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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

#201

Post by euroderf »

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…

Years ago The Economist had a front-page story saying that negligible interest rates are going to be around long-term. If an influential and bold assertion like that is not effectively refuted, some people are gonna take it as gospel truth. Caveat lector

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

#202

Post by ororroro »

yieldcrv wrote: post #29

adding liquidity via “policy maker’s tools” doesn't fix the problem or provide assurance that Credit Suisse isn’t the beginning of something else CS AT1 bondholders now have gigantic $17bn hole in their balance sheet/portfolio The whole AT1 bond market is experiencing losses of similar size to the treasury bond market If anybody collateralized those? Bigger losses Losses aren't controversial, but they are when theyre…

AT1 bonds are specifically designed for this purpose though. They offer high returns but at a higher risk. How would one collateralize an asset that is designed to default catastrophically while hiding this fact from the lender?

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

#203

Post by euroderf »

ModernMech wrote: post #102
Avshalom wrote: post #70

It aint fucking lost on me that financial papers spent the better part of 2022 arguing that we were headed for a recession. The q4 numbers came in showing the US economy was still expanding and now those same papers are telling me we're in a banking crisis on the basis of like two and a half banks, with SVB and CS both being fully rescued. The fucking owners of capital seem bound and determined to destroy their own s…

> The fucking owners of capital seem bound and determined to destroy their own system. Well yeah, everything worked out fine for them last time they did. Some got very rich. Why not try again?

As long as losses are socialized it's all good eh!

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

#204

Post by mo_42 »

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…

I like these kind of comments. They’re much more analytical than the ones predicting recessions and what not.

Seems like in economics it’s also useful to analyze qualitatively. Of course you cannot run doomsday headlines with that.

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

#205

Post by mo_42 »

ZhadruOmjar wrote: post #151
dragonwriter wrote: post #111

Earlier quoted context omitted.

> 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.

It’s a convenient symbiosis: Doomsday economists get cited by newspapers, which serves him/her in publicly and the newspaper in clicks.

Simple heuristic: if it’s easily digestible, it probably doesn’t serve true understanding. I think that especially true for newspaper articles related to economics.

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

#206

Post by vkou »

JackFr wrote: post #159
Dalewyn wrote: post #80

Earlier quoted context omitted.

>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.

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

Depositors don't stand to benefit from a bank engaging in stupid risky bets with depositor money.

Investors do (on the upside of those bets).

This is why depositors should (and do) have moral priority for their money.

Investors also are able to directly control the degree of stupid risk-taking behaviour taken by the bank, by virtue of their control of the board. Depositors have no such leverage.

If you make depositors (or the public at large) pay for the sins of the bank's management, you get a classic conflict of interest problem. If you make investors pay, it goes a long way towards aligning their interests with keeping the bank running well.

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

#209

Post by lottin »

QuadmasterXLII wrote: post #141
bigdaddyrabbit2 wrote: post #116

Earlier quoted context omitted.

>banks to become even riskier with deposits as they get to keep the profits if their risky bets payoff and get bailed out if they fail This isn't true, is it? While they do get to keep profits, if the bets don't pay off, the bankers - shareholders, bondholders, employees, executives - all get wiped out (as happened with SI, Signature and SVB). The depositors get bailed out. They get to keep profits if they win, but l…

I think there's some sort of clipping effect distorting things. If your losses are limited at your assets, then the bet (heads: I gain 2X my assets, tails: I lose 2X my assets) has positive EV.

It's not just banks, this is how limited liability works.

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

#210

Post by horns4lyfe »

fells wrote: post #132
hayst4ck wrote: post #129

The primary function of central banks isn’t managing inflation and employment, it is acting as a lender of last resort. In this way, central banks provide the bedrock for the banking system. The Fed’s ability to perform this role expanded during the Global Financial Crisis. They created many different types of lending facilities to provide liquidity to banks, and many former broker-dealers (like Morgan Stanley and Go…

The fed doesn't have access to taxpayer money.

They absolutely do. They print money, and the resulting inflation is an indirect tax; the glory of MMT.
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