MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 904 votes

The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.

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Realtor · Longmont, CO · Member since 2021 · 577 posts · 631 votes
3y

If this was a crisis that happened because of risky investments I would agree. That being said, this is a crisis that was created because the bank chose the safest asset on earth (US treasury bonds) to put their depositors money into and the Fed kept rates low too long and then raised rates too fast, and focused on lagging indicators all the while knowing they risked collapsing the banking system. If the Fed does not step in, it is likely that there will be a rush on the banks, and these banks will not be able to liquidate assets fast enough to handle the pressure and collapse. As RE investors we like buying opportunities, but we should not like government created banking system failures. 

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Eric Bilderback:

    Same thing would happen to the businesses that held their deposits at SVB that happened to all the communities, businesses, families that worked and depended on a mill when they shut down logging or the same thing that happens when companies outsource production overseas and close whatever production factory.  You go bust and your community becomes depressed.  But hey at least they couldn't tell the folks in Silicon Valley they need to learn to code.  LOL 

    If mills and factories were integral to protecting our economy and securing our place as a world/economic superpower, and if they were going out of business due to external factors unrelated to their economic output, then I would agree the government should step in and protect them.


    Long story short, the bar should be set very high for when the government intervenes in private industry.  In my opinion, this particular situation met that high bar.  Most situations do not.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Bruce Woodruff:

    Protecting billionaire corporate business interests is not protecting 'the little guy'.

    Your argument that they are thereby saving thousands of jobs may be true, but that is a slippery slope to go down. Anyone could use that to justify almost anything......

    As I've written numerous times above, it's not just about protecting jobs -- it's about preserving US stature in the world by protecting an industry that allows us to maintain our standing as the world economic superpower.

    You may hate the billionaires, but their very existence is the by-product of a free-market economy that is second-to-none on this planet.

    Personally, I'd like to keep it that way.

    But again, I recognize that this is a complex issue and that there are plenty of opinions that make complete sense.  I like to think that mine is one of them...  ;)

  • Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    3y
    Quote from @J Scott:
    Quote from @Michael Wooldridge:

    So in other words your saying it doesn’t make sense to give up on services in our “services” economy? 
     

    If you want to secure your place as the world superpower short-term, you need to control the reserve currency.

    If you want to secure your place as the world superpower mid-term, you need to control innovation.

    If you want to secure your place as the world superpower long-term, you need to control education.

    The tech industry in the US is the second piece of that equation...


    If you want to get rich off the decline of your nation then you do exactly what Corporate America and Washington DC are doing to their country.  

    Give me a country full of family wage career jobs, moms that can afford to stay home with their kids, that is a country worth fighting even dying for.  I don't find bringing new innovation to the world inspiring and I sure don't agree with the mindset that views society as a giant economy.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Eric Bilderback:

    If you want to get rich off the decline of your nation then you do exactly what Corporate America and Washington DC are doing to their country.  

    Give me a country full of family wage career jobs, moms that can afford to stay home with their kids, that is a country worth fighting even dying for.  I don't find bringing new innovation to the world inspiring and I sure don't agree with the mindset that views society as a giant economy.

    There are a lot of things about this country that I dislike (including the corporate welfare and the political corruption on both sides), but as someone with kids, I have no choice but to hope that things get better (and do what I can to make them better, even in my own little way).

  • Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    3y
    Quote from @Michael Wooldridge:
    Quote from @Eric Bilderback:

    Same thing would happen to the businesses that held their deposits at SVB that happened to all the communities, businesses, families that worked and depended on a mill when they shut down logging or the same thing that happens when companies outsource production overseas and close whatever production factory.  You go bust and your community becomes depressed.  But hey at least they couldn't tell the folks in Silicon Valley they need to learn to code.  LOL 


    It’s about the question of scale and systemic impact. Might not be fair but life rarely is and it is logical.
     

     I get the argument the @J Scott is making.  I just think it is short sided but I am not sure I have articulated mine enough where he understands what I'm saying.  

  • Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    3y
    Quote from @J Scott:
    Quote from @Eric Bilderback:

    If you want to get rich off the decline of your nation then you do exactly what Corporate America and Washington DC are doing to their country.  

    Give me a country full of family wage career jobs, moms that can afford to stay home with their kids, that is a country worth fighting even dying for.  I don't find bringing new innovation to the world inspiring and I sure don't agree with the mindset that views society as a giant economy.


    There are a lot of things about this country that I dislike (including the corporate welfare and the political corruption on both sides), but as someone with kids, I have no choice but to hope that things get better.

