So many are going to cash, exchanging bond funds for MM settlement funds, buying ST Treasuries and creating TBill ladders, recommended in various financial forums, so in one sense citizen taxpayers are either contributing to the liquidity problem or funding the rescue. Repos are now a percentage in MM funds which is new (eg VMFXX)
The Federal Reserve eventually is going to be forced to contend with the unavoidable reality that pushing up interest rates destroys the market value of existing low-yield securities.
What doomed SVB was the portfolio of securities they held "for sale", meaning they were planning on selling the assets at some point, and couldn't without taking a loss because the yields were too low.
Any financial institution holding its liquid reserves in low-yield Treasuries has effectively lost part of their liquid reserves--permanently.
LOL, we should all know how that will work/play out...with the FDIC only having about 1% in total liquidity, to cover their deposit liabilities. ONE bank failure like SVB can suck up the liquidity they actually have. So, I predict them bailing out the silicon valley elites and having nothing left for the rest of the banks. Just another corrupt bail out and money grab by the financial cabal, with the forthcoming litany of excuses for the decimated middle class. The rest of us get digital id's, ration cards, CBDC's, programmable money and a new-level of technocratic slavery.
CBDCs would not resolve a banking/debt crisis. The foundation for introducing a new currency is hyperinflation (think Weimar Republic levels, which we are nowhere near). Neither the 2007-2008 GFC nor this current mess leads towards the introduction of a new currency, digital or otherwise.
The typical person may not understand the reasons for crisis, but they notice government tends to lurch from crisis to crisis. Does government then deserve more of their money?
Fractional reserve banking is an intrinsically dishonest enterprise, and we made it much worse in March of 2009, when we effectively legalized accounting fraud by the banks.
Yes that's the problem, many of these practices aren't illegal, so CEOs and corporations can't really be held accountable to a rigorous standard. Thanks for this wonderful article Peter.
Like Brad Pitt said in The Big Short: save seeds.
Do you have any advice on how best to protect our $?
So many are going to cash, exchanging bond funds for MM settlement funds, buying ST Treasuries and creating TBill ladders, recommended in various financial forums, so in one sense citizen taxpayers are either contributing to the liquidity problem or funding the rescue. Repos are now a percentage in MM funds which is new (eg VMFXX)
The Federal Reserve eventually is going to be forced to contend with the unavoidable reality that pushing up interest rates destroys the market value of existing low-yield securities.
What doomed SVB was the portfolio of securities they held "for sale", meaning they were planning on selling the assets at some point, and couldn't without taking a loss because the yields were too low.
Any financial institution holding its liquid reserves in low-yield Treasuries has effectively lost part of their liquid reserves--permanently.
Aha, the last sentence helped "the penny drop" for me, thank you.
Seems to me they're just bailing out the big money players and silicon valley elites...and will not do the same for the rest of the commoners.
In theory, the "commoners" money is not at risk, as it presumably is insured by the FDIC.
How well that works out in reality we shall soon see.
LOL, we should all know how that will work/play out...with the FDIC only having about 1% in total liquidity, to cover their deposit liabilities. ONE bank failure like SVB can suck up the liquidity they actually have. So, I predict them bailing out the silicon valley elites and having nothing left for the rest of the banks. Just another corrupt bail out and money grab by the financial cabal, with the forthcoming litany of excuses for the decimated middle class. The rest of us get digital id's, ration cards, CBDC's, programmable money and a new-level of technocratic slavery.
CBDCs would not resolve a banking/debt crisis. The foundation for introducing a new currency is hyperinflation (think Weimar Republic levels, which we are nowhere near). Neither the 2007-2008 GFC nor this current mess leads towards the introduction of a new currency, digital or otherwise.
It seems to me that you don't clearly see what else is coming.
The typical person may not understand the reasons for crisis, but they notice government tends to lurch from crisis to crisis. Does government then deserve more of their money?
What government has ever deserved even a penny of a citizen's money?
Fractional reserve banking is an intrinsically dishonest enterprise, and we made it much worse in March of 2009, when we effectively legalized accounting fraud by the banks.
The one thing that Congress has never thought to do (and won't think to do now) is re-institute Glass-Steagall.
If you're going to regulate banking, keeping deposits away from the investment bank casino operations is a better regulation than most.
Yes that's the problem, many of these practices aren't illegal, so CEOs and corporations can't really be held accountable to a rigorous standard. Thanks for this wonderful article Peter.