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Silicon Valley Bank collapse (among others), more than just a small private bank collapses and has implications for tech and media.

FAST6191

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Been unfolding for a few days now but might as well have a post here.

Silicon Valley Bank is (or perhaps was) a relatively unknown bank to the public at large but it was not some fly by night regional bank and had some 216 billion US dollars of assets under management, and was in the top 20 banks in the US having been around for some 40 years.
The FDIC does insure bank deposits... but only up to 250 thousand USD. Fine for the average man on the street ( https://theconversation.com/america...t-means-as-a-potential-recession-looms-196333 ) but when deposits are measured in tens of millions for some of their customers... yeah. Examples of losses are Roku (the streaming service) had 487 million in there which is likely gone, Roblox (ask the kids) 150 million, Circle (runners of a stablecoin USDC, these days one of the bigger avenues for cryptocurrency liquidity) apparently being out some 3.3 billion. The US government is being careful not to use the word bailout (instead "Bank Term Funding Program" appears to be the euphemism) but we shall see. Those losses are big, possibly company killers, but many would have split their assets among other banks so it may be a slow bleed out instead.
Contagion is a term you will hear as a result of this, and it appears there is some with various banks being drained of funds by customers not wanting to lose their deposits, and it remaining to be seen how much reassurance the bail outs/lending programs will have on this.

Just prior to the bigger headline grabber of SVB is Silvergate which collapsed just before. On top of this the housing market is dropping rather fast (house prices, time on sale, home builders, mortgage rates/requirements...) and this time around it seems auto loans (as in cars and such) are also likely to be a bubble possibly already popping to add to the fun.

We will probably not know the complete picture for a while but the main story thus far is a small run necessitated the sale of bonds (sometimes required to be purchased by them by law) which the price right now is in the toilet (your old 10 year bonds at a few percent being worth far less than the 7 or more percent offered for a short one today, even more so with inflation being what it is), not so bad when they could have been held until maturity and all would have been fine but selling them ahead of that timeline meant a loss that everybody knows about, rinse and repeat.

Videos and links from a variety of perspectives.


Edit. Follow up dropped







https://www.independent.co.uk/news/...icon-valley-americans-joe-biden-b2299973.html
https://www.forbes.com/sites/conorm...collapse-the-biggest-bank-failure-since-2008/

Thoughts? Anybody personally troubled by things happening here?
 
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caipora

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Capitalism has nothing to do with it. Government manufactured inflation, causing devaluation of government bonds, did this. And the bailout that's not a bailout is just kicking the can of a worse collapse down the road a short way.
> Banks in the US breaking apart
> Nothing to do with capitalism
 

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Capitalism has nothing to do with it. Government manufactured inflation, causing devaluation of government bonds, did this. And the bailout that's not a bailout is just kicking the can of a worse collapse down the road a short way.
and who is to blame i would rather see the political affiliation of the heads of the reserve who are jacking up intrest rates like a heroin junkie or a chain smoker,my guess is "what is the GOP alex? (rip) thats the problem there they think all americans are stupid and point to democrats thinking no one will notice that they themselves are to blame sure maybe the average uneducated trumper but not every red is stupid ...right?
 
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Xzi

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Glad we're not going the taxpayer-funded bailout route this time around, that should never be an option unless they're willing to submit to public ownership. I also find it funny that many of the same people who lobbied against student loan forgiveness are now aggressively demanding the government come to their aid in this scenario.
 

Marc_LFD

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This was obviously coming, question was, who'd go down first. FDIC covered it this time, but they won't be able to cover everyone so if or when more banks do collapse people need to smarten up and withdraw their money while keeping some for the bills.

CDIC and FSCS are more or less on the same boat, as well as the others (from Western countries).

Now imagine going cashless and using CBDC (how will you use CBDC when there's no electricity? ya can't). lol
 

FAST6191

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and who is to blame i would rather see the political affiliation of the heads of the reserve who are jacking up intrest rates like a heroin junkie or a chain smoker,my guess is "what is the GOP alex? (rip) thats the problem there they think all americans are stupid and point to democrats thinking no one will notice that they themselves are to blame sure maybe the average uneducated trumper but not every red is stupid ...right?
Is that not a rather simplistic overview?

