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Ask HN: Do you think this is the start of the new financial crisis?

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Re: Ask HN: Do you think this is the start of the new financial crisis?

#51

Post by 01100011 »

No. Contagion is so far limited. Economy is still doing relatively well and inflation is still hot. BTFP is arguably QE-lite and has reversed some QT as far as I can tell. When we crash you won't need to ask if we're crashing. It will be obvious.

China reopening trade has been softer than expected so far, but could still put pressure on commodities. Honestly the market is very confused right now. The bond market is saying recession(see rates dropping/curve steepening). The stock market is saying everything is more or less fine. Gold is up, but maybe because of dollar weakness and lack of faith in the fed to maintain a strong dollar.

The upper half of Americans really haven't felt enough pain yet. They still have plenty of money and are keeping demand high. I fully expect us to crash, but I don't think the bank crisis is more than a waypoint on a journey that started with the first rate hike(and, arguably, 2008).

Re: BTFP. It seems like QE-lite to me because banks were sitting on underwater assets that can now be used as collateral at full PAR value meaning the banks can reanimate these dead investments and put that money to work. I would love to be proven wrong but after going back and forth this is my current understanding.

Also, this is HN. Don't expect a high degree of accuracy on economic predictions here. Economics is hard. Even the fed and all of their PhDs can't get it right.

I think there are a lot of unknown risks out there now. Banks at least have the FDIC, the treasury and the fed(at least if you're big enough to present a systemic risk). There are non-bank lenders and other parties in our grossly complex financial system that are also under stress and could be the catalyst for major reversion soon.

Re: Ask HN: Do you think this is the start of the new financial crisis?

#53

Post by wilsonnb3 »

Might as well shake a magic 8 ball, nobody knows and 99% of the people who end up being right are just lucky.

Certainly not much point in asking on HN. If your question isn’t tech related then you aren’t going to get better answers here than you would on Reddit, Quora, Facebook, or your local pub.

Re: Ask HN: Do you think this is the start of the new financial crisis?

#54

Post by mrzimmerman »

TheAlchemist wrote: post #39

Yes, it feels like it felt just before the 2008 crisis - I was looking into banks financial statements and it was pretty incredible feeling - like wow it can’t be that bad ! Markets didn’t start to tank yet, so you don’t know if you’re crazy or not. Same here - there are bubble signs everywhere (SPACs, startup valuations, joke money called Dogecoin with market cap of 10B$ !), banks are sitting at >600B$ of unrealized…

How was Credit Suisse bailed out? It seems like they were closed and sold, as happens with a bank that fails.

Bailouts, by 2008 standards, would have been giving money to Credit Suisse so they could continue operating and avoid the fallout of their bad choices.

Re: Ask HN: Do you think this is the start of the new financial crisis?

#55

Post by bbunix »

varunjain99 wrote: post #17

I don't think this will be anywhere close to 2008. In many ways, SVB was a perfect storm of many factors. High uninsured deposits. Few, tech-savvy despositors. Bad investment choices w.r.t. interest rates. Makes sense why a run was possible. Other smaller banks - while they may even have similar investment choices - are likely to have many depositors who are under the FDIC limit. So... rationally... they shouldn't ca…

Multiplied by VC/tech driven by a herd mentality at the speed of light.

Re: Ask HN: Do you think this is the start of the new financial crisis?

#56

Post by TheAlchemist »

mrzimmerman wrote: post #54
TheAlchemist wrote: post #39

Yes, it feels like it felt just before the 2008 crisis - I was looking into banks financial statements and it was pretty incredible feeling - like wow it can’t be that bad ! Markets didn’t start to tank yet, so you don’t know if you’re crazy or not. Same here - there are bubble signs everywhere (SPACs, startup valuations, joke money called Dogecoin with market cap of 10B$ !), banks are sitting at >600B$ of unrealized…

How was Credit Suisse bailed out? It seems like they were closed and sold, as happens with a bank that fails. Bailouts, by 2008 standards, would have been giving money to Credit Suisse so they could continue operating and avoid the fallout of their bad choices.

Not the greatest term I agree. But how do we call what happened ?

Shareholders still got some money (~3B$). If it wasn't for government intervention, the bank would be dead very soon.

The thing with banking and finance is that incentives are very bad - you play with other's people money, on thin margins - you're de facto encouraged to take risks. If they pay off, you get big bonuses, if they don't - you just change the bank you work for.

Re: Ask HN: Do you think this is the start of the new financial crisis?

#57

Post by TearsInTheRain »

qaq wrote: post #42
hanoz wrote: post #31

Yes, because interest rates clearly need to go a lot higher to get inflation under control around the world, yet banks are already starting to fail from the stress of it at these low rates, and the central banks' bailout mechanism is itself inflationary. Although, strictly speaking the answer should be no , this is not the start of a new financial crisis, it is a continuation of the 2008 crisis.

This. I think people are not paying enough attention to the fact that the "fix" is negating anti inflation measures.

But also bank failures are disinflationary so is the bailout negating the rate hikes or just negating the new regime of tighter lending standards by banks? I dont think anyone has a solid answer to that question

Re: Ask HN: Do you think this is the start of the new financial crisis?

#58

Post by chrismcb »

hanoz wrote: post #31

Yes, because interest rates clearly need to go a lot higher to get inflation under control around the world, yet banks are already starting to fail from the stress of it at these low rates, and the central banks' bailout mechanism is itself inflationary. Although, strictly speaking the answer should be no , this is not the start of a new financial crisis, it is a continuation of the 2008 crisis.

How is it a continuation of the 2008 crisis?

Re: Ask HN: Do you think this is the start of the new financial crisis?

#59

Post by chrismcb »

mrzimmerman wrote: post #50
hanoz wrote: post #31

Yes, because interest rates clearly need to go a lot higher to get inflation under control around the world, yet banks are already starting to fail from the stress of it at these low rates, and the central banks' bailout mechanism is itself inflationary. Although, strictly speaking the answer should be no , this is not the start of a new financial crisis, it is a continuation of the 2008 crisis.

Honest question, how is (in the case of SVB and Select) making sure depositors don’t lose money while the bank itself is closed and assets sold off, holders of it’s debt (those who lent money to the bank), and those that owned the stock all lose their investments? I understand the 2008 bailouts were actually giving money to the banks that were/are deemed “too big to fail” and allowing them to more or less operate as…

What is the actual question here?

Re: Ask HN: Do you think this is the start of the new financial crisis?

#60

Post by scott00 »

humanrebar wrote: post #19
neural_thing wrote: post #9

The vibes are similar to early 2008. But the financial structure is different. Banks are not overleveraged. Housing is not all adjustable rate. That being said, easy to see weakness. Commercial real estate is a big one. I'm somewhat concerned about non-bank Financials. Some large foreign banks (CS(dead) , DB, HSBC) I'm skeptical of. And a recession feels imminent (felt to me this way even before SVB). To sum up, I do…

I don't understand how residential housing isn't a big bubble. That has to have second order effects yet to be fully felt. I guess maybe it could look like even more inflation? If inflation goes up enough and wages mostly keep up, housing could become relatively reasonably priced again.

Increased housing prices definitely and directly cause inflation. Housing is in the neigborhood of 40% of the CPI basket, and even more of core CPI.
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