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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

#201

Post by geysersam »

makomk wrote: post #179
groestl wrote: post #133

Earlier quoted context omitted.

> 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…

The trouble is that a large chunk of the media has basically lied about this and told people that no, they'd be able to consume just as much as before if it wasn't for the evil profiteering corporations and the mega-rich stealing from them. They've done things like point to the increase in wealth of the super-rich "during the pandemic" to prove that ordinary people have become poorer because the money they deserve wa…

Fact remains that wealth inequality has increased enormously over the last decades. This is a big economic issue that deserves journalistic coverage.

If you don't want to frame it in terms of "evil" or "profiteering" that's fine.

But this issue is important. The expected consequence of inequality is reduced economic output (in terms of utility). It leads to inefficiency. I feel this is a perspective that's not stressed enough.

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

#202

Post by matwood »

parineum wrote: post #168
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.

Printing money causing inflation has got to be one of the simplest things in economics to understand. Increase supply of thing, thing becomes worth less. And what's your source on Monetarism being debunked, the people printing currency? It's pretty strange how, when all the money was being printed, it wasn't that hard to find a plethora of economists warning that it would cause inflation (due to Monetarism principles…

> Increase supply of thing, thing becomes worth less.

So as the supply chain continues to improve, prices should come down?

Inflation is too much money, chasing too few goods. It's the push/pull between money supply and goods in the market that drives inflation. Money can't be talked about in a vacuum.

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

#203

Post by qwytw »

unyttigfjelltol wrote: post #195
dsomers wrote: post #148

Earlier quoted context omitted.

> 4. The old treasuries decline 30-40% in present value. Oops, they're not so safe after all if you need your money back before maturity, which is often decades away. This is because they fucked up their duration risk handling, no one held a gun to SVBs head and forced them to invest so heavily in long duration bonds. If they bought more short duration bonds none of this would be a problem. Other banks didn’t make th…

Maybe, but the latest Fed action violates a 40-year downtrend in interest rates, so it was exceptionally improbable from a historical perspective. From 2020 trough to 2022 peak, government interest rates increased almost 1,000%, which means the magnitude also is hard to anticipate or plan for, and the effects extreme from failing to do so. You can do a regression of interest rates from whenever to now, draw a line th…

> almost 1,000%

Well 0.1 -> 1.0 is a 900% increase, want to 1.0 -> 4.0 is "just" 300% so I'm not sure if this is a very good way to measures increases in interest rates...

> regression of interest rates from whenever to now, draw a line that's never violated until

Given the data (https://www.macrotrends.net/2015/fed-funds-rate-historical-c...) I would expected such line to be nearly useless due to a very low R2 (too lazy to actually calculate it...)

But yeah, even back in last March the bond markets were not expecting that the rates will be above 2.75% in 12 months.

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

#205

Post by matwood »

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

> Actually Fed real error has been raising rates to counter an inflation not caused by monetary policies.

When all you have is a hammer...

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

#206

Post by jocaal »

misja111 wrote: post #184
kriro wrote: post #176

Earlier quoted context omitted.

If the market always knows best then why do I need traders except for market making purposes? Shouldn't everyone just buy the lowest cost passive ETF of a big enough index like S&P 500 then? I think "the market always knows best" is correct in most cases and if you think you know better you are probably wrong but there are empirical counterexamples like the Buffets of the world (unless one would claim that his gains…

> Shouldn't everyone just buy the lowest cost passive ETF of a big enough index like S&P 500 then? Yes, this is very best the advise to invest your money (except if your name is Warren Buffet). Buy it and hold it. There have been so many papers published that show this. You cannot predict the market, what you can do is save yourself some risk and some transaction costs. Any investment advisor that tells you different…

You can also save yourself time. I see so many people use enormous amounts of time reading headlines about companies and consuming videos about the economy and all that jazz to stay up to date and make "informed trades". But in the end a lot of that time is wasted. And you might say that's ok if that is their hobby, but lets be honest, the reason people do this is because they got sold on the idea that they can get rich from it.