    Look at those folks in East Palatine or kids growing up in Flint, MI that drink water with Mercury in it.  Wheres their bailout? as the US gets into wars and bailsout the richest folks in the country.  I doubt anyone in those communities cares about Americas standing what the hell does the worlds reserve currency matter to them?  In fact I would argue both those communities would probably like to see the elite (for the lack of a better word) who have been so indifferent to them go bust.

    Morally the bailout of SVB was repulsive but also strategically a blunder if your objective is to give more Americans opportunity and make America strengthen our country for the future. 

    Obviously many smart, good people disagree with me but for the life of me I don't see how.  

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Eric Bilderback:
    Quote from @J Scott:
    Quote from @Eric Bilderback:

    If you want to get rich off the decline of your nation then you do exactly what Corporate America and Washington DC are doing to their country.  

    Give me a country full of family wage career jobs, moms that can afford to stay home with their kids, that is a country worth fighting even dying for.  I don't find bringing new innovation to the world inspiring and I sure don't agree with the mindset that views society as a giant economy.


    There are a lot of things about this country that I dislike (including the corporate welfare and the political corruption on both sides), but as someone with kids, I have no choice but to hope that things get better.

    Look at those folks in East Palatine or kids growing up in Flint, MI that drink water with Mercury in it.  Wheres their bailout? as the US gets into wars and bailsout the richest folks in the country.  I doubt anyone in those communities cares about Americas standing what the hell does the worlds reserve currency matter to them?  In fact I would argue both those communities would probably like to see the elite (for the lack of a better word) who have been so indifferent to them go bust.

    Morally the bailout of SVB was repulsive but also strategically a blunder if your objective is to give more Americans opportunity and make America strengthen our country for the future. 

    Obviously many smart, good people disagree with me but for the life of me I don't see how.  

    I don't disagree with you at all. A country is wealthy as ours -- especially one that wastes as much money as ours -- has no excuse for anybody going hungry, anybody not having a roof over their head, anybody not having access to good health care, anybody not having access to clean water, etc.

    Capitalism and ensuring that people's basic needs are met are not antithetical to one another.  

    We have a lot of things in abundance in this country today, but one thing we don't have in abundance is empathy.  😕

    We can disagree on the details of the SVB bailout, but I'm guessing we agree on that.

  • Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    3y
    Quote from @J Scott:
    Quote from @Eric Bilderback:
    Quote from @J Scott:
    Quote from @Eric Bilderback:

    If you want to get rich off the decline of your nation then you do exactly what Corporate America and Washington DC are doing to their country.  

    Give me a country full of family wage career jobs, moms that can afford to stay home with their kids, that is a country worth fighting even dying for.  I don't find bringing new innovation to the world inspiring and I sure don't agree with the mindset that views society as a giant economy.


    There are a lot of things about this country that I dislike (including the corporate welfare and the political corruption on both sides), but as someone with kids, I have no choice but to hope that things get better.

    Look at those folks in East Palatine or kids growing up in Flint, MI that drink water with Mercury in it.  Wheres their bailout? as the US gets into wars and bailsout the richest folks in the country.  I doubt anyone in those communities cares about Americas standing what the hell does the worlds reserve currency matter to them?  In fact I would argue both those communities would probably like to see the elite (for the lack of a better word) who have been so indifferent to them go bust.

    Morally the bailout of SVB was repulsive but also strategically a blunder if your objective is to give more Americans opportunity and make America strengthen our country for the future. 

    Obviously many smart, good people disagree with me but for the life of me I don't see how.  


    I don't disagree with you at all. A country is wealthy as ours -- especially one that wastes as much money as ours -- has no excuse for anybody going hungry, anybody not having a roof over their head, anybody not having access to good health care, anybody not having access to clean water, etc.

    Capitalism and ensuring that people's basic needs are met are not antithetical to one another.  

    We have a lot of things in abundance in this country today, but one thing we don't have in abundance is empathy.  😕

     Awwww now I feel good.  

    I love this country and I love investing, wealth, all of it.  But this country is not what it once was and I don't think people here on BP understand or can sympathize that some of the very factors that have made their investments successful have had the opposite effect on other communities.

    @J Scott your a gentleman have a great weekend,

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Eric Bilderback:
    Quote from @J Scott:
    Quote from @Eric Bilderback:
    Quote from @J Scott:
    Quote from @Eric Bilderback:

    If you want to get rich off the decline of your nation then you do exactly what Corporate America and Washington DC are doing to their country.  

    Give me a country full of family wage career jobs, moms that can afford to stay home with their kids, that is a country worth fighting even dying for.  I don't find bringing new innovation to the world inspiring and I sure don't agree with the mindset that views society as a giant economy.


