The experts are in charge, so relax.
The twin crashes in US commercial real estate and the US bond market have collided with $9 trillion uninsured deposits in the American banking system. Such deposits can vanish in an afternoon in the cyber age.
The second and third biggest bank failures in US history have followed in quick succession. The US Treasury and Federal Reserve would like us to believe that they are “idiosyncratic”. That is a dangerous evasion.
Almost half of America’s 4,800 banks are already burning through their capital buffers. They may not have to mark all losses to market under US accounting rules but that does not make them solvent. Somebody will take those losses.
“It’s spooky. Thousands of banks are underwater,” said Professor Amit Seru, a banking expert at Stanford University. “Let’s not pretend that this is just about Silicon Valley Bank and First Republic. A lot of the US banking system is potentially insolvent.”
The full shock of monetary tightening by the Fed has yet to hit. A great edifice of debt faces a refinancing cliff-edge over the next six quarters. Only then will we learn whether the US financial system can safely deflate the excess leverage induced by extreme monetary stimulus during the pandemic.
It costs $17,500 to insure $1 million of US debt against default for a year (the contract is actually priced in euros.) That’s up roughly 10-fold since the beginning of 2023, and compares to less than $400 for Germany, per Bloomberg.
— unusual_whales (@unusual_whales) May 4, 2023
Hold until maturity works until you have to sell. You were actually insolvent all along, but the regulators have “fixed” things so that a financial institution can legally hide their insolvency.
In a world in which biological males can become female simply by believing that they are, is it any wonder that the primacy of consciousness has so many widespread applications?
Don’t identify Debt as Debt, identify it as a deferred asset. Even better, who’s to say if a debt is a debt or an asset an asset- let them decide what they want to be and then call them that, maybe it changes the next day. Who are you to judge?
So what if debt or assets are abstract intangibles that can’t speak for themselves; hire a abstract diversity officer than can speak for them!
The banking reg reforms were modified to eliminate a stress test covering the possible effects of interest rate rises on bank solvency.
I’m sure it was eliminated because the banks found it inconvenient to their business model.
The Biden administration is the most incompetent in human history.
Not incompetent Art, nihilistic. The goal is to financially destroy America from within. Engineered inflation is the excuse.
Raising interest rates to fight supply side caused inflation is not going to stop it (unless you destroy the whole economy)
Increasing production will reduce inflation, reducing energy costs will also reduce it.
Obama scolded Americans that we … “needed to get off our high horse”. Well … this is what “getting off our high horse” looks like. Crushing our economy and all financial assets. We will own nothing, and our nothing won’t be worth anything. Yeayyy nihilist communists.
Funny how Obama said “you didn’t build that” and yet we are expected to pay for it anyway.
Remember when the GOP warned the dems about this spending spree they were on.
But Nooooooo.
Inflation is not caused by American buying stuff. It’s caused by the Government spending!
Ken Gee
Butt Snowden is bad, amIrite?
Bingo
There are 3-4 banks down 30-50% today. Looks like the roller coaster just left the station.
And with lots of on-and-off trading halts with the affected banks. Gold and bonds are up today; equities are way down.
the fed was beating the drum of raising interest rates for a long time, yet these banks weren’t willing to take the hit of selling the long bonds at the first rate hike, and instead held on to them, largely due to the bank rules on how to treat short term holdings under mark to market, versus long term hold to maturity bonds.
the fed has made the decision to wipe out shareholders by seizing the banks and then selling them to JP Morgan, at a much discounted rate. This is corrupt at a minimum, and possibly illegal
Are Canadian banks well managed? My wife has an account for each of our 3 granddaughters at CIBC. They stopped the type of account she had and she had to open new accounts. The balances were transferred and interest calculated up to the closure. Well that interest was 1 cent. My wife has just received 3 cheques in the mail for 1c each. Each was in a separate envelope and postage is ?. Yes she will deposit these cheques and cost the CIBC to process them.
Frankly, a credit crunch that allowed car loans of no greater than $30k, and eliminated financing of useless , redundant commercial real estate would be a huge blessing. And, tightening up lending for poor credit risks on residential mortgages would also alleviate a credit crunch.
If they then added large tax credits ( 90%, 80% ? ) for productive investment, the earnings of millions of working folk would soon dramatically improve.
Tax credits for “productive investment”? This explains global warming and green energy. You want more of that? Reduce the size of government by 50%. Stop picking the winners and losers. Let Alberta export its energy via BC ports. Did you know that Atlantic Canada has the first commercial space port in North America? Who the heck is paying for that one?
Vowg – Green energy is non productive.