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Reasons the banking crisis isn’t a repeat of 2008

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Re: Reasons the banking crisis isn’t a repeat of 2008

#151

Post by ZhadruOmjar »

dragonwriter wrote: post #111
fyzix wrote: post #104

Earlier quoted context omitted.

Schiff didn't account for the economic ignorance of the masses in his prediction. He understood that runaway inflation would cause the gold price to spike, he didn't foresee the confidence that traders have in the FED to fight off inflation. The FED cannot win the inflation fight (confirmed by their recent soft pivot back to QE) and gold will not go up until the traders realize this fact.

> Schiff didn’t account for the economic ignorance of the masses in his prediction. Literally every economic misprediction can be blamed on not accounting for the way people actually behave in real-world economies, but…that’s not something that adds credibility for the next prediction by the same predictor.

I don’t know if it’s the newspapers or economists I dislike more but I am pretty sick of watching these people incorrectly predict everything for the last 15 years and then turn around and say they are right when ONE thing sort of looks like the thing they kind of predicted.

Re: Reasons the banking crisis isn’t a repeat of 2008

#152

Post by spaceman_2020 »

dalbasal wrote: post #57

It feels like all the content here is subtext... so I guess I get to do Philology. These are the given reasons: | this probably isn’t 2008, for three key reasons: (1)Policymakers have tools to solve banking crises, (1.5) and the bigger banks are much stronger (2) The economy is in a much different place (3) The magnitude of the problem is, so far, much smaller | His take on reason #1 is that MMT has won. Monetarism i…

It’s so short-sighted to say that inflation is “tolerable”.

Since 2008, the real inflation has been in asset prices - housing, equities, startup valuations have been up massively across the board.

This has societal consequences. The divide between the asset owning class and the non-asset owning class has never been greater. Stretch that out and you get populists getting elected all over the world.

Donald Trump didn’t get elected in a vacuum.

Re: Reasons the banking crisis isn’t a repeat of 2008

#153

Post by kube-system »

fyzix wrote: post #104
zoltar wrote: post #63

Earlier quoted context omitted.

Is that the same Peter Schiff that said gold was going to $5,000/oz in 2012?

Schiff didn't account for the economic ignorance of the masses in his prediction. He understood that runaway inflation would cause the gold price to spike, he didn't foresee the confidence that traders have in the FED to fight off inflation. The FED cannot win the inflation fight (confirmed by their recent soft pivot back to QE) and gold will not go up until the traders realize this fact.

The actions of the masses is the economy.

Re: Reasons the banking crisis isn’t a repeat of 2008

#154

Post by safety1st »

quags wrote: post #103
fyzix wrote: post #23

History never repeats itself, but it does often rhyme. We cannot have a decade of 0% interest rates and expect no consequences. Peter Schiff predicted this from the moment the fed bailouted the banks in 2008. There's nothing the fed can do to escape this one, it's either massive inflation or massive recession. The fed has avoided the latter by bailing out the banks again so expect double digit inflation for the next…

If we go by another Peter, Peter Lynch in this case he would say no one can predict inflation or interest rates long term. Secondly his words is there is always something to worry about when investing - like when oil went to 40 and there would be a depression or when Japan was going to take over the world leading to Americas downfall - or when Japan was crashing and going to cause a depression. Or when oil went from…

Over the years as my perspective has become more global I've come to realize what a privileged position the US is in, economically:

* Ports on both the Atlantic and Pacific

* A very effective transportation system in between

* In the big growth sector where points 1 and 2 don't matter, tech, it's still #1 in the world anyway

* A market of 350 million high income people (by global standards) under one regulatory framework

No other country can compare. No one else has this. These in-built advantages are incredibly hard to beat.

There will be crises but the key insight for me was that because of these advantages the US is almost always going to be better prepared to weather those crises than the rest of the world. That is why it enjoys such a huge inflow of capital and immigration (currently #1 recipient of FDI in the world, most immigrants of any country in the world).

It's just a big risk to bet your money against the success of the US, no matter how dumb its leaders get.

It probably also helps that Americans tend to flip out and go full doomsday mode when anything goes wrong inside of their borders, I mean it's stressful, it's not very well planned, but it does make problems hard to ignore.

Re: Reasons the banking crisis isn’t a repeat of 2008

#155

Post by klyrs »

arcticbull wrote: post #91
alxmng wrote: post #87

Who cares about keeping deposits safe when money isn’t worth anything? Americans don’t even have money in the bank. Median savings is $4500. Many people who perform socially useful jobs can barely afford the basic basket of goods like rent, food, and transportation.

My money still seems to work great. Those are some serious fiscal and social (but not monetary) issues that should be taken up with Congress not the Fed, and not the FDIC. Who handled this all very well I might add. > Median savings is $4500. The average American family has a $748,000 net worth, according to Federal Reserve data, median $121,000. Savings isn't just what's in your 'savings' account. Mine definitely is…

By your numbers, the median American family could put their entire net worth towards a cramped condo and still be making payments. That is not the image of stability that you're pretending it is.

Re: Reasons the banking crisis isn’t a repeat of 2008

#156

Post by Retric »

fuoqi wrote: post #140
Retric wrote: post #115

Earlier quoted context omitted.

Banks don’t have nearly as many worthless assets today as they did in 2008, which completely changes the underlying economics. As long as they aren’t offering higher returns than their existing investments can support, the only thing they have to fear is bank runs.

SVB also did not have "worthless assets", but the extreme rate hikes by the Fed significantly reduced its value. Wait until tightness of credit conditions will cause chain of defaults and we will see how well banks will fare. We already see the first signs of it in the auto loans market.

SVB was offering both extremely high interest rates and suffered a bank run.

Thus they both really messed up and happened to get punished, but it really doesn’t reflect the wider banking system.

Re: Reasons the banking crisis isn’t a repeat of 2008

#157

Post by sneed-oil »

jzymbaluk wrote: post #100
kneebonian wrote: post #97

Earlier quoted context omitted.

Sure the depositors that had more than 3x my annual salary just sitting in their account.

Of all the "evil" things one could do with gargantuan wads of cash, having it sit in a bank account is just about the most innocuous thing I can think of to do with it. It seems like a wise, cautious move actually, and it seems like it'd be bad to punish businesses for being cautious with their money

Their money is being used to make investments and they're getting paid interest for it. If their deposit was above the amount insured by the FDIC then they knew it could all be lost if the bank collapsed. I wouldn't call lending more than 250k to a bank "cautious" (that's what you do when you "deposit" your money in a bank), they could have bought Treasury bonds instead. But maybe they were smart and had guessed that in this third world financial system, if your bank is too big to fail, depositors get bailed out by the government anyway.

Re: Reasons the banking crisis isn’t a repeat of 2008

#158

Post by Rury »

eqmvii wrote: post #130
treebeard901 wrote: post #101

In 2008, the Treasury and Federal Reserve had a ton of ammo to use to provide liquidity. Since then, they have tried to inflate their way out of it using creative accounting and quantitative easing. The reason this could be worse than 2008 is that those methods will not work as well. Part of the reason SVB failed so fast was because they held a lot of long term government debt, mortgages etc. When they tried to sell…

> Part of the reason SVB failed so fast was because they held a lot of long term government debt, mortgages etc. When they tried to sell it to provide liquidity for deposits they found there were not many buyers for it. What? That’s nonsense. There is an extremely liquid market for the securities and selling them was no problem. The problem is that they lost value when interest rates rose, were held in a “hold to mat…

Yeah, there was a liquid market for it, but not for par value. No one wants to buy securities yielding ~1% when there's ample supply of safe securities yielding ~4%, so they had to discount them a fair bit to get them to sell. Which is how they lost value.

But it mainly happened fast because once word was out on social media that they were bleeding out, it had stoked depositors to withdraw their deposits.

Re: Reasons the banking crisis isn’t a repeat of 2008

#159

Post by JackFr »

Dalewyn wrote: post #80
fyzix wrote: post #23

History never repeats itself, but it does often rhyme. We cannot have a decade of 0% interest rates and expect no consequences. Peter Schiff predicted this from the moment the fed bailouted the banks in 2008. There's nothing the fed can do to escape this one, it's either massive inflation or massive recession. The fed has avoided the latter by bailing out the banks again so expect double digit inflation for the next…

>bailing out the banks My understanding this time around is the depositors rightfully got bailed out (both to maintain peoples' trust in banking, and because losing your money to others' failures fucking sucks), but the banks themselves were left out to dry.

Do depositors have some sort of moral superiority to investors, or simply a legal priority?

Citibank equity holders (one of the the more egregious bailouts from the GFC) 15 years later are still down 90%. So it’s not like in the bad old days of 2008 investors were getting off scot free.

Re: Reasons the banking crisis isn’t a repeat of 2008

#160

Post by vlovich123 »

safety1st wrote: post #154
quags wrote: post #103

Earlier quoted context omitted.

If we go by another Peter, Peter Lynch in this case he would say no one can predict inflation or interest rates long term. Secondly his words is there is always something to worry about when investing - like when oil went to 40 and there would be a depression or when Japan was going to take over the world leading to Americas downfall - or when Japan was crashing and going to cause a depression. Or when oil went from…

Over the years as my perspective has become more global I've come to realize what a privileged position the US is in, economically: * Ports on both the Atlantic and Pacific * A very effective transportation system in between * In the big growth sector where points 1 and 2 don't matter, tech, it's still #1 in the world anyway * A market of 350 million high income people (by global standards) under one regulatory frame…

> A market of 350 million high income people (by global standards) under one regulatory framework

China almost has the same number of millionaires. Per capita it’s not as good, but in terms of volume. And I’d say they’re closer to a single regulatory framework than the US which has all sorts of conflicting state laws which get in the way of interstate commerce (despite the commerce clause). Sure there are a lot of advantages as you say. But they’re not indefinitely insurmountable.

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