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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?

#71

Post by mattbrewsbytes »

TearsInTheRain wrote: post #57
qaq wrote: post #42

Earlier quoted context omitted.

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

I think the repeating pattern is the banks end up over leveraging based on value of things like MBS or this one is maybe interest rates because money has been free to them for so long (holding lots of worthless bonds I think). In the end, none of it is their money they are playing with so they have a high risk tolerance and a history of getting bailed out, bought out and at a minimum getting bonuses paid out. And then they lobby for deregulation or self-policing.

I think having a shot at solving problems involves less lobbying and more criminal prosecution and loss of operating licenses.

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

#73

Post by adamredwoods »

UncleOxidant wrote: post #7

No, I remember 2007-2008 pretty clearly. That felt much more precarious. Right now it seems pretty clear that if your bank fails you're going to get your money. That's not to say that this isn't the start of some kind of a financial crisis. But it could be very different from 2008. In this case I think the risk is more towards high inflation - for example, if enough banks were to fail (hypothetically - I doubt this w…

2008 crushed the Icelandic bank system. I don't think any one is in that kind of trouble right now.

https://en.wikipedia.org/wiki/2008%E2%80%932011_Icelandic_fi...

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

#74

Post by mattbrewsbytes »

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…

Guarantee of everything tells the banks they can do whatever they want with everyone else’s money to possibly make more money with zero repercussions.

If people could get bailed out of their credit card debt, how reckless would peoples spending be?

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

#75

Post by pas »

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.

people rarely invest into new ventures, raise wages, or hire more employees during a bank run. the FDIC stepping in doesn't negate that (it probably prevented a serious crash that could have lead to even more supply chain fluctuations, which itself causes a significant portion of the inflation.)

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

#76

Post by rrrrrrrrrrrryan »

This one has some similarities to '07 (banks starting to fail, overvalued real estate bubble, ultra low unemployment), but it feels more like the dotcom bust to me.

I feel like higher interest rates are going to be here for a while, and a lot of tech companies are absolutely blowing through cash, about to be caught with their pants down. Anything that isn't profitable will die.

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

#77

Post by pas »

stephen_g wrote: post #46
jurassic wrote: post #18

It’s not a great situation. What we’re seeing is that the fed can’t raise rates to fight inflation without further eroding the balance sheet of big institutions holding large amounts of low yield bonds. So they’re kinda stuck. Hello stagflation.

Raising rates never really reduced inflation anyway… In the 70s Volcker shock, when the oil crisis eased the inflation came down of its own accord, and would have with or without the rate hikes (and the money supply was expanding when the inflation started coming down, which was the exact opposite of their theory - they were trying to reduce the money supply with their rate rises, which they thought would reduce infl…

why do you think it's not effective just because it's not perfect?

the US central bank has a dual mandate, price stability and close to full employment. having just one it could be much more aggressive.

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

#78

Post by alxmng »

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.

Yes. It’s counter-intuitive but both lowering and raising interest rates are inflationary. A rise in rates means more bond coupon and more bonds sold (new money), and lowering rates results in more bank lending (new money). A rise in rates is actually more inflationary, since bank lending won’t necessarily increase with lowering rates, but a rise in rates necessarily means more bonds and bond coupon from banks purchasing bonds.

The system is designed (fractional banking + government bonds) such that the money supply must continue to increase.

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

#79

Post by basch »

peyton wrote: post #28
UncleOxidant wrote: post #7

No, I remember 2007-2008 pretty clearly. That felt much more precarious. Right now it seems pretty clear that if your bank fails you're going to get your money. That's not to say that this isn't the start of some kind of a financial crisis. But it could be very different from 2008. In this case I think the risk is more towards high inflation - for example, if enough banks were to fail (hypothetically - I doubt this w…

We have a gigantic housing bubble and banks are holding the bag.

Who here has a mortgage that eventually got purchased by Fannie or Freddie? The lenders underwriting home loans hold them a grand total of a couple days before they get passed along.

The crisis this time is going to be to bank shareholders. Probably some pensions and retirement funds. And then consolidation, and fewer choices for the consumer. Eventually we will all bank at MorganChaseGoldmanWitterWellsSchwabFargoHamiltonMellonMerrillLynchPierceFennerReynoldsSmithSachs.

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

#80

Post by runnerup »

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.

> I don't understand how residential housing isn't a big bubble.

It’s not inherently a bubble because it’s driven by demand far outstripping supply. It may prove to be bubble-like if:

A) Some significant % of homeowners see salaries reduced enough they can’t keep up on payments.

B) We suddenly start building massive amounts of additional housing units so a larger % of the population can own/rent a home and the price drops to match the lowest income that still outcompetes the rest of the non-homeowners / non-renters / uncomfortably sharing renters.

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