sullat posted:

Yeah everyone knows that the best time to buy stock in a company is when you're panick-withdrawing all your money out of it.

spacemang_spliff posted:

lol I'm not a banker but it seems like if the FDIC is now insuring all deposits no matter how big then it's basically a blank check to do whatever no matter how risky. A billion dollars of deposits to speculate in PonziCoin? Why not you already got preemptively bailed out

spacemang_spliff posted:

lol I'm not a banker but it seems like if the FDIC is now insuring all deposits no matter how big then it's basically a blank check to do whatever no matter how risky. A billion dollars of deposits to speculate in PonziCoin? Why not you already got preemptively bailed out

Oglethorpe posted:

buy high, sell sober

Oglethorpe posted:

buy high, sell sober

Xaris posted:

Bar Ran Dun posted:

shareholders =! depositors

shareholders were nuked.

Oglethorpe posted:

buy high, sell sober

Bar Ran Dun posted:

shareholders =! depositors

shareholders were nuked.

FizFashizzle posted:

Forgive me, if this is wrong, or obvious, but I read that many of the start ups were required by their founders to park their money at SVB. Presumably, this money was coming from accounts that were already at SVB.

Doesn’t that just scream fraud?

Shipon posted:

the bank goes under BUT the depositors at least will likely be made fine through asset sales.

goochtit posted:

ScrubLeague posted:

Yeah man we've been in a recession since about 1976 they just chose different numbers to look at

err posted:

lol love yellen/jpow doing unprecedented poo poo

Woke Mind Virus posted:

So if the paper loss on treasuries for SVB isn't real anymore because they can get new loans from the fed, then why exactly are the shareholders screwed? Isn't this company worth something again?

shyduck posted:

BREAKING: the economy

Lessail posted:

drat i take a break to watch some hockey and we got a whole new thread and several pages of posts already

quote:

SERIES (Parts 1-4) TL/DR: We are at the end of a MASSIVE debt supercycle. This 80-100 year pattern always ends in one of two scenarios- default/restructuring (deflation a la Great Depression) or inflation (hyperinflation in severe cases (a la Weimar Republic). The United States has been abusing it’s privilege as the World Reserve Currency holder to enforce its political and economic hegemony onto the Third World, specifically by creating massive artificial demand for treasuries/US Dollars, allowing the US to borrow extraordinary amounts of money at extremely low rates for decades, creating a Sword of Damocles that hangs over the global financial system.

The massive debt loads have been transferred worldwide, and sovereigns are starting to call our bluff. Governments papered over the 2008 financial crisis with debt, but never fixed the underlying issues, ensuring that the crisis would return, but with greater ferocity next time. Systemic risk (from derivatives) within the US financial system has built up to the point that collapse is all but inevitable, and the Federal Reserve has demonstrated it will do whatever it takes to defend legacy finance (banks, broker/dealers, etc) and government solvency, even at the expense of everything else (The US Dollar).

The Inflation Serpent


To most citizens living in the West, the concept of a collapsing fiat currency seems alien, unfathomable even. They regard it as an unfortunate event reserved only for those wretched souls unlucky enough to reside in third world countries or under brutal dictatorships.

Monetary mismanagement was seen to be a symptom only of the most corrupt countries like Venezuela- those where the elites gained control of the Treasury and printing press and used this lever to steal unimaginable wealth while impoverishing their constituents.

However, the annals of history spin a different tale- in fact, an eventual collapse of fiat currency is the norm, not the exception.

In a study of 775 fiat currencies created over the last 500 years, researchers found that approximately 599 have failed, leaving only 176 remaining in circulation. Approximately 20% of the 775 fiat currencies examined failed due to hyperinflation, 21% were destroyed in war, and 24% percent were reformed through centralized monetary policy. The remainder were either phased out, converted into another currency, or are still around today.


The average lifespan for a pure fiat currency is only 27 years- significantly shorter than a human life.

Double-digit inflation, once deemed an “impossible” event for the United States, is now within a stone’s throw. Powell, desperate to maintain credibility, has embarked on the most aggressive hiking schedule the Fed has ever undertaken. The cracks are starting to widen in the system.

