When was the last time anyone checked what percentage gold their gold bars are?
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America’s banks are missing hundreds of billions of dollars
311–320 of 450 posts
Re: America’s banks are missing hundreds of billions of dollars
#312Fall of the Western Roman Empire.
Nah this is fine, money printer go brrrr
Re: America’s banks are missing hundreds of billions of dollars
#313Can anyone recommend some good blog articles or books (aimed at lay people) on how the global economy works, bank interactions with other banks, and government management of inflation and interest rates? I'd like to understand a bit about both the previous crash and the current banking crisis, but feel I need to do some background reading first.
Be careful out there reading blogs. Maybe I'm biased because I have a degree in Econ from MIT, but I'd highly recommend starting out with the "orthodox" treatment of the subject, as you'd learn at a university. To that end Core Econ[0] is a very solid, free, engaging, easy to read book that covers it. Chapter 10, "Banks, money, and the credit market", is particularly what you're asking about. You can take a look at t…
That the Austrian School is being singled out is particularly interesting right now, given that they are highly critical of fractional-reserve banking precisely because it might generate crises such as the one we're living through. Chapter 10 of the Core Econ book does not feature the word "fractional" and only talks about reserves and money creation in passing [0]
So I hope that, like the Index, you warning steers people towards instead of away from austrian aconomics :)
[0] https://www.core-econ.org/the-economy/book/text/10.html#108-...
Re: America’s banks are missing hundreds of billions of dollars
#314Earlier quoted context omitted.
> 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…
There’s interest rate risk, credit risk, and prepayment risk with the securities they buy. On a Treasury or guaranteed bond, there is no credit risk. On a Treasury there is no prepayment risk. Therefore if you hedge out the interest rate risk, you’re essentially left with 0 risk. 0 risk = 0 or near 0 premium. e.g. there’s no point in doing the trade if you hedge.
Oh you can get a lot more creative than that. You can hedge out "catastrophic" interest rate rises while taking your chances on smaller increases. In this case, catastrophic can easily be estimated by taking the duration of the book and the equity cushion and applying a margin of safety. Or you can simply ladder Treasury durations that inherently don't have enough duration to cause problems. SVB apparently did none of that.
Re: America’s banks are missing hundreds of billions of dollars
#315The title is clickbaity. It's not like the banks are missing any of their depositors' money.
so what you’re saying is that there’s a major bank out there that could pay out all - or even half of - its deposits right now?
Re: America’s banks are missing hundreds of billions of dollars
#316Earlier quoted context omitted.
> 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…
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…
Seems to me you're missing the forest for the trees.
"The Market" is the spontaneous order generated by millions of individual transactions seeking equilibrium.
Individual traders can fail, be greedy, or succeed, and the market as a whole still balances out.
Think of it like a biotope pond, which exists and naturally adjusts to all sorts of conditions, and think of the Federal Reserve and Banks lending practices as a corporation dumping 40 metric tons of mislabled organic fair-trade ketchup into that pond.
Too much of even a good thing, still poisons the system.
Re: America’s banks are missing hundreds of billions of dollars
#317Earlier 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. 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…
Yea. Depositors should never try to take their money out. How dare they ask their money back.
It's one thing to take your money out. It's another thing to sound a bullhorn and make everyone rush to take their money out, because that will overwhelm any bank.
What Thiel did was beyond irresponsible. He should be criminally tried.
Re: America’s banks are missing hundreds of billions of dollars
#318Fall of the Western Roman Empire.
what was the Roman Empire’s equivalent of legalised Ponzi schemes? sugar of lead? Livia?
Re: America’s banks are missing hundreds of billions of dollars
#3191. 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…
SVB leveraged cozy relationships to attract business than they could handle. They ignored compliance and normal banking risks. They left their C level risk management position open and we’re not transparent about their fiscal health. Rate risk is a key feature to buying any bond, and it’s a risk that is manageable if management isn’t asleep at the switch. Nobody forced SVB to buy long duration bonds. Any investor wit…
> Blaming the government is a cop out. The job of finance professionals is to manage the assets in their custody responsibly.
Somehow I feel that blaming the government is much more than a cop-out; it's a calculated position that enables the big players to continue privatizing the wins and socializing the losses. "Of course we are getting a bailout", the narrative goes, "cause it was the big government's fault all along!"
Re: America’s banks are missing hundreds of billions of dollars
#3201. 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…
It's possible that they have already reaped the profits and are now saddling the banks with debt, leaving the burden on the people.