Raising rates is about the only tool they have to bring inflation down, something that is a result of nice bit of money printing during the whole stay in your home citizen bit for which all I really saw from the US left was "more more more" (possibly even doing just that -- California having their own thing, more to this day if we go with the inflation relief thing which only adds fuel to the fire, in addition to baseline stimmy cheques) which is a bit of a pity if they are to be looked to as a model of fiscal responsibility.
It will necessarily crush the economy, this being part of it really, and there is much to be said about the timings as well; raising rates now will hurt really badly, raising rates faster earlier would potentially have allowed the whole soft landing fantasy to be something closer to reality but no they play to the stock market.
All that said you seem to be caught on a left-right dichotomy which is cute really but not a particularly useful one -- left-right is meaningless in the face of people that want to control you and dominate you with their money and approach to the world. Spot them before doing the straw man thing.
 
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Marc_LFD

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and who is to blame i would rather see the political affiliation of the heads of the reserve who are jacking up intrest rates like a heroin junkie or a chain smoker,my guess is "what is the GOP alex? (rip) thats the problem there they think all americans are stupid and point to democrats thinking no one will notice that they themselves are to blame sure maybe the average uneducated trumper but not every red is stupid ...right?
People still think it's about political party one or two. If you'd dive into doing research you'd realize right-wing and left-wing MSM are owned by the same corporation, for example.

QJqfk9j.jpg


Well, divide and conquer sure is working and your post is proof of that.
 
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Hanafuda

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and who is to blame i would rather see the political affiliation of the heads of the reserve who are jacking up intrest rates like a heroin junkie or a chain smoker,my guess is "what is the GOP alex?


https://www.federalreserve.gov/aboutthefed/bios/board/

Looks like the current Federal Reserve Board of Governors is 3 R and 3 D. A couple names from the list don't have their political affiliation listed on Wikipedia, but probably safe to assume that if appointed to the Board by Trump, then R. And if appointed by Biden, then D. But that "guess" is only necessary for a couple of them.
 
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chrisrlink

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Is that not a rather simplistic overview?

Raising rates is about the only tool they have to bring inflation down, something that is a result of nice bit of money printing during the whole stay in your home citizen bit for which all I really saw from the US left was "more more more" (possibly even doing just that -- California having their own thing, more to this day if we go with the inflation relief thing which only adds fuel to the fire, in addition to baseline stimmy cheques) which is a bit of a pity if they are to be looked to as a model of fiscal responsibility.
It will necessarily crush the economy, this being part of it really, and there is much to be said about the timings as well; raising rates now will hurt really badly, raising rates faster earlier would potentially have allowed the whole soft landing fantasy to be something closer to reality but no they play to the stock market.
All that said you seem to be caught on a left-right dichotomy which is cute really but not a particularly useful one -- left-right is meaningless in the face of people that want to control you and dominate you with their money and approach to the world. Spot them before doing the straw man thing.
so raising rates fights inflation? coulda fooled me personally its on companies,landlords doing this look at Arazona tea least time i checked their single can of tea was 99 cent (plus tax) and still is 99 cent afaik they havent changed their price for their other products either AND ARE STILL SUCESSFUL so it boils down to actual greed under the guise of inflation (not denying it exist just putting it out that its as artifical as sweet&low) also the $70 games started way before the inflation scare (still ddon't agree with it like most of you) but fact is folks EA started the $70 video game hype train before inflation started so any argument of "oh inflation increased new game prices to $70 USD" is wrong
 

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so raising rates fights inflation? coulda fooled me personally its on companies,landlords doing this look at Arazona tea least time i checked their single can of tea was 99 cent (plus tax) and still is 99 cent afaik they havent changed their price for their other products either AND ARE STILL SUCESSFUL so it boils down to actual greed under the guise of inflation (not denying it exist just putting it out that its as artifical as sweet&low) also the $70 games started way before the inflation scare (still ddon't agree with it like most of you) but fact is folks EA started the $70 video game hype train before inflation started so any argument of "oh inflation increased new game prices to $70 USD" is wrong
Inflation is measured on a basket of products, not over a single product. Inflation is not caused by "greed" as well, it is the deterioration of the value of the money, and the cause of that is over printing of money (note that "printing" literal).

I really doubt that video games are on the common basket used to measure inflation on USA, or anywhere on that matter. Tea is measured on common basket for inflation in many societies, but I believe that it is out of USA's one. (cultural habits are criteria for that).

Edit: here is the weighted USA basket for 2021
FT_22.01.14_InsideCPI_1.png
 

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Despite these challenges, SVB has remained a prominent player in the technology and life sciences industries. The bank's close relationships with startups and venture capital firms have helped it to remain a key player in Silicon Valley's finance ecosystem.
 

