https://twitter.com/DavidSacks/status/1634292056821764099 Looking at the comments here, it's possible that this may trigger a run on banks.
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The collapse of SVB exposes the largest crack in the economy
111–120 of 311 posts
Re: The collapse of SVB exposes the largest crack in the economy
#112Re: The collapse of SVB exposes the largest crack in the economy
#113This whole discussion around bonds makes me feel like I'm either too stupid or too smart, because it does not make sense to me that SVB would not have any sort of hedging around government bonds? I don't know much about US bonds, but Brazil issues 3 types of bonds: fixed rate, inflation-indexed floating rates and interest-indexed floating rates. It's common sense between investors you need to hold a mix of the 3 to h…
The US does have inflation-indexed bonds, but they're only available in small amounts ($10k/year). They're for consumers, not institutions.
You can, however, buy bonds with varying maturity times. That's generally OK, since there's a liquid market in those bonds. They appear to have been caught flat footed by a sudden run.
Re: The collapse of SVB exposes the largest crack in the economy
#114Earlier quoted context omitted.
The exemption should still be allowed, as it led to great banking innovations for startups. The exemptees just need to be fucking careful with this advanced mode of operation.
Please name one “banking innovation” the banking industry has implemented in the last decade which has benefitted consumers.
Same-day ACH, aka why you now get paid two days earlier than you used to. Check deposits by smartphone camera. Most of the stuff on https://www.bitsaboutmoney.com.
Re: The collapse of SVB exposes the largest crack in the economy
#115Earlier quoted context omitted.
Literally funds the government lol
But why would you need a private corporation to put peoples money in T-Bonds? Why not just make the government do that directly? I don't see how these corporate profits benefited society. They didn't fill some hard to do function, they just risked others money and planned to skim the gains for profit, why should society encourage that? And they didn't even risk the money in growth areas, they just gave it to the gove…
Well now you're questioning the necessity of banks in general. Additionally, the government regulates them into these securities.
>Why not just make the government do that directly?
If I understand, do you mean why not cut out the middle-man and have people buy the T-Bills/Bonds themselves? If so I completely agree, to some degree, that banks nowadays are nearly complete scams as far as warehousing your money, while providing near 0% interest, with the backdrop of 4 to 5+% risk free short term rates from the government as alternative.
I myself have taken out a bunch of cash and deposited into various tenors of treasuries at TreasuryDirect.gov
And many others have as well, which is why depending on which data you look at there has been a massive withdrawal of cash from commercial banks in recent months, with people either buying treasuries or putting the cash with their brokers (who are buying treasuries etc).
I don't know the answer to how this is resolved, or banks place in the economy... they are supposed to provide credit and money creation for business investment. Since the 2008 crisis, lending has been subdued... there are probably many causes for this. Banks have terrible apps, user interfaces, user experience moving money quickly (in the US) and terrible returns provided to you for lending them money (most people don't realize this is what you're doing when you deposit). So yea, they are a legacy, protected industry that scams their customers out of the spread between the treasury yields they are getting.
Re: The collapse of SVB exposes the largest crack in the economy
#116Earlier quoted context omitted.
all I’m seeing is that the monkey jpeg startup just needs to never take VC capital from Andreesen Horowitz and then won’t be tied to using that one bank just stick with selling directly to collectors and you already have enough money
>just stick with selling directly to collectors and you already have enough money Uh, oh! Unregistered security...
I’ll accept that if baseball cards are securities too
Re: The collapse of SVB exposes the largest crack in the economy
#117> A 10Y T-Bill purchased on the first trading day of 2021 is now worth less than $0.80 on the dollar Just one note for those that aren't fully aware, the treasuries were only down approx 20% because they were forced to sell before the 10yr maturity. If they could have held the entire term they would get back 100%.
I noticed that he conflated the safety of a T-note* with the asset price. US Treasuries are AAA-rated super safe guaranteed returns because they're not expected to default or miss a coupon payment, and they'll be redeemed for the full value when they mature. That doesn't mean they don't have market prices that fluctuate. *T-bills are up to 52 weeks maturity.
Thanks for the note! I'll change the wording in my article WRT bills/notes. :)
With regards to safety, I noted that I think there are two types of safety to note here:
1. Default risk. 2. Asset price volatility.
Ultimately if someone is willing and able to hold to expiry, they aren't subject to #2, but this clearly wasn't the case with SVB and may also be the case with other institutions. I think it lacks nuance to not consider the middle states between the purchase of a bond and the full return of the bond upon expiry.
Re: The collapse of SVB exposes the largest crack in the economy
#118Re: The collapse of SVB exposes the largest crack in the economy
#119Earlier quoted context omitted.
It means that the bank was gambling, lost, and wants to externalize those losses onto the rest of us who weren't gambling.
Funny that in threads about crypto companies failing everyone cries about "this is why we have regulations and safety valves in the financial industry!" but now when these are in force people cry about the safety valves and regulations existing, and how the companies should just be allowed to fail
Who's doing that?
Part of the issue here is that SVB was able to get into trouble because important regulations and safeguards were removed years ago.
The ones that exist to minimize the wider impact of a bank failure are working, and I don't see anyone upset about that fact.
Re: The collapse of SVB exposes the largest crack in the economy
#120Earlier quoted context omitted.
government doesn't need taxes to fund anything, it can just create money and sell bonds. Taxes are just for steering money flows
Inflation would like a word.
Speaking from my German perspective. Our (European) central bank printed central bank money like crazy the last 10 years, and apparently it was not a problem. Prices only shot up once there were supply shocks due to Covid and Putin. And sure enough, the supply shocks are slowly waning, and hence YoY inflation rates are also rapidly declining.
Yet everyone keeps talking about how the money supply is causing inflation, even though there is no plausible direct connection [1] between the amount of money in some bank account somewhere and consumer prices. The bakery down the street does not look at federal reserve rates when figuring out their bread prices.
[1] I'm guessing that someone will be able to explain this to me. But keep in mind that your explanation should cover how we could have over a decade of near-zero interest rates and the respective money supply inflation without seeing any significant consumer price inflation.