Silicon Valley Bank and FTX Fail. Inflation is Transitory.

[Catonahottinroof]

That’s a drop in the bucket for a bank with around $250B in deposits/assets.

SVB gave over $73MM to BLM......

[Catonahottinroof]

Credit Suisse gets a backstop loan to keep it from failing from the Swiss Central Bank.

https://www.foxbusiness.com/markets/...-national-bank

[VirginiaCat]

Ok I found some details on SVB...

It was not a sterotypical bank, even for a large one. Avg. Bank has 80% of Depository accounts with balances under the $250K FDIC limit per individual. SVB was backward. Over 80% of the Depositors had well over the $250K minimum. Silicon Valley Focus Venture Capitalists and Invesment Manager heavy.

[CitizenBBN]

Ok I found some details on SVB...

It was not a sterotypical bank, even for a large one. Avg. Bank has 80% of Depository accounts with balances under the $250K FDIC limit per individual. SVB was backward. Over 80% of the Depositors had well over the $250K minimum. Silicon Valley Focus Venture Capitalists and Invesment Manager heavy.

INteresting. I knew they had numerous huge depositors, mostly venture capital and tech money. Huge amounts. Didn't know it was that upside down.

That was part of their liquidity problem. They didn't have people pulling out $10K or $100K, but a hundred million at a time. Once that started their legal liquidity ratios obviously plummeted.

[DanISSELisdaman]

The only way rate hikes solves inflation is by tanking your economy. The cure is as bad as the disease.

The only real solution is to stop the levels of spending, open up oil and gas as fast as you can, stop paying people to not work, and get people back in jobs.

The inflation is due primarily to economic inputs, specifically oil/gas prices and labor price pressure. When you have to pay more for gas and heat and transport and then the labor rates soar b/c 7 million able bodied men in this country, just the legal ones, are sitting on their butts, you get this huge price pressure that people in Washington call inflation.

But it's all b/c of the labor shortage and the oil/gas constriction. Those are the two most basic inputs into the entire economy, and our government brilliantly strangled the flow of both at the same time.

Raising rates has the effect of reducing demand for both labor and fuels but only b/c you are constricting the economy by constricting investment and disposable consumer spending. You get lower inflation but the price you pay is a recession.

Start drilling for oil in every place including Rick Pitino's hairline, cut out the endless help for people who don't lift a finger to work so they go get a job and this problem goes away as if by magic.

Absolute truth and while they're at it, it might help if they stopped buying everything from China and started putting Americans to work making the products they have been selling us.

[MickintheHam]

From Today’s WSJ:
“They gave ad*vice to ex*ec*u*tives and made per*sonal loans to them, help-ing them splurge on homes and vine-yards. The bankers hosted poker games, cook*ing classes, boat par*ties and mix*ers that brought to*gether en*tre*pre-neurs and in*vestors.

“They were a mix*ture of a real bank that could han*dle trans*ac*tions and lend money, but they also were fun peo*ple to hang out with at par*ties,” said Jonathan Medved, an Is*raeli ven*ture-cap*i*tal in*vestor who worked with SVB for over 30 years.“

Naturallly it is a description of SVB. Any bats on whether they were able to coax Maxine Waters or Janet Yellen to attend those parties. If you bank is throwing parties such as those you certainly want to limit your deposits to $250k.

[Catonahottinroof]

Nothing to see here…..move along…..

https://www.msn.com/en-us/money/comp...ar/ar-AA1aA6tU

[CitizenBBN]

Yep, all is well. Remain calm. Uh huh.

The math is pretty easy. Banks hold a lot of longer term investments including bonds, commercial loans, etc. For years those rates are low so they are locked into a lot of low rate financials. then rates shoot way up. They can't unload their low rate stuff, but they can't attract depositors offering lower rates than you can get for t-bills.

So depositors move money to those other things, their liquidity ratios go to heck and start to violate FDIC minimums, and boom they are in trouble.

Raising rates this much this fast has created a serious liquidity/funding problem for the entire banking system. This is why using interest rates to fight inflation is a last resort sledgehammer solution and should never be used this forcefully.

The reason for inflation is a) 7 million able bodied men who refuse to work b/c the government will allow them to sit on their asses, and b) government policies aimed at choking off the oil and gas industry which is the single most economically impactful input into our entire economy.

So labor rates are skyrocketing and the government decides to skyrocket energy costs at the same time, and we wonder why we have inflation?

The only way raising rates will impact that situation is to slow the economy, i.e. by reducing demand for labor and oil/gas b/c we slow consumer spending and investment. The problem is that it causes hell with things like banking, and of course lowers growth. That's IF you can avoid a full blown recession from it, which is extremely tricky and basically random chance.

Our country is run by people who think they are smart, but don't have the common sense to come in out of the rain.

[bigsky]

Bank failure bingo is a thing.

[MickintheHam]

Nothing to see here…..move along…..

https://www.msn.com/en-us/money/comp...ar/ar-AA1aA6tU

It’s Trump’s fault!

[MickintheHam]

Yep, all is well. Remain calm. Uh huh.

The math is pretty easy. Banks hold a lot of longer term investments including bonds, commercial loans, etc. For years those rates are low so they are locked into a lot of low rate financials. then rates shoot way up. They can't unload their low rate stuff, but they can't attract depositors offering lower rates than you can get for t-bills.

So depositors move money to those other things, their liquidity ratios go to heck and start to violate FDIC minimums, and boom they are in trouble.

Raising rates this much this fast has created a serious liquidity/funding problem for the entire banking system. This is why using interest rates to fight inflation is a last resort sledgehammer solution and should never be used this forcefully.

The reason for inflation is a) 7 million able bodied men who refuse to work b/c the government will allow them to sit on their asses, and b) government policies aimed at choking off the oil and gas industry which is the single most economically impactful input into our entire economy.

So labor rates are skyrocketing and the government decides to skyrocket energy costs at the same time, and we wonder why we have inflation?

The only way raising rates will impact that situation is to slow the economy, i.e. by reducing demand for labor and oil/gas b/c we slow consumer spending and investment. The problem is that it causes hell with things like banking, and of course lowers growth. That's IF you can avoid a full blown recession from it, which is extremely tricky and basically random chance.

Our country is run by people who think they are smart, but don't have the common sense to come in out of the rain.

Well stated. In another knee jerk reaction you will see the Fed end or slow the rate hikes. At the moment everything out of DC is radical.

[dan_bgblue]

but don't have the common sense to come in out of the rain.

Very true as when it rains Jill always carries Joe"s umbrella so he will only have to think about walking.

[dan_bgblue]

I feel sure that sloppy Joe and Yellen are willing to stand in front of live cameras and state that inflation is transitory. I think they have a valid point as inflation has always been transitory. It always lasts as long as it takes to recover from it, and they both neglected to mention that the transition might take a few years not months.