A fissure in the monetary system is very dangerous. Leaving aside that you can lose money into it, it causes market participants to drastically alter their behavior, which can cause the collapse of financial institutions, gross misallocations of capital, and other collateral damage.
April 1, 2023 First, it was the crypto-focused Silvergate Bank. Then it was Silicon Valley Bank. And immediately after, Signature Bank. Silvergate and Signature could be dismissed because, well, crypto. But Silicon Valley Bank is something entirely else. It was older, and much larger. And a mainstay of high-tech, venture-funded startups for many decades. Then […]
As the Federal Reserve has hiked rates from 0% to over 4.75%, the average interest rate on bank deposits has remained low, around the FDIC’s national average for savings accounts of 0.37%. This has led many to ask the simple question. Why aren’t banks raising the interest rate on deposits? The Hotel California Banking System […]
Last week, we had this to say about the implications of SVB’s collapse… Everyone in the market has to think about an unpleasant reality and come to grips with it. They have to consider the risks of things that previously they may have thought absolutely safe. Such as bank deposits, and Treasury bonds (and government-guaranteed […]
You can listen to an audio summary of this article below. Silicon Valley Bank (SVB) collapsed and was then seized by the California Department of Financial Protection on Friday, March 10. This came after a frenetic two days, when the bank announced a big loss, tried to raise capital, and then faced an accelerating run-on-the-bank. […]
There is an old erroneous view of fractional reserve banking. “Naturally, all fractionally reserved banks are de facto insolvent at all times…” The Acting Man blog is usually very good, but it published an article by Pater Tenebrarum containing this comment (http://www.acting-man.com/?p=6781). If there is a weakness in Austrian School thinking surely fractional reserve banking […]