One has to look no further than a simple graph of the M2 Money Supply, a measure that most economists agree best estimates the total money supply of the United States, to see a worrying trend:


The trend is exponential. Through recessions, wars, presidential elections, cultural shifts, and even the Internet age- M2 keeps increasing non-linearly, with a positive second derivative- money supply growth is accelerating.

This hyperbolic growth is indicative of a key underlying feature of the fiat money system: virtually all money is credit. Under a fractional reserve banking system, most money that circulates is loaned into existence, and doesn't exist as real cash- in fact, around 97% of all “money” counted within the banking system is debt, in one form or another. (See Dollar Endgame Part 3)

Debt virtually always has a yield- that yield is called interest, and that interest demands payment. Thus, any fiat money banking system MUST grow money supply at a compounding interest rate, forever, in order to remain stable.

Debt defaulting is thus quite literally the destruction of money- which is why the deflation is widespread, and also why M2 Money Supply shrank by 30% during the Great Depression.

This process repeats ad infinitum, perpetually compounding loan creation and thus money supply, in order to prevent systemic defaults. The system is BUILT for constant inflation.

In the last 50 years, only about 12 quarters have seen reductions in commercial bank credit. That’s less than 5% of the time. The other 95% has seen increases, per data from the St. Louis Fed.


Even without accounting for debt crises, wars, and government defaults, money supply must therefore grow exponentially forever- solely in order to keep the wheels on the bus.

The question is where that money supply goes- and herein lies the key to hyperinflation.

In the aftermath of 2008, the Fed and Treasury worked together to purchase billions of dollars of troubled assets, mortgage backed securities, and Treasury bonds- all in a bid to halt the vicious deleveraging cycle that had frozen credit markets and already sunk two large investment banks.

These programs were the most widespread and ambitious ever- and resulted in trillions of dollars of new money flowing into the financial system. Libertarian candidates and gold bugs such as Peter Schiff, who had rightly forecasted the Great Financial Crisis, now began to call for hyperinflation.

The trillions of printed money, he claimed, would create massive inflation that the government would not be able to tame. U.S. debt would be downgraded and sold, and with the Fed coming to the rescue with trillions more of QE, extreme money supply increases would ensue. An exponential growth curve in inflation was right around the corner.

Gold prices rallied hard, moving from $855 at the start of 2008 to a record high of $1,970 by the end of 2011. The end of the world was upon us, many decried. Occupy Wall Street came out in force.

However, to his great surprise, nothing happened. Inflation remained incredibly tame, and gold retreated from its euphoric highs. Armageddon was averted, or so it seemed.

The issue that was not understood well at the time was that there existed two economies- the financial and the real. The Fed had pumped trillions into the financial economy, and with a global macroeconomic downturn plus foreign central banks buying Treasuries via dollar recycling, all this new money wasn’t entering the real economy.
...
Instead, it was trapped, circulating in the hands of money market funds, equities traders, bond investors and hedge funds. The S&P 500, which had hit a record low in March of 2009, began a steady rally that would prove to be the strongest and most pronounced bull market in history.

The Fed in the end did achieve extreme inflation- but only in assets.

Without the Treasury incurring significant fiscal deficits this money did not flow out into the markets for goods and services but instead almost exclusively into equity and bond markets.

The great inflationary catastrophe touted by the libertarians and the gold bugs alike never came to pass- their doomsday predictions appeared frenetic, neurotic.

Instead of re-evaluating their arguments under this new framework, the neo-Keynesians, who held the key positions of power with Treasury, the Federal Reserve, and most American Universities (including my own) dismissed their ideas as economic drivel.

The Fed had succeeded in averting disaster- or so they claimed. Bernanke, in all his infinite wisdom, had unleashed the “Wealth Effect”- a crucial behavioral economic theory suggesting that people spend more as the value of their assets rise.

An even more extreme school of thought emerged- the Modern Monetary Theorists- who claimed that Central Banks had essentially discovered a ‘perpetual motion machine’- a tool for unlimited economic growth as a result of zero bound interest rates and infinite QE.

The government could borrow money indefinitely, and traditional metrics like Debt/GDP no longer mattered. Since each respective government could print money in their own currency- they could never default.

The bill would never be paid.

Or so they thought.

Yudo posted:

This banking thing seems pretty easy we should all get into it.