    There are a lot of things about this country that I dislike (including the corporate welfare and the political corruption on both sides), but as someone with kids, I have no choice but to hope that things get better.

    Look at those folks in East Palatine or kids growing up in Flint, MI that drink water with Mercury in it.  Wheres their bailout? as the US gets into wars and bailsout the richest folks in the country.  I doubt anyone in those communities cares about Americas standing what the hell does the worlds reserve currency matter to them?  In fact I would argue both those communities would probably like to see the elite (for the lack of a better word) who have been so indifferent to them go bust.

    Morally the bailout of SVB was repulsive but also strategically a blunder if your objective is to give more Americans opportunity and make America strengthen our country for the future. 

    Obviously many smart, good people disagree with me but for the life of me I don't see how.  


    I don't disagree with you at all. A country is wealthy as ours -- especially one that wastes as much money as ours -- has no excuse for anybody going hungry, anybody not having a roof over their head, anybody not having access to good health care, anybody not having access to clean water, etc.

    Capitalism and ensuring that people's basic needs are met are not antithetical to one another.  

    We have a lot of things in abundance in this country today, but one thing we don't have in abundance is empathy.  😕

     Awwww now I feel good.  

    I love this country and I love investing, wealth, all of it.  But this country is not what it once was and I don't think people here on BP understand or can sympathize that some of the very factors that have made their investments successful have had the opposite effect on other communities.

    @J Scott your a gentleman have a great weekend,


    I’ll be the first person to say unchecked capitalism (in fact there was a big thread months ago where I said this) is killing this country. We actually need a progressive capital gains tax at some reasonably high dollar amount. I agree no argument. I still would want to see the bank save that happened because of how many people would get crushed.

    I think part of is just as it’s not black and white around corp bailouts - the same goes for the other end of it. Join anti work and they talk about 99% tax rates and many of here on BP would be targets because of our independent wealth.  I’m a big believer it’s not black, it’s not white but grey.

     

  • Justin KurpiusPro Member
    Rental Property Investor · Member since 2017 · 84 posts · 41 votes
    3y
    Quote from @Nathan Grabau:

    If this was a crisis that happened because of risky investments I would agree. That being said, this is a crisis that was created because the bank chose the safest asset on earth (US treasury bonds) to put their depositors money into and the Fed kept rates low too long and then raised rates too fast, and focused on lagging indicators all the while knowing they risked collapsing the banking system. If the Fed does not step in, it is likely that there will be a rush on the banks, and these banks will not be able to liquidate assets fast enough to handle the pressure and collapse. As RE investors we like buying opportunities, but we should not like government created banking system failures. 

    disagree. Mismanagement led to the downfall of SVB. if you do not know how to manage risk, you should not be in banking. it's truly that simple.
  • Justin KurpiusPro Member
    Rental Property Investor · Member since 2017 · 84 posts · 41 votes
    3y
    Quote from @Jason Malabute:

    The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

    Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

    When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

    Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

    In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

    As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

    In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.


    Agree. Google the video of the politician from Oklahoma questioning Janet Yellen. He summed it up well. The government is forcing a bigger problem - which is driving deposits to banks that are "too big to fail". all the local smaller banks will go belly up. Why back SVB above FDIC while not being able to do the same with others (which Yellen confirmed this). When government steps in, you can rest assured they will make things worse.

  • Justin KurpiusPro Member
    Rental Property Investor · Member since 2017 · 84 posts · 41 votes
    3y
    Quote from @Eric Greenberg:

    Id feel differently if they did something risky but to me they did not. 

    Are you worried if they don't get bailed out that Institutions/VCs/etc will only bank with large banks (JP Morgan/BOA/etc) who have 500B+ in asset?  I could imagine in return anyone outside those few banks, especially small local banks, will start loosing footing which could lead to their slow death and a more monopolistic banking scenario. 


    they did the riskiest thing possible. they did not match duration risk to their portfolio. Had no "risk manager".
  • Justin KurpiusPro Member
    Rental Property Investor · Member since 2017 · 84 posts · 41 votes
    3y
    Quote from @Ben Zimmerman:

    There are roughly 4800 FDIC banks in the United States. A billion dollars is a lot of money to regular folks like me and you, but in Corporate America a billion dollars is a drop in the bucket. At the limit of 250k per bank, in order to get FDIC insurance on a billion dollars, the company would need to spread its money across virtually every single bank in the nation, and it becomes physically impossible to do if you have 1.2 billion dollars.