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

#207

Post by ClumsyPilot »

thworp wrote: post #161
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.

You can only say that once you accept inflation to mean "a single number representing price increases", which is so over-simplified as to be laughable. Not to mention easily manipulated by statistical tricks and more obvious tricks like weighing for "feature increase" or using country-wide medians and not weighing those for population distribution. If you look at real estate prices vs CPI since MMT really began, real…

> as "inflation doesn't cause inflation" since it meant any expansion of the money supply.

Since 1950's, population has doubled and GDP is up 10x.

What should money supply be for it to cause zero inflation? 1x? 2x? 10x?

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

#208

Post by hgomersall »

bryanrasmussen wrote: post #198
_0w8t wrote: post #191

Earlier quoted context omitted.

There is an observation that the real salaries stagnated since seventies for an average American because all the growth went into financial industries. Those rose in the last 50 years from few percents to close to a quarter of economy essentially resulting in a hidden tax paid by everyone to bankers.

essentially the point I was making. Although I think real salaries also stagnated because every household became a two-income household so people's household incomes rose hiding the fact that they were actually getting screwed over.

Which people are now starting to realise!

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

#209

Post by huevosabio »

unyttigfjelltol wrote: post #195
dsomers wrote: post #148

Earlier quoted context omitted.

> 4. The old treasuries decline 30-40% in present value. Oops, they're not so safe after all if you need your money back before maturity, which is often decades away. This is because they fucked up their duration risk handling, no one held a gun to SVBs head and forced them to invest so heavily in long duration bonds. If they bought more short duration bonds none of this would be a problem. Other banks didn’t make th…

Maybe, but the latest Fed action violates a 40-year downtrend in interest rates, so it was exceptionally improbable from a historical perspective. From 2020 trough to 2022 peak, government interest rates increased almost 1,000%, which means the magnitude also is hard to anticipate or plan for, and the effects extreme from failing to do so. You can do a regression of interest rates from whenever to now, draw a line th…

I don't think anyone in such position would do a simple regression to guess interests.

In 2020 and 2021, we already had tons of talk of upcoming inflation due to the stimulus pacjages. I myself took some precautions, and I am really not at all savvy.

The management team of a major bank would certainly be aware of the risk of inflation given the massive uptick in money supply and that the fed would be forced to raise interests as soon as the inflation manifests.

I think incompetence is an easier explanation. Years of ZIRP bubbled incompetent or lazy people to the top.

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

#210

Post by dsomers »

unyttigfjelltol wrote: post #195
dsomers wrote: post #148

Earlier quoted context omitted.

> 4. The old treasuries decline 30-40% in present value. Oops, they're not so safe after all if you need your money back before maturity, which is often decades away. This is because they fucked up their duration risk handling, no one held a gun to SVBs head and forced them to invest so heavily in long duration bonds. If they bought more short duration bonds none of this would be a problem. Other banks didn’t make th…

Maybe, but the latest Fed action violates a 40-year downtrend in interest rates, so it was exceptionally improbable from a historical perspective. From 2020 trough to 2022 peak, government interest rates increased almost 1,000%, which means the magnitude also is hard to anticipate or plan for, and the effects extreme from failing to do so. You can do a regression of interest rates from whenever to now, draw a line th…

> Maybe, but the latest Fed action violates a 40-year downtrend in interest rates, so it was exceptionally improbable from a historical perspective.

imo this is very flawed thinking, a once in a 40 year event is almost 100% likely to happen in an average persons life — maybe twice. I think when it comes to either your life savings or gigantic amounts of money like banks manage it’s irresponsible to not consider economic cycles that even only happen once per 100 years because of how likely it is to happen once is your life and be absolutely devastating.

I stand by my statement, this is 100% on SVBs amateur hour monkey level thinking.

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