Silicon Valley Bank (SVB) Collapses

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The Dow was up over 400 and I went to the store. Just got back and it’s a lot less.

One day.
The Dow Jones is about even for the day. I don't much follow the Dow as it is 30 companies; too small a sample size. Prominant companies, by definition, but I tend to follow broader indexes, especially for shorter term trends.

Bottom line, for me anyways, is we seem to have averted a big hit from the SVB collapse. Most of our posters here were forecasting a gloomy outcome, right? Sometimes being wrong is a good thing.
 
The banking system fund is making the depositers whole; that's what it is for. I am not sure what you mean here.
What banking system fund? You mean the FDIC? The FDIC is insurance which all banks pay into, and the max payout is $250K per account. I am fine with FDIC covering losses up to $250K, but they have promised everyone gets all their money including companies that had millions or potentially billions in their accounts.

Its not a banking system fund, and there is no such fund.
 
She was gone almost a year, and wasn't replaced. They didn't want a risk officer.
With relaxed regulations, the burden was reduced. Risk management was occuring, I'm sure. Effective risk management? Not so much.

I am certainly not saying I agree with this.
Plenty of blame to go around.
 
The Dow Jones is about even for the day. I don't much follow the Dow as it is 30 companies; too small a sample size. Prominant companies, by definition, but I tend to follow broader indexes, especially for shorter term trends.

Bottom line, for me anyways, is we seem to have averted a big hit from the SVB collapse. Most of our posters here were forecasting a gloomy outcome, right? Sometimes being wrong is a good thing.


I don’t think it’s over yet and neither does Moody’s.
 
What banking system fund? You mean the FDIC? The FDIC is insurance which all banks pay into, and the max payout is $250K per account. I am fine with FDIC covering losses up to $250K, but they have promised everyone gets all their money including companies that had millions or potentially billions in their accounts.

Its not a banking system fund, and there is no such fund.
The funding will come from loans from the newly created Bank Term Funding Program.
 
My bad...get 1000 powerball winners together...bam...you get the idea...

In the end, all we have to do is maintain GDP growing at a faster rate than debt payments over time - we do not have to "payoff" the debt...ever....we will always issue more.
Yes, to put it on a human scale, I thought of someone buying a new house for $12,000 in a middle-class neighbourhood c. 1955.

They put $2,000 down, and started with a mortgage of $10,000.

Instead of paying down the mortgage, they added 1% to it annually. The mortgage would now have increased to approximately $20,000 - but the house is now worth $600,000.

They're fine - they have lots of equity, and have no trouble making payments on a $20,000 loan.

But what if they had added 5% to the mortgage balance each year?

Now they owe about $276,000. They still have lots of equity, and can make the payments ONLY IF the interest rates are low.

How about 10%? Now they owe $6.5M, are way underwater, and can't pay the mortgage regardless of what rates are.

That's the miracle of compound interest, which can work for you or against you.

********

Keynesian economics is based on the government running a surplus in good times, saving up the surpluses, and deficit spending (i.e. deleting the nest egg) to stimulate the economy in hard times.

But instead, our governments tend to run deficits at all times, and thereby amass a huge national debt.

When we get to the point where the accumulated debt starts to approach our worth, lenders need more security as they are taking more risk, and we have to pay higher interest rates on the debt.

The current debt loads of Canada and the U.S.scare me.
 
Yes, to put it on a human scale, I thought of someone buying a new house for $12,000 in a middle-class neighbourhood c. 1955.

They put $2,000 down, and started with a mortgage of $10,000.

Instead of paying down the mortgage, they added 1% to it annually. The mortgage would now have increased to approximately $20,000 - but the house is now worth $600,000.

They're fine - they have lots of equity, and have no trouble making payments on a $20,000 loan.

But what if they had added 5% to the mortgage balance each year?

Now they owe about $276,000. They still have lots of equity, and can make the payments ONLY IF the interest rates are low.

How about 10%? Now they owe $6.5M, are way underwater, and can't pay the mortgage regardless of what rates are.

That's the miracle of compound interest, which can work for you or against you.

********

Keynesian economics is based on the government running a surplus in good times, saving up the surpluses, and deficit spending (i.e. deleting the nest egg) to stimulate the economy in hard times.

But instead, our governments tend to run deficits at all times, and thereby amass a huge national debt.

When we get to the point where the accumulated debt starts to approach our worth, lenders need more security as they are taking more risk, and we have to pay higher interest rates on the debt.

The current debt loads of Canada and the U.S.scare me.
I don't disagree with anything you've stated. I was just trying to make the point that "paying off" the debt, as if there could ever be a day where the US has zero debt or have no need to issue debt, isn't only fantasy but not even remotely how the system is designed to operate. We will always issue debt to fund the government and what we we're really talking about are rates of increases between debt and GDP. Yes, those rates of increase are obviously skewed towards debt increasing much faster than GDP and that needs to change.
 
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I don't disagree with anything you've stated. I was just trying to make the point that "paying off" the debt, as if there could ever be a day where the US has zero debt or have no need to issue debt, isn't only fantasy but not even remotely how the system is designed to operate. We will always issue debt to fund the government and what we were really talking about are rates of increases between debt and GDP. Yes, those rates of increase are obviously skewed towards debt increasing much faster than GDP and that needs to change.
Nor was I disagreeing with you - I went off on a bit of a rant there.

I agree that debt can grow safely if it's a constant or diminishing % of GDP.

Unfortunately, governments and individuals were lulled into thinking that the abnormally low interest rates of the last decade or so until recently were here to stay.

The recent increases, while necessary to tame inflation, will challenge governments' ability to manage the debt.
 
The black swans will eventually come home to roost. Get ready folks.
I'm trying to decide if it's more fun to be doom and gloom or hopelessly optimistic?
My grandfather was a very smart engineer. Starting around 1997 he started talking about Y2K and building a stockpile of food and supplies in basement for in impending end of society as we know it. He warned us. He begged us to take it seriously. He sent us articles to read. He really believed it was going to be the end of society.

I partied REALLY hard that New Years as the ball dropped and all the lights stayed on.

I learned that day it's really easy to be a doom and gloom person and really believe it. I also learned that for the most part humanity figures it out.
 
A better question is who are we in debt with?
Important point!

Around 1987, our provincial finance minister was proud of having gotten a very good interest rate on money borrowed from Japan.

When the Yen appreciated mightily (30%?) against the C$, the deal didn't look nearly as good.
 
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