    When you have a billion dollars, its not just as easy as 'diversify and buy some real estate'. With no leverage that means buying over 3300 SFR homes at 300k each, or 6600 with a meagre 50% LTV. At that scale we aren't talking about just buying some real estate, we are talking about forming a major corporation to procure and manage that many rentals. And once again, remember that a billion dollars is a small number in the corporate world. What do you do when you need to spend 10 billion, or 100 billion?

    You mention that markets like this can be beneficial for real estate investors who have preexisting relationships with people who have cash...but where do those people with cash keep their cash?  Answer:  In the bank. 

    Banks follow strict regulations when it comes to what they can and can not do with deposits, and how much reserves they are required to keep.  These regulations are put in place to prevent risky behavior.  If the federal government puts in place rules that say that "X is safe to do", and then completely and dramatically changes the financial landscape by changing from QE to QT virtually overnight, and dramatically jacking up interest rates sending the entire global financial industry into a tailspin is that really the banks problem, or is it the government themselves the problem?

    And lastly lets not forget that this bank is failing because it invested its money in the absolute safest investments possible.  Treasuries.  So if playing it safe leads to a bankruptcy then what does that tell you about the government changing the rules mid game?

    A functioning economy requires a safe place to store your money.  Until crypto takes over and people are able to self custody their wealth, banks are the only option that we have.


     the countless regulations create risk. The very problem is that government steps in and makes everyone feel safe (to the point you are making with your statement). Do you rely on government regulations to buy a car? no. you would most likely do your own research. When you buy a real estate property or rental, do you rely on federally regulated guarantee, no. If the government would remove themselves from banking - the free market will create avenues to rank banks with endless detail on which banks are being run into the ground by a management team that does not know how to manage duration risk. We didn't let banks fail in 2008 - delaying the inevitable. now the problem is much bigger and the Federal Reserve has zero "dry powder" to fix the problem.  buckle up. it's going to get bad. 

  • Justin KurpiusPro Member
    Rental Property Investor · Member since 2017 · 84 posts · 41 votes
    3y
    Quote from @Mike Dymski:

    Commercial depositors spreading their large deposit accounts across hundreds or thousands of banks is a nonstarter.


    what if the commercial depositor you mention does it own research? why would they need to spread accounts across hundreds of thousands of banks?
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @J Scott:

    As I've written numerous times above, it's not just about protecting jobs -- it's about preserving US stature in the world by protecting an industry that allows us to maintain our standing as the world economic superpower.

    You may hate the billionaires, but their very existence is the by-product of a free-market economy that is second-to-none on this planet.

    Not sure where you got that I 'hate billionaires'....I love full and unbridled capitalism, and that produces many billionaires. I just want them to be treated the same as everyone else. No one is too big to fail, no one is too big to not go to jail.

    People losing their jobs is an unfortunate by-product of this system. But there are more jobs open right now than there are takers, so no big deal.

    Any and all business failures should be ignored by the Govt. Even mine....oh wait, they were.....but only cost a small amount of jobs....


  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Bruce Woodruff:

    My apologies if I misinterpreted or mischaracterized your comment. I just went back to reread and realized that that wasn't what you were trying to imply.

    Again, I'm sorry...

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @Michael Wooldridge:

    I’ll be the first person to say unchecked capitalism (in fact there was a big thread months ago where I said this) is killing this country.

    Unchecked capitalism is not the problem. Government intervention is. And the last thing our society needs is more taxes to disincentivise everyone...

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @J Scott:

    My apologies if I misinterpreted or mischaracterized your comment. I just went back to reread and realized that that wasn't what you were trying to imply.

    Again, I'm sorry...

    Hey no problem, I actually think we are agreeing on many/most issues..... :-)
  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Bruce Woodruff:
    Quote from @Michael Wooldridge:

    I’ll be the first person to say unchecked capitalism (in fact there was a big thread months ago where I said this) is killing this country.

    Unchecked capitalism is not the problem. Government intervention is. And the last thing our society needs is more taxes to disincentivise everyone...

    I take advantage of capitalism all the time but this is one area I absolutely disagree with you on. Uncheck capitalism is just bad especially if there is no penalty for crashing a sector or economy if you walk away with a few hundred million for taking the delayed risks. Also separately at some point capital gains need to be a progressive tax over a certain number. 

    And generation by generation buying power has dropped. Either way it works out well for me - maybe better since my generation has been weaker in a lot of those areas but it would be nice for the kids to have more opportunity. Then again my goal is to make them one of those capital gains so - irony I guess. 
     

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y

    @Michael Wooldridge
    @James Hamling

    The QT era is finally over, https://fred.stlouisfed.org/se...
    we back to QE mode silently.

    If you see this chart, what's the point of having QT right, fighting inflation doesn't work. What's the point of having SVB collapse.

