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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

#131

Post by pibechorro »

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…

Central, top down control of the economy by political entities is a recepy for graft and disaster. Its a complex emergent system, you pull one string and changes propagate far and deep in unpredictable ways.

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

#132

Post by hanselot »

puzzlingcaptcha wrote: post #128
mo_42 wrote: post #89

Earlier quoted context omitted.

> 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. Printing money doesn’t cause inflation necessarily. Your thinking is based on Monetarism, which has been debunked a while ago. In essence, it’s not about the amount of money that is created. It's about the amount of goods we try to consume in relation to the amount of goods produced.

How do you debunk a theory in a field that doesn't allow for a hypothesis to be tested? Economics is just navel-gazing.

The same way you prebunk things in our modern world.

If the information does not fit the narrative, the information must be fake...

How else will we ensure the safety of our elections and democracy? Don't you know democracy dies in the dark? Don't you know that this is extremely dangerous for our democracy?

Edit: BTW, nothing against what you said, economics seems very similar to the Agile cult to me at this point.

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

#133

Post by groestl »

mrbombastic wrote: post #125
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…

I buy this outline but honest question, was the massive covid stimulus avoidable? I rode a bicycle around NYC during the early days of covid and it was a ghost town, like not a person on the streets in a city of 8 million. On the weekend I took a ride up state for a hike and virtually every business was closed on the way. It seemed inevitable at that point the economic consequences of this were going to be massive an…

> I am wondering what the alternative was?

When an economy stops producing services and goods, somebody is going to need to reduce their consumption of said goods eventually. The question is just, who that is. Another poster above mentioned three ways a government can balance their budget: spending less, raising more, decreasing real value of debt by inflation. Each of those has a target "audience", which suffers the most when pulling that lever.

For inflation (if not combined with compulsory loans), it's the middle class.

Pick your poison.

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

#134

Post by majidazimi »

mrbombastic wrote: post #125
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…

I buy this outline but honest question, was the massive covid stimulus avoidable? I rode a bicycle around NYC during the early days of covid and it was a ghost town, like not a person on the streets in a city of 8 million. On the weekend I took a ride up state for a hike and virtually every business was closed on the way. It seemed inevitable at that point the economic consequences of this were going to be massive an…

Peasants have unemployment insurance. If government is supposed to pay something on top of it, why do we even have unemployment benefits to begin with?

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

#135

Post by petrocrat »

gen220 wrote: post #38
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…

Does the government require banks to buy long-term treasuries? [1] Or did banks choose to buy long-term treasury bills, chasing the highest paper returns (i.e. discounting the risk of potential rising interest rates in the future)? It's not a rhetorical question, but a sincere one. [1]: https://en.wikipedia.org/wiki/United_States_Treasury_securit... states that Treasuries are sold in all varieties of duration, from 4…

> Does the government require banks to buy long-term treasuries?

Yes, there are a number of banks that have "Primary Dealer" [1] status which confers to them some benefits, but also makes them legally obligated to make some minimum number of winning bids on government treasury auctions. See the section under "Expectations & Requirements" in the link. Probably the most quantifiable requirement is they have to maintain a minimum of 0.25% market share in winning Treasury bids: "Maintain a share of Treasury market making activity of at least 0.25 percent."

[1]: https://www.newyorkfed.org/markets/primarydealers

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

#136

Post by cudgy »

SkyMarshal wrote: post #123
cudgy wrote: post #100

Earlier quoted context omitted.

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

“reasonably expected” works 99% of the time and then completely implodes 1% of the time. It’s like building a seawall to protect against the next tsunami, and measuring the height of the seawall based on the worst past tsunami. But the worst past tsunami was completely unpredictable prior to it happening, based on all the lesser tsunamis that had come before it. And the future worst tsunami will be by definition wors…

Interest rates being near 0% would create the most easily predictable risk of a calamity from investing in long-term bonds. Where else do interest rates go? Going negative is not likely to happen for long.

Furthermore, the bond yield was inverted for quite some time (indicating a financial tsunami was on the way) making it even more idiotic to be in long-term treasuries.

Also, building walls against physical forces is a terrible analogy for pressing a button to change your bond ladder risk.

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

#137

Post by okeuro49 »

mrbombastic wrote: post #125
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…

I buy this outline but honest question, was the massive covid stimulus avoidable? I rode a bicycle around NYC during the early days of covid and it was a ghost town, like not a person on the streets in a city of 8 million. On the weekend I took a ride up state for a hike and virtually every business was closed on the way. It seemed inevitable at that point the economic consequences of this were going to be massive an…

Put a shield around the most vulnerable and their carers, until there was a vaccine for them and leave everyone else, especially the young, to continue their lives as normal.

Easily said now, however.

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

#138

Post by kavalg »

mo_42 wrote: post #89
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. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. Printing money doesn’t cause inflation necessarily. Your thinking is based on Monetarism, which has been debunked a while ago. In essence, it’s not about the amount of money that is created. It's about the amount of goods we try to consume in relation to the amount of goods produced.

Consumption is driven by the availability of money in the form of income/stimulus or credit.

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

#139

Post by cudgy »

brewdad wrote: post #110
cudgy wrote: post #100

Earlier quoted context omitted.

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.

Did you forget? There is a reason that all depositors would want their money in 24 hours … they realized that the bank was mismanaged and overly exposed to the interest rate risk, and they were only insured for $250k.

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

#140

Post by bryanrasmussen »

hgomersall wrote: post #96
1vuio0pswjnm7 wrote: post #78

Earlier quoted context omitted.

"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…

It's almost like we should be optimising people getting stuff for creating actual value.

A decade ago I had lunch with a friend through kindergarten (our daughters were friends) he was a financial advisor and things were going good for him. I complained, as people who 'make' stuff often do, that finance was unbalancing everything and taking too big a share of profits (not to be annoying to him, just sharing a viewpoint) and he replied that the reason why finance was getting more of the share was because finance was where the innovation was nowadays.

He later got charges for corruption and there was a big investment scandal where some people who had done well with him before ended up loosing money later.

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