broadsword
Brigadier
No need to hide. According to Brandon, "FACT SHEET: The Biden Economic Plan Is Working".
American Economics Thread
- Thread starter Bernard
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No need to hide. According to Brandon, "FACT SHEET: The Biden Economic Plan Is Working".
"Stronk as Hell"
#BrandonDeliversBankruptcies
This is only for NY state no?
Yes only NY manufacturing, you can find other information when searching for this that shows historical US recessions correspond with similar survey results.
What is happening at American and European banks is that the ultra low yielding assets on their balance sheet is starting to cause problems because of the high inflation. SVB collapsed in large part due to its business model that catered to startups and crypto currencies that have fared badly over the past two years. But it's also because when they try to sell their assets to raise money they couldn’t find any buyers as no one wanted to pay the price they were asking.
This is the result of more than a decade of 0% interest rate and QE that has suppressed the return on loans given by banks. And not just bonds but also car loans and mortgages.
Now with the higher inflation all these low yielding assets on their books are losing money due to the loss of purchasing power. And If they want to sell these assets they will lose even more as they have to give the buyers huge discounts.
This is not just affecting banks but also hedge funds, mutual funds, pension funds and even just household investors.
This is also causing secondary problems for them. As a result of these low yielding assets they can’t afford to give their depositors higher interest on their savings. And now these depositors are taking their money out of the banks and investing in higher returning ventures like government bonds that now have a much higher yield or precious metals and commodities.
There is more bad news for the banks as people with adjustable mortgages, car loans and credit card debts are all going to see their interest payment on these debts go up and that means more defaults are coming.
I believe we are at the start of the endgame here. The financial system is continuing to lose money while the central banks can’t lower rates without causing more inflation and potentially crashing their currencies.
I believe what the FED is doing right now is to ease/pivot in a thousand cuts. They are announcing a series of smaller initiatives that can’t be considered a pivot from their stated goal of fighting inflation but that are nonetheless supportive of the market.
It's not going to be enough and the crisis will persist and they will have to in the end go back to 0% interest rate and QE or else the entire financial system and economy will collapse.
But if they do do so then what is going to collapse is the value of their currencies and inflation will soar and destroy the economy that way.
This is the result of more than a decade of 0% interest rate and QE that has suppressed the return on loans given by banks. And not just bonds but also car loans and mortgages.
Now with the higher inflation all these low yielding assets on their books are losing money due to the loss of purchasing power. And If they want to sell these assets they will lose even more as they have to give the buyers huge discounts.
This is not just affecting banks but also hedge funds, mutual funds, pension funds and even just household investors.
This is also causing secondary problems for them. As a result of these low yielding assets they can’t afford to give their depositors higher interest on their savings. And now these depositors are taking their money out of the banks and investing in higher returning ventures like government bonds that now have a much higher yield or precious metals and commodities.
There is more bad news for the banks as people with adjustable mortgages, car loans and credit card debts are all going to see their interest payment on these debts go up and that means more defaults are coming.
I believe we are at the start of the endgame here. The financial system is continuing to lose money while the central banks can’t lower rates without causing more inflation and potentially crashing their currencies.
I believe what the FED is doing right now is to ease/pivot in a thousand cuts. They are announcing a series of smaller initiatives that can’t be considered a pivot from their stated goal of fighting inflation but that are nonetheless supportive of the market.
It's not going to be enough and the crisis will persist and they will have to in the end go back to 0% interest rate and QE or else the entire financial system and economy will collapse.
But if they do do so then what is going to collapse is the value of their currencies and inflation will soar and destroy the economy that way.
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At our company this morning people getting canned left and right, I work in IT dept of a financial firm. Some folks were literally in the middle of Teams conference calls when the order came down to chop their AD access etc... they thought the had merely "lost network connection" and was still trying to reconnect, many have been here for over a decade which is a long ass time in IT industry
The bonds navs problem is call interest rate risk and major banks dont go all in with heavy allocation into particular yield and duration to the extent of regional niche banks like SVB, they hold all kinds of bonds/securities.
SVB's problem is 2nd fold, other than the huge concentration of low yield 1.9% T bills holding as you mention, and coupled with the fact that of their client base being mostly cash-burning startups, and dry funding condition starting 2021 lead to cash withdrawal as opposed to typical inflow due to cash injection from fundings. That lead SVB to sell off TBills at loss to generate liquidity, the negative news that follow lead to a bank run which finally cause the collapse.
You don't see that anymore in the younger generation of IT workers like me.
Many IT worker company hop every 3~4 years and get a nice raise out of it or a better negotiation position with your current boss.
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