March 10, 2023 - The Next Black Date in Economics?

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Hawkeye
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by Hawkeye »

Doctor Steuss wrote:
Mon Mar 13, 2023 8:39 pm
Looking at the FDIC info. The combined assets of the last decade's worth of failures are a fraction of what this one bank's assets are. :shock:

Combined assets of the last 122 bank failures (in millions): $35,455
Combined assets of SVB (in millions): $209,000
They said the CEO of on the banks had already withdrawn $3.2 million in his own money just 2 weeks before the bank run.
The best part about this is waiting four years to see how all the crazy apocalyptic predictions made by the fear mongering idiots in Right Wing media turned out to be painfully wrong...Gasoline would hit $10/gallon. Hyperinflation would ensue.
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by Doctor Steuss »

Res Ipsa wrote:
Mon Mar 13, 2023 8:14 pm
Hawkeye wrote:
Mon Mar 13, 2023 8:11 pm


https://www.breitbart.com/economy/2023/ ... pen-panic/

I guess I don't understand this part of the Breitbart article. Where are all depositors getting their money from a failed bank if not from the taxpayer?
From increased fees on banks, which will be shifted to bank customers. Or, in other words, taxpayers.
It appears they might be able to cover it just by liquidating assets. SVB's assets are greater than their deposit commitments, according to this (or at least they were 3 months ago):
As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.
https://www.fdic.gov/news/press-release ... 23016.html
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Xenophon
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by Xenophon »

Thanks for posting, honor. I haven't really commented on it as I don't think I know enough to make anything other than surface level remarks.

As a weird aside I have a business acquaintance that was impacted by the SVB closure. I don't have a ton of specifics but apparently, they were the only bank that would give them a business loan. Like a lot of tech firms their revenue is subscription based and often at an annual level so most banks want to see revenue within the last 45/60 days and that isn't always how their capital flows. Supposedly most of their funds aren't caught in limbo but it did express concern for where he will go for his next loan. I've also seen plenty of folks comment that they aren't sure how they will do payroll in the coming weeks or get paid by clients. All in all it just seems like a giant mess and I hope it has a very narrow impact radius.
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by Moksha »

What does the rollback on Dodd-Frank signify?
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by honorentheos »

Xenophon wrote:
Mon Mar 13, 2023 10:50 pm
Thanks for posting, honor. I haven't really commented on it as I don't think I know enough to make anything other than surface level remarks.
Glad to get the conversation going at any level. To be honest, not seeing it show up as a topic by Sunday AM felt somewhat like being in a room where an '85 Chevy Suburban drove through the front wall yet everyone carried on as if nothing happened. If we can't have surface level discussions on an off-topic forum of a tiny niche message board it's time to call it quits. We may have a higher PhD to schmuck ratio than many places, but even the PhDs have to make small talk about topics they didn't defend or the silence becomes deafening.
As a weird aside I have a business acquaintance that was impacted by the SVB closure. I don't have a ton of specifics but apparently, they were the only bank that would give them a business loan. Like a lot of tech firms their revenue is subscription based and often at an annual level so most banks want to see revenue within the last 45/60 days and that isn't always how their capital flows. Supposedly most of their funds aren't caught in limbo but it did express concern for where he will go for his next loan. I've also seen plenty of folks comment that they aren't sure how they will do payroll in the coming weeks or get paid by clients. All in all it just seems like a giant mess and I hope it has a very narrow impact radius.
Me, too. The personal impacts of these sorts of headlines can be easily lost and I appreciate you sharing that.

A week ago Elixabeth Warren challenged Fed Chair Jerome Powell over the 2 million people who would become unemployed as he pushes for inflation to get down to 2%. From Politico:
Politco wrote:Sen. Elizabeth Warren (D-Mass.): “Chair Powell, if you could speak directly to the 2 million hardworking people who have decent jobs today who you’re planning to get fired over the next year, what would you say to them? How would you explain your view that they need to lose their jobs?”

Powell: “I would explain to people more broadly that inflation is extremely high, and it’s hurting the working people of this country badly — all of them. Not just 2 million, but all of them are suffering under high inflation, and we are taking the only measures we have to bring inflation down.”

Warren: “And putting 2 million people out of work is just part of the cost, and they just have to bear it?”

Powell: “Will working people be better off, if we just walk away from our jobs and inflation remains 5, 6 percent?”

This was an unusually testy moment from Powell, who is generally calm and collected under questioning, including from Warren.

But this conversation highlights the key points that both officials have been making. In the senator’s mind, inflation is largely caused by problems like supply chain issues and corporate greed — issues that are unrelated to overspending, which is what the Fed is designed to counteract. (To get to that two million number, she’s pulling from Fed projections that unemployment could rise to 4.6 percent.)
Another exchange between Republican Senator Jon Kennedy and Powell from that same Senate Banking Committee brief:
Sen. John Kennedy (R-La.): “You’re trying to raise the unemployment rate, are you not?”

Powell: “No, we’re not — we’re trying to realign supply and demand, which could happen through a bunch of channels, like for example, just job openings.”

While Powell flatly denied that his goal was to see unemployment increase, he acknowledged that the Fed does want to see the labor market weaken. Those might seem contradictory, but the thinking is that if there are fewer open jobs, it will help cool wage gains, which feed inflation, without necessarily causing a rise in joblessness.
In my OP I made an attempt to tie the SVB failure to the Fed's action to control inflation for a reason. It's simply a fact the Fed has to damage the economy to control inflation. It's actions were behind many of the issues that are becoming publicly scrutinized and that affected SVB direcly. But there are also less obvious connections. Something had to give, someone had to get hurt. Tuesday last week, Powell and the US Senate was still watching unemployment numbers even as Powell's words pushed stocks lower...and the next day saw SVB reporting to investors they had to sell assets at a loss to cover the withdrawals it was facing and the reaction was a cascading panic that finally found the point through which to break.

So I think there is a bigger picture here to keep an eye on as we follow what it happening in the regional banking world. The historical perspective is the Fed is more likely to be too aggressive than they are to deftly manage a cooling off to control inflation and this looks like a critical point in the story.
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by Vēritās »

Powell needs to be replaced ASAP before he ruins the economy. He has it all wrong.

With each passing decade the long standing axiom that increased money supply and government spending automatically causes inflation is becoming weaker and weaker. We didn't get inflation during the massive spending under Obama and we didn't get inflation recently until we had massive supply chain issues. People have had tons of in savings for more than a decade now but it wasn't until the Pandemic when the basic principles of supply and demand caused inflation. Powell says raising rates is the ONLY thing that can be done because we have to make the economy so unbearable that people will stop spending money. If that's true then any monkey can do his job and the cure has become worse than the disease. The fact is you have to balance the strain between supply and demand and you can do it from either end. Instead of focusing on reducing demand (coercing Americans to stop spending by making them jobless!), how about we focus on repairing the supply chain issues instead? I'm totally in the same camp as Joseph Stiglitz and Elizabeth Warren on this one.
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by Hawkeye »

What's going to happen is that the government will bail out the people who chose to put their money into higher risk/return investments. This will then encourage other investors to take higher risks knowing that the federal government will ultimately bail them out, because no bank is too big to fail. How many homeowners in New Orleans have purchased flood insurance now, given the urgent threat that gets more likely each day due to global warming?

If Powell is the reason for this why didn't the Biden administration replace him earlier? Was it negligence on the part of the BIden administration or failure to be sufficiently woke? Did they not pay enough attention to global warming and achieving sufficient diversity in management and customers? Was S&B just not woke enough? Do they need to be reeducated in what it means to be a Marxist?

No as always, it couldn't possibly have been the scamdemic. It was Trump's fault for the policies he managed to enact back in 2018, everything else had nothing to do with the current situation. Those who don't understand history are doomed to repeat it.
The best part about this is waiting four years to see how all the crazy apocalyptic predictions made by the fear mongering idiots in Right Wing media turned out to be painfully wrong...Gasoline would hit $10/gallon. Hyperinflation would ensue.
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by honorentheos »

Hawkeye wrote:
Tue Mar 14, 2023 12:51 pm
What's going to happen is that the government will bail out the people who chose to put their money into higher risk/return investments. This will then encourage other investors to take higher risks knowing that the federal government will ultimately bail them out, because no bank is too big to fail.
Sources, please. The statements coming out are running opposite your claim. I'm curious where you are hearing this.
If Powell is the reason for this why didn't the Biden administration replace him earlier? Was it negligence on the part of the BIden administration or failure to be sufficiently woke? Did they not pay enough attention to global warming and achieving sufficient diversity in management and customers? Was S&B just not woke enough? Do they need to be reeducated in what it means to be a Marxist?
Do you even have a clue about what is going on, ajax? On what planet does the whole woke debate belong here? Some twat twitted something about wokeness and that's all it took for you to decide, "Yup, wokeness is bringing down the banking industry. Socialists!"

It's one of the statements that is so far removed from the issues involved it's not even wrong.
No as always, it couldn't possibly have been the scamdemic. It was Trump's fault for the policies he managed to enact back in 2018, everything else had nothing to do with the current situation. Those who don't understand history are doomed to repeat it.
Ajax, come on. What happened with SVB and what is rocking the banking industry is pretty clear. It's valuable to move past the partisanship to see what is actually going on. You can go back to the OP and tell me what it gets wrong and why it's wrong if that helps.
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by Vēritās »

Ajax never wants to ground himself in reality. The fact us SVB took risks and had no risk management dept because after Trump deregulated the banks there was no incentive for them to be anything other than reckless. It is why these huge corporate tax cuts never amount to more jobs or investment like promised, but rather they result in more corporate stock buybacks. Ajax wants to pretend this corporate greed is some new revelation that only started happening with Democrat Presidents.
"I am not an American ... In my view premarital sex should be illegal ...(there are) mentally challenged people with special needs like myself- Ajax18
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Re: March 10, 2023 - The Next Black Date in Economics?

Post by Hawkeye »

Hell Just Froze Over
Waters: I Can’t Say Trump Rollbacks Caused SVB Collapse, It’s Too Early and They Were Invested in a Lot of Startups


On Monday’s broadcast of CBS’ “Red & Blue,” House Financial Services Committee Ranking Member Rep. Maxine Waters (D-CA) stated that she hasn’t come to any conclusions on whether regulatory rollbacks under the Trump administration caused the collapse of Silicon Valley Bank (SVB), there is work still to be done to see what steps need to be taken in response to the collapse, and noted that the bank was invested in a lot of startups.

Host Caitlin Huey-Burns asked, “Sen. Elizabeth Warren (D-MA) has attributed this to the rollback of regulations in 2018 under the Trump administration, do you agree with that?”

Waters answered, “Well, let me just say this: The rollback was troublesome for me and some of us who worked on Dodd-Frank reforms. However, we have to take a look at what is happening in our world today. For example, we have these startups. They are different in terms of seeking out support and loans. We have banks that don’t deal with them directly because they don’t understand some of this creativity. And it’s not easy for the startups to get loans, and what we saw was Silicon Valley Bank that was the go-to bank for these startups and they were able to support them. Many have become successful. They have created jobs. The bank was handling payroll. And we wanted to make sure that the people and the staffs that are in these startups get paid, and we’ve done that. And so, I think we’re going to look at all of this. And we’re going to make some decisions. I’m not at any conclusions now about what we will do, what we won’t do. But I am very much focused on and relieved that we’ve done an extraordinary job in a short period of time and that we will work to see if we have re-define risk, if we need to have more stress tests, and whether or not we need to make sure there’s not the kind of deregulation that would cause a collapse by a bank.”

https://www.breitbart.com/clips/2023/03 ... -startups/
The best part about this is waiting four years to see how all the crazy apocalyptic predictions made by the fear mongering idiots in Right Wing media turned out to be painfully wrong...Gasoline would hit $10/gallon. Hyperinflation would ensue.
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