    M2 is increasing, I guess real estate spike run would be til June this year.

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Carlos Ptriawan:

    @Michael Wooldridge
    @James Hamling

    The QT era is finally over, https://fred.stlouisfed.org/se...
    we back to QE mode silently.

    If you see this chart, what's the point of having QT right, fighting inflation doesn't work. What's the point of having SVB collapse.

    M2 is increasing, I guess real estate spike run would be til June this year.

    Can’t say I’m surpriseded. 

    I saw Fed - St Louis article the other day that inflation prediction for march is 4.2%. They’ve been conservative in their estimates so far -so I’m not totally surprised.

    Also - all here know  - in May we will hit the country peak on home prices. So to me it feels like inflation will be not completely under control but manageable by that point anyway since housing has been 40% of inflation. 

    And they were never going to hurt jobs without crashing economy. Too many boomers retiring. That said it probably made sense to get rates back up in this range anyway. When they drop rates and have mortgages at 4.5 to 5.75% everybody wil be super happy and the Fed has room to reduce prime if needed in future.


  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Carlos Ptriawan:

    @Michael Wooldridge
    @James Hamling

    The QT era is finally over, https://fred.stlouisfed.org/se...
    we back to QE mode silently.

    If you see this chart, what's the point of having QT right, fighting inflation doesn't work. What's the point of having SVB collapse.

    M2 is increasing, I guess real estate spike run would be til June this year.

    This was not QE.

    There was a $152 billion increase in borrowing by banks from the Fed discount window last week.  This accounts for much of the increase, and will be returned to the Fed, with interest.  

    Another $142 billion was lent to the new bridge banks that the FDIC insurance fund has created. That will also be repaid with interest.

    And finally, about $12 billion was borrowed to BTFP, the new Fed program to ensure liquidity at banks. Again, it will be repaid with interest.

    I understand that people are looking for a reason to be outraged, but look at the actual data before you get outraged.

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @J Scott:
    Quote from @Carlos Ptriawan:

    @Michael Wooldridge
    @James Hamling

    The QT era is finally over, https://fred.stlouisfed.org/se...
    we back to QE mode silently.

    If you see this chart, what's the point of having QT right, fighting inflation doesn't work. What's the point of having SVB collapse.

    M2 is increasing, I guess real estate spike run would be til June this year.

    This was not QE.

    There was a $152 billion increase in borrowing by banks from the Fed discount window last week.  This accounts for much of the increase, and will be returned to the Fed, with interest.  

    Another $142 billion was lent to the new bridge banks that the FDIC insurance fund has created. That will also be repaid with interest.

    And finally, about $12 billion was borrowed to BTFP, the new Fed program to ensure liquidity at banks. Again, it will be repaid with interest.

    I understand that people are looking for a reason to be outraged, but look at the actual data before you get outraged.


     It effectively acts as QE. Mortgage rates dropped this week…

    I won’t speak for Carlos but I don’t believe he is outraged. It was just something we said was likely to happen about summer/fall this year in another thread

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @J Scott:
    Quote from @Carlos Ptriawan:

    @Michael Wooldridge
    @James Hamling

    The QT era is finally over, https://fred.stlouisfed.org/se...
    we back to QE mode silently.

    If you see this chart, what's the point of having QT right, fighting inflation doesn't work. What's the point of having SVB collapse.

    M2 is increasing, I guess real estate spike run would be til June this year.

    This was not QE.

    There was a $152 billion increase in borrowing by banks from the Fed discount window last week.  This accounts for much of the increase, and will be returned to the Fed, with interest.  

    Another $142 billion was lent to the new bridge banks that the FDIC insurance fund has created. That will also be repaid with interest.

    And finally, about $12 billion was borrowed to BTFP, the new Fed program to ensure liquidity at banks. Again, it will be repaid with interest.

    I understand that people are looking for a reason to be outraged, but look at the actual data before you get outraged.


     I'm not outraged, I'm in fact excited.
    It doesn't matter what you call it. Whatever the new bridge loan that FDIC/Sec , it prints new money and it's QE.

    Practically QT is over from last week. Interest rate is one thing from QE perspective, but printing new money and addint asset is another QE component.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    3y
    Quote from @Carlos Ptriawan:

    It doesn't matter what you call it.

    That's where we disagree.  Words do matter.  Because different words mean different things.

    There's a reason why we have separate terms for open market operations (OMO) and quantitative easing (QE).

    It's impossible to have a nuanced conversation about economics if you refuse to acknowledge that.

    So, with that said, I'm out...  I'll leave it to you guys to debate.  Have a great day, gentlemen!

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