The Collapse of SVB & The Run on Banks
By Nate Burruano
On Friday, the Silicon Valley Bank (SVB) Collapsed & Was Taken Over by the FDIC.
The reason for this was due to an increase in interest rates, which caused the bank to experience non-cash losses on their bond portfolio. As a result, their shareholder equity decreased, and their loan book worsened. Additionally, depositors were able to find higher yields in treasuries, causing a decrease in deposits. This situation led to a bank run, which caused panic among investors and individuals withdrawing their money from regional banks.
The Federal Reserve responded by implementing a multi-billion-dollar bailout to the banking industry. Banks are allowed to post collateral using treasuries, and borrow against it using the par value of the treasuries. This incentive encourages banks to take on more risk, with zero downside.
This free money may lead to higher inflation and quantitative easing, and there is a possibility that other regional banks may also collapse in the next few months. If this happens, it may cause a financial crisis, leading to the Fed printing more money and causing hyperinflation and the destruction of the US dollar.
This is a critical moment in financial markets, and it is essential to own real assets at this time. Eventually, the effects of zero percent interest rates and high debt loads will catch up with us.
GOLD 0.00%↑ SLV 0.00%↑ SPY 0.00%↑ QQQ 0.00%↑ GS 0.00%↑ JPM 0.00%↑ BAC 0.00%↑ C 0.00%↑ VTI 0.00%↑ BLK 0.00%↑ SQ 0.00%↑ WFC 0.00%↑ USB 0.00%↑ MS 0.00%↑ TD 0.00%↑
