This episode we have returning guest Doomberg to talk about the recent crazy events happening in the banking world.
We talk about the down fall of Silicon Valley Bank, Silvergate and Signature Bank.
Doomberg gives his thoughts on what SEC is trying to do to the crypto industry, and how these events mark the beginning of the end for the on and off ramps into fiat.
Lastly, we talk about the how the fed raising rates is finally causing things to break!
Hope you enjoy the show!
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In the financial world, bank runs and bailouts have become a common occurrence in recent years. The first term refers to a situation where a large number of depositors withdraw their money from a bank due to nervousness over its solvency. The second term refers to a governmental or institutional intervention designed to save the bank from failure by injecting funds to prop up its balance sheet. In both cases, the fear of a domino effect on other banks and the overall economy hangs like a pall over our future.
Bank runs are nothing new. In fact, they go back hundreds of years. In the past, runs were sparked by rumors and fear of fraud, mismanagement, war, or panic. Bankers were often unable to meet the demands of depositors and the result was the closure of banks. Depositors would lose their savings, and creditors and investors would lose their capital. In some cases, entire communities were affected.
Today, bank runs are less frequent but are still a possibility. The modern banking system has evolved with regulatory requirements and deposit insurance schemes, which effectively mitigate the risks of bank failures. Nevertheless, when a bank loses the confidence of the public due to fraud, mismanagement, scandal, or bad loans, depositors start to withdraw their savings en masse, unbalancing its liquidity and accelerating its collapse.
This is where bailouts come in. Governments and regulators are often forced to step in at