FAST6191

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so raising rates fights inflation? coulda fooled me personally its on companies,landlords doing this look at Arazona tea least time i checked their single can of tea was 99 cent (plus tax) and still is 99 cent afaik they havent changed their price for their other products either AND ARE STILL SUCESSFUL so it boils down to actual greed under the guise of inflation (not denying it exist just putting it out that its as artifical as sweet&low) also the $70 games started way before the inflation scare (still ddon't agree with it like most of you) but fact is folks EA started the $70 video game hype train before inflation started so any argument of "oh inflation increased new game prices to $70 USD" is wrong
That is the theory.

You want rates low during the good times (though taxes high in some scenarios) such that money is available for those that need it for fairly cheap.

During periods of high inflation, like what would happen after you dump a whole load of new money onto the market ( http://www.shadowstats.com/alternate_data/money-supply-charts , all that nice money given out as economy stimulation cheques while being told to stay in your house), you raise the rates (and maybe lower taxes using the surplus from the good times to cover the losses, not that anybody does mind you) such that people instead put their money into the now quite lucrative government bonds (if the US government goes bankrupt, and technically it can't as it could just print more money, we are all fucked so you can assume it will never fail and instead take that 6% or whatever it is at -- better than stock market this year so far) and don't spend it on goods and services thus reducing the option for people to charge that little bit more, who passes the cost on, who passes the cost on...
Couple of choice videos




As far as item remaining the same then cost of manufacture (it is basically water after all which the only thing cheaper is air) vs price it is sold at, and a concept called pain points. If they sell more as it is cheaper and people default to that then they make more. A risky gambit but one that can do things.
https://nypost.com/2022/10/14/arizo...-to-keep-99-cent-price-for-as-long-as-we-can/ also notes they are redesigning the cans to make it cheaper to manufacture.
You also want to watch for shrinkflation in all this as well, or if you prefer there is a reason the large jars of nutella are now 950G rather than the 1000G they were at a couple of years ago.

On 60 and 70 dollar games then if games were similar prices back in 1995 (could be earlier still but let's go with that)
https://christmas.musetechnical.com/ShowCatalogPage/1995-Sears-Christmas-Book/0188
https://www.usinflationcalculator.com/ notes it is the better part of $120 today.
Also I am far from one agreeing to such prices. I think they should be $15 like a CD or DVD. Similarly games don't cost more to make give or take inflation in wages, and frankly increased power in computers offsets that considerably (you needed to be a good coder in the 16 bit and older era, any just about passed java school could make such a thing today and have power to spare) but it is that game companies choose to spend more on making them.
 

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There’s more to this story than meets the eye. Yellen’s recent comments in regards to FDIC bank deposit insurance can be construed as full protection, but only for large entities that can create a systemic risk in the event of a bank run. That leaves small community banks in the dust, it’s an existential threat to all the small players and the government blatantly picking winners and losers based on arbitrary metrics.
 

FAST6191

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Yeah that is particularly mask off, and yet we still have people thinking the government is on their side (70 billion, a fraction of what will be spent here would have given each Flint MI resident yes resident not household 200000 to relocate, most houses being considerably south of that even before). I had hoped we would see a few tech companies feel the burn though, guess we will just have to wait for nature to take its course.

The work of fiction regarding the other banks being the ones to do the bail out (being threatened to do so) and it not costing the tax payer (give or take the "nothing in this world for free" increase in fees to bank users, which tend to be tax payers) was a better effort in propaganda than I thought some of those were capable of though.

Related to this watching Credit Suisse


Equally some people are making out like bandits with this one

9 billion of assets for a dollar.
 

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Yeah that is particularly mask off, and yet we still have people thinking the government is on their side (70 billion, a fraction of what will be spent here would have given each Flint MI resident yes resident not household 200000 to relocate, most houses being considerably south of that even before). I had hoped we would see a few tech companies feel the burn though, guess we will just have to wait for nature to take its course.

The work of fiction regarding the other banks being the ones to do the bail out (being threatened to do so) and it not costing the tax payer (give or take the "nothing in this world for free" increase in fees to bank users, which tend to be tax payers) was a better effort in propaganda than I thought some of those were capable of though.
It’s effectively a government take-over of the system. If large banks have government guarantees and small banks have guarantees from big banks, it effectively means that only big banks matter, they have no breaks in regards to risk management and they’re 100% reliant on the state that will bankroll them if they screw up. It’s a system that incentivises recklessness.
 

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