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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

#151

Post by censor_me »

mschuster91 wrote: post #145
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. The cause of the inflation is not a classic spiral, it's profiteering especially on the side of fossil fuel producers and in retail. > 5. A bunch of VCs decide they'd like their money back today, not in 20 years. A bank doesn't have it on hand, so it goes under. It's not "a bunch of…

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

#152

Post by alxmng »

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…

100% agreed. Government bonds are free money given to capital holders for doing absolutely nothing productive. It made sense when the government needed to raise revenue, but with fiat it’s just free money for nothing.

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

#153

Post by scrlk »

prennert wrote: post #126
somenameforme wrote: post #87

Earlier quoted context omitted.

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…

There is a concept in the armed forces for making decisions in a given timeframe (struggling to find a source for this). Essentially you do the best you can in the time you are given. Then you move on and iterate. If you dither too much you probably don't have to make a decision anymore as the enemy has made it for you. In that framework it is accepted that a solution is not perfect. I think about these crises the sa…

> There is a concept in the armed forces for making decisions in a given timeframe (struggling to find a source for this).

OODA loop? https://en.wikipedia.org/wiki/OODA_loop

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

#154

Post by mo_42 »

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.

As in any other scientific field: you put forward a theory and if there is enough evidence that does not fit the theory it’s debunked.

In economics, "enough" is hard to assess though. Also, a theory may linger around for a while because it suits the agenda of some people. And I guess many more methodical issues like these.

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

#155

Post by GateCrasher »

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…

Probably not. The size of the QE has been too big, and more mistakes have been made but that's only natural. What annoys me is the fact that the CB's feel the need to keep lying about this. The whole sticking "transitory" story, while no one in their right mind thought the inflation was transitory (at least for a short period) is the best example but there are many more. You simply can't shut down the economy for months without having a recession.

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

#156

Post by kgwgk »

pash wrote: post #149
kgwgk wrote: post #105

Earlier quoted context omitted.

> the Treasury stepped in to make investors whole. Not really: https://en.wikipedia.org/wiki/Reserve_Primary_Fund#Failure

Yes, really. The Treasury guaranteed dollar-for-dollar redemptions for all investors’ holdings at the time the RPF broke the buck, following Lehman’s failure several days before [0, 1]. Only those who speculated on the value of the fund after that time lost money, and very little. 0. https://home.treasury.gov/news/press-releases/hp1161 1. https://elischolar.library.yale.edu/cgi/viewcontent.cgi?arti...

Your second reference makes it quite clear that nobody was “made whole” by the program:

“Participating MMFs were required to have an NAV at or above $0.995 on September 19, 2008 (Department of the Treasury 2008f). Architects of the program chose this cutoff to prevent damaging runs while at the same time not curing “losses that had already been sustained (because of credit mistakes) at the few funds that were already in trouble” (Shafran 2020).”

“There were no losses, and the Department of the Treasury did not make any payments through the Guarantee Program, generating a surplus of $1.2 billion in fees.”

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

#157

Post by nly »

bryanrasmussen wrote: post #140
hgomersall wrote: post #96

Earlier quoted context omitted.

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…

He is probably right.

So many businesses have become financialized now. In the UK, John Lewis, which is/was an upmarket department store (and also owns Waitrose, a grocery store), is a mutual, owned by it's employees, but is now in the built-to-rent property market. Its literally burning the reputation and diversifying in to all kinds of gimmicks as it dies.

Sainsbury's, one of the biggest supermarket chains in the UK, has been in to lending (credit cards, loans) for decades now.

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

#158

Post by ianai »

misja111 wrote: post #130
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…

> I honestly was thinking we will stay in this zero-rate regime for the next decade or more. I suspect the people at SVB thought in a similar fashion and plan accordingly I have been working in several trading companies, both as trader and in IT, and the first thing they teach you when trading, is that the market always knows better than you. So hedge your risks and don't trust that you have some kind of vision that…

Imagine how different the calculus would have been through the pandemic had the Fed been raising rates in 17-19? They would have had runway to lower interest rates before going to zero. In hindsight, the zero interest rate regime was aberrant-unprecedented and forced the market to magic up lots of “accommodations.”

Anyway, the problem with svb was exactly that they decided to not hedge against the possibility of raising interest rates. And for much of the market, that was a bad call. So anyone defending them needs to explain the rational of keeping the zero interest rate regime post-Covid. And it’s got to be better than “line goes up and to the right” for your chosen asset

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

#159

Post by prox »

InCityDreams wrote: post #92

As someone with no real interest in finances, would it be fair to refer to something I've often heard: that economics is a jike - no-one really knows what they're doing, and all the theories (whether future, present, or past) count for zip [rather like "management"]. If something worked, they'd do it.

I am currently (and it’s a big volume) reading “the value of everything” , I read it in stints but it’s a great read of how economics evolved as a science and it definitely has social elements to it: so it is motivated in parts by peoples wishes of what they want to get out of it, but it also has a large scientific component as well, so it certainly isn’t black and white.

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

#160

Post by Marazan »

somenameforme wrote: post #102
albertopv wrote: post #60

Earlier quoted context omitted.

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 "transi…

CPI in 1947 = 21 CPI in 1972 = 42

25 years to double.

CPI in 1980 = 84

18 years to double

CPI in 1999 = 168

19 years to double

24 years later is still hasn't doubled again. It's hardly a runaway freight train compared to pre 1971 is it?

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