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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

#211

Post by ClumsyPilot »

geysersam wrote: post #170
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…

> 1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. What do you mean by this? No one forced them to invest in bonds and not hedge against raising interest rates.

The while posts makes out banks to be victims. Supposedly they have no agency.

Bank lives matter!

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

#212

Post by geysersam »

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…

Thank you for this.

The ill-defined nature of inflation is an extremely important and often overlooked fact.

Another interesting problem with the concept of inflation:

Thirty years ago, what would've been the "consumer price" of a modern smartphone? Millions, easily.

Same goes for many other technologies that have fallen in price rapidly. (Big screen TVs, speakers, computers, anything with a screen, a CPU or a wireless communication chip really.)

Is this deflation?

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

#213

Post by sgjohnson »

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…

3. this is also why they are required to hold swaps as a hedge.

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

#214

Post by [deleted] »

albertopv wrote: post #90
refurb wrote: post #63

Earlier quoted context omitted.

Inflation started going up before Covid and the war in Ukraine . Saying “the central bank printed money for years without inflation” as proof it’s not the cause is like saying a gas leak didnt cause the explosion because it’s been leaking for years.

Maybe you are misinformed: https://en.wikipedia.org/wiki/2021%E2%80%932023_inflation_su...

[deleted]

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

#215

Post by disgruntledphd2 »

sanp wrote: post #185
Dwolb wrote: post #169

Earlier quoted context omitted.

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.

Would pre-2018 regulations (when they were eased for banks with deposits less than $250B) have prevented this?

I think so. I believe that this is the reason EU banks have been ok so far, as they do need to hedge interest rate risk.

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

#216

Post by postdb »

prox wrote: post #159
InCityDreams wrote: post #92

As someone with no real interest in finances, would it be fair to refer to something I've often heard: that economics is a jike - no-one really knows what they're doing, and all the theories (whether future, present, or past) count for zip [rather like "management"]. If something worked, they'd do it.

I am currently (and it’s a big volume) reading “the value of everything” , I read it in stints but it’s a great read of how economics evolved as a science and it definitely has social elements to it: so it is motivated in parts by peoples wishes of what they want to get out of it, but it also has a large scientific component as well, so it certainly isn’t black and white.

>"the value of everything" This is kind of mentality that lead to currently securitising of the planet. Buying up land and evaluate whatever that can be evaluated. Much of these comes from the cheap free money comes from Feds. I mean if I can print free money and buy real asset, I'll do it too. In general it exposes the mentality that we humans like to predict the future to avoid risk. Reality is that we can't some times no matter how much risk management we do. . Instead of try to predict the future, just prepare ourselves for whatever will happens.

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

#217

Post by nashashmi »

christophilus wrote: post #80
csomar wrote: post #59

Earlier quoted context omitted.

You don't need a direct financial kickback to define corruption. From: https://www.cnbc.com/2023/03/16/svb-signature-bank-failures-... > Treasury Secretary Janet Yellen told senators that government refunds of uninsured deposits will not be extended to every bank that fails, only those that pose systemic risk to the financial system.

If you’re too big to fail, you’re too big to exist. We should either let them fail (my preference, despite the pain) or bail them all out. But I also think that if we’re going to insist that there is a private entity that is too big to fail, it should be broken up until the pieces are not too big to fail.

Actually svb did fail. And flunk. The shareholders are wiped out. The employees are gone. Saving the depositors is an act of charity.

And if you save one bank, it restores confidence in the other banks against a bank run. Otherwise I was thinking of removing money in all banks combined.

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

#218

Post by okeuro49 »

dageshi wrote: post #193
okeuro49 wrote: post #182

Earlier quoted context omitted.

> There'd be no practical way to shield the vulnerable or the carers The shielding system was an official policy in the UK https://www.local.gov.uk/sites/default/files/documents/SHIEL... > left to run rampant in the wider population eventually the medical system is overwhelmed and collapses. The risk of hospitalisation was low around the 30s and younger.

> The shielding system was an official policy in the UK Yeah, it still didn't and doesn't work though. Carers will have families, they'll have children in school, they'll potentially have more than one job. You can't shield the "carers" so you can't shield the vulnerable outside of a wider scale lockdown. Lockdown was the only thing that stopped case numbers going up till the vaccine came along. > The risk of hospita…

> Lockdown was the only thing that stopped case numbers going up till the vaccine came along.

Really? The graphs I have seen show cases declining even before lockdowns were imposed.

> The average age in the UK is 40. So pretty much half the population would need to completely isolate from the other half while the younger half lived their lives as normal.

The advice would have been the same, work from homes where possible. There was already the concept of "bubbles".

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

#219

Post by ClumsyPilot »

hgomersall wrote: post #120
wahern wrote: post #98

Earlier quoted context omitted.

The U.S. is a capitalist system. In a capitalist system, the function of a bank is to convert savings to investments, without the government deciding which investments to make. That function must be served in both good times and , especially, bad times. Providing a risk-free place to park your money disincentives investments, especially at those times when capitalists are supposed to earn their keep--discovering ways…

What? No, the purpose of a bank is to make loans to loan worthy entities, for which they should receive adequate recompense reflecting the risk of default. Investments don't come into it. It's only in recent years that banks started doing investment, and arguably that's a big part of the problem.

Same difference - they are given capital, and they need to find a way to deploy it.

Whether they loan, invest, or do something else is their decision.

There is something really fucked up about about the idea that society owes you a risk-free place to put your cash.

We accept other risks in life - some job are dangerous, my health could be gone any moment, I might be unable to pay for trratment. My house is not safe from a calamity.

But as soon as money is not safe, there is a fucking panic.

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

#220

Post by robertlagrant »

geysersam wrote: post #201
makomk wrote: post #179

Earlier quoted context omitted.

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 stress…

Can you elaborate? How does the existence of a rich person somewhere else reduce my economic output?
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