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America’s banks are missing hundreds of billions of dollars

economist.com

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Re: America’s banks are missing hundreds of billions of dollars

#101

Post by jonkho »

1vuio0pswjnm7 wrote: post #78
csomar wrote: post #53

Earlier quoted context omitted.

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

"The upside of MMT and 0% interest rates is that it allows a whole set of businesses to become viable. Businesses with a 1% yield are not viable with a high interest rate as it makes more sense to just buy bonds. People who can generate yield will thrive, since the expected market yield is zero. It's still a question whether this will benefit mainstream; or a bunch of tech companies that have a monopoly of tech and i…

That would have to be a 1% real yield on top on the massive XX% inflation the free money would cause! So XX + 1% would be the nominal yield to make it a viable business.

Re: America’s banks are missing hundreds of billions of dollars

#102

Post by somenameforme »

albertopv wrote: post #60
nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

2. is wrong, we had years of central banks money printing without inflation, recovery from Covid19 and the war are the reasons of this high inflation. Actually Fed real error has been raising rates to counter an inflation not caused by monetary policies. SVB put all their investments in one bucket and it has been a very poor decision, really a rookie one

Here [1] is a graph of inflation. We've had increasingly accelerating inflation, especially since 1971 [2]. That's the end of Bretton Woods, or the date that the USD became completely unbacked by anything - enabling the freedom to arbitrarily "print" money.

In more recent times, even more rapidly accelerating inflation began in July 2020, shortly following the $2.2 trillion CARES act from late March 2020. The "transitory inflation" narrative would begin in early 2021. The war in Ukraine began in February 2022, and doesn't even register as a visible data point in terms of rate change.

[1] - https://fred.stlouisfed.org/series/CPIAUCSL

[2] - https://wtfhappenedin1971.com/

Re: America’s banks are missing hundreds of billions of dollars

#103

Post by kgwgk »

jkhdigital wrote: post #49
7e wrote: post #40

Earlier quoted context omitted.

1. Why is cash parked at the Fed not an option?

The article mentions the real core of the issue, but doesn’t make it clear that it is in fact the core: SLR (a banking regulation). SLR effectively requires banks to raise capital along with deposits . So if you flood the banking system with cash through fiscal policy, they can’t just accept all those deposits and leave them parked in their Fed reserve account. If they could, then the Fed wouldn’t need reverse repo—i…

> SLR effectively requires banks to raise capital along with deposits.

How is that relevant for the choice between buying treasuries and keeping the reserves?

> So if you flood the banking system with cash through fiscal policy, they can’t just accept all those deposits and leave them parked in their Fed reserve account.

Isn’t it just as possible as “just accept all those deposits and buy treasuries with the money” - if not more?

Re: America’s banks are missing hundreds of billions of dollars

#104

Post by mnd999 »

csomar wrote: post #53
nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

This is a wrong characterization and makes it look like it's the Fed fault all along. Government bonds still have risks (ie: The government not paying) but more importantly, they are tightly linked to the main interest rate. Their prices can fluctuate significantly and do all the time. Bankers know that. That's kind of the first or second lesson they'd teach you at a basic financial course. Everything is priced in te…

Interest rate swaps exist to manage this risk no?

Re: America’s banks are missing hundreds of billions of dollars

#105

Post by kgwgk »

pash wrote: post #70
dr_dshiv wrote: post #54

Earlier quoted context omitted.

What’s the hidden risk of money markets?

Money-market accounts are not covered by government deposit insurance. But money-market funds make a return for themselves by investing their customers’ cash in risky assets, similarly to a bank. If there’s a run on your money-market fund akin to the bank runs we’ve recently seen, the FDIC isn’t going to save you. (Kinda. The other big distinction between a bank and a money-market fund is that the latter don’t indulg…

> the Treasury stepped in to make investors whole.

Not really:

https://en.wikipedia.org/wiki/Reserve_Primary_Fund#Failure

Re: America’s banks are missing hundreds of billions of dollars

#106

Post by aaa_aaa »

albertopv wrote: post #91
aaa_aaa wrote: post #76

Earlier quoted context omitted.

This is false. Just look at amount of money pumped, it is easy to see the skyrocketing line in graphs. It is not the only but the main reason of inflation.

Nope https://en.wikipedia.org/wiki/2021%E2%80%932023_inflation_su...

Nope. Now look at all those countries money supply charts.

Re: America’s banks are missing hundreds of billions of dollars

#107

Post by cudgy »

wahern wrote: post #98
7e wrote: post #40

Earlier quoted context omitted.

1. Why is cash parked at the Fed not an option?

The U.S. is a capitalist system. In a capitalist system, the function of a bank is to convert savings to investments, without the government deciding which investments to make. That function must be served in both good times and , especially, bad times. Providing a risk-free place to park your money disincentives investments, especially at those times when capitalists are supposed to earn their keep--discovering ways…

> The U.S. is a capitalist system.

Really? Doesn’t look like one when it comes to large institutions or large banks. They scream “Capitalism! … for everyone” during the boom times and “Socialism! … for corporations only” when they screw up or times are tough.

Re: America’s banks are missing hundreds of billions of dollars

#109

Post by skellington »

somenameforme wrote: post #87
nugget wrote: post #61

Earlier quoted context omitted.

Watch the exchange between Sen Lankford and Sec Yellen yourself: https://www.youtube.com/watch?v=Bcvl104tyRY Yellen says unsecured depositors at TBTF banks will always be bailed out, but those at smaller banks are on their own. It's one of the most incredible moments I've witnessed. I'm not sure if there's some hidden agenda being pursued, or if Yellen is just so far removed from the real world that she doesn't under…

I never understand things like this. She looks like a deer caught in the headlights when he asks her the most predictable and basic question about her decisions. How can you be in such a position, make such decisions, and be unable to offer a compelling answer to the most basic questions? Even if it some sort of a hidden agenda and [further] centralizing banking is just seen as a convenient stepping stone towards CBD…

[flagged]

Re: America’s banks are missing hundreds of billions of dollars

#110

Post by brewdad »

cudgy wrote: post #100
nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

Two words … bond ladder. Stagger maturities to meet reasonably expected distributions and interest rate trends. Basic financial management 101.

Until your depositors want 25% of all the deposits your bank holds in less than 24 hours.

For all of the missteps SVB made, there isn’t a bank on the planet that can survive that.

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