‘bubble’ bursting, but right on cue, these huge investments over the past two years are now being backstopped by policies to keep the infusion of capital flowing in that special bypass lane on the climate beltway.
The structure is being set for capital to flow to the now “accelerated climate agenda”, the carbon-control agenda, whether by hook or by crook, by corporation or by government — one way or the other the push to accelerate this agenda is already occurring.
Did we just see Act 1? Did we just witness a Trojan Horse carrying tech venture capital out of Silicon Valley Bank, et. al., while the government performs a backstop flow of capital to refill it?
Will we see more federal spending packages, and additional tools unveiled to meet the combined global government-corporation-charity investments of $6 trillion that the BlackRock and Bank of America CEOs said will be necessary annually on a global scale to “bring consumption to ‘net zero’ by 2050?”
One of the now-infamous quotes to come out of that 2021 World Economic Forum (WEF) meeting held virtually in Davos in January 2021 was Klaus Schwab predicting: “You will own nothing, and you be happy.” In 2022, the same crew talked of tracking what we eat, where we go, and how we get there.
What the Davos crowd may not have factored-into the equation is the skepticism of freedom-loving American consumers who are not keen to be globally digitized via artificial intelligence that could control the very essence of life – carbon — by consolidating the flow of capital and information to an accelerated decarbonization of essential food, health and energy.
The Davos crowd and cohort China may not realize freedom-loving Americans will resist this bitter pill.
They certainly did not foresee American legislators and Governors standing up against out-of-control ESG-investing.
And, they didn’t foresee the victory for Dutch farmers and their pro-farmer political party that shocked the world in last week’s elections.
(By the way, Dutch dairy farmer Ad Baltus, whom I interviewed in the 2022 Farmshine series about the farmers’ plight and protests in The Netherlands is now among the six people helping to form Holland’s new national administration and working on the coalition parliament there. Look for a follow up interview with him in the future.)