Probability That US Banks Will Restrict Cash Withdrawals Is 'Rising Like Mercury,' Says Macro Guru

Last week, macro guru and hedge fund manager Hugh Hendry shared his views on the U.S. banking system.

On Stansberry Research's "The Daniela Cambone Show," Hendry said that the Federal Reserve's monetary policy has increased the probability that banking customers could one day face restrictions on the amount of cash they can withdraw.

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

Hendry then added, “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.”

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Hendry said that the country's banking industry will likely witness a further deposit flight since customers can now easily pull out their funds with the press of a button.

Speaking about the Fed’s interest rate hikes, he said, “[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 uncompetitive rates and now the tyranny that money can 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,” he said. 

“So what’s the Fed doing? It’s encouraging more and more and more money to leave banks,” Hendry added. 

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