Fitch warns it may be forced to downgrade dozens of banks, including JPMorgan Chase
10 Replies to “Everything Is Fine”
Time for all banks to increase their executive bonuses?
As I understand it, this is caused by many people and institutions taking out a lot of short-term debt on the assumption that low interest rates would last forever. When interest rates started to rise in early 2022 in order to combat inflation, those entities found themselves in a cash crunch, and loan defaults started to rise, putting pressure on banks’ liquidity.
The good news is that inflation is falling, which will give federal banks some freedom to lower interest rates next year.
As one who went mostly cash a number of years ago I want a return on my money. I am tired of the 1or 2 % return. I lived and worked with mortgages that never went below 8.25% and paid up 14.5 %, the nation and people were prosperous. Too much government has screwed people too long.
Put in 100 hours to study Bitcoin. Listen to 3 different Bitcoin podcasters, a little bit of youtube, stay out of the shitcoin casino.
Then buy and self custody Bitcoin.
For banks, the issue is that Treasury rules say that their reserves must be made up of “high quality bonds” which is usually various government bonds. Those rules also say that in your balance sheet, bonds which you plan to hold to maturity, do not have to considered under the “mark to market” rules, and can instead be valued based on their face value rather than their current value. When the fed started raising rates, it devalued a lot of those bonds that had long time frames, which would have been fine, if the bank had 10, 20 or 30 years before they needed to pay them out, but it made some people skittish when they looked at balance sheets and saw that the amount of potential losses in the Hold to Maturity portion of the reserves exceeded what was available in the available for sale accounts, and no one wanted to be the last one out when a bank run started.
In the case of JP Morgan, they have about $216b in Available for Sale, and $425b in Hold to maturity securities that are sitting on a $36b unrealized loss according to their 2022 annual report.
Note also, the rate of inflation increase is falling, but the government will never allow deflation
Inflation is NOT falling, and for one very good reason: service inflation. Inflation on key foodstuffs, maybe. But high interest rates are deflationary in an industrial economy, but not in a service economy. Most Western countries are now service economies. For now.
Pretty soon we will wake up one morning and discover the world doesn’t need our overpriced, bull**** “consulting and advisory” services any longer. Then the **** will hit really the fan.
Hope you know how to hunt and grow food. Can you dress and skin a deer?
Bdsm, living a life as a hunter gatherer and some time farmer is an impossibility and a non-starter for billions of people.
Sounds like Fitch wants a raise too.
Do wonder Dimon said the US gov downgrade didn’t matter. He’s getting his next!
Trickle down economics.. Your government sucks then your bank sucks then your job sucks then your life sucks..
Who says it doesn’t work?..
Time for all banks to increase their executive bonuses?
As I understand it, this is caused by many people and institutions taking out a lot of short-term debt on the assumption that low interest rates would last forever. When interest rates started to rise in early 2022 in order to combat inflation, those entities found themselves in a cash crunch, and loan defaults started to rise, putting pressure on banks’ liquidity.
The good news is that inflation is falling, which will give federal banks some freedom to lower interest rates next year.
As one who went mostly cash a number of years ago I want a return on my money. I am tired of the 1or 2 % return. I lived and worked with mortgages that never went below 8.25% and paid up 14.5 %, the nation and people were prosperous. Too much government has screwed people too long.
Put in 100 hours to study Bitcoin. Listen to 3 different Bitcoin podcasters, a little bit of youtube, stay out of the shitcoin casino.
Then buy and self custody Bitcoin.
For banks, the issue is that Treasury rules say that their reserves must be made up of “high quality bonds” which is usually various government bonds. Those rules also say that in your balance sheet, bonds which you plan to hold to maturity, do not have to considered under the “mark to market” rules, and can instead be valued based on their face value rather than their current value. When the fed started raising rates, it devalued a lot of those bonds that had long time frames, which would have been fine, if the bank had 10, 20 or 30 years before they needed to pay them out, but it made some people skittish when they looked at balance sheets and saw that the amount of potential losses in the Hold to Maturity portion of the reserves exceeded what was available in the available for sale accounts, and no one wanted to be the last one out when a bank run started.
In the case of JP Morgan, they have about $216b in Available for Sale, and $425b in Hold to maturity securities that are sitting on a $36b unrealized loss according to their 2022 annual report.
Note also, the rate of inflation increase is falling, but the government will never allow deflation
Inflation is NOT falling, and for one very good reason: service inflation. Inflation on key foodstuffs, maybe. But high interest rates are deflationary in an industrial economy, but not in a service economy. Most Western countries are now service economies. For now.
Pretty soon we will wake up one morning and discover the world doesn’t need our overpriced, bull**** “consulting and advisory” services any longer. Then the **** will hit really the fan.
Hope you know how to hunt and grow food. Can you dress and skin a deer?
Bdsm, living a life as a hunter gatherer and some time farmer is an impossibility and a non-starter for billions of people.
Sounds like Fitch wants a raise too.
Do wonder Dimon said the US gov downgrade didn’t matter. He’s getting his next!
Trickle down economics.. Your government sucks then your bank sucks then your job sucks then your life sucks..
Who says it doesn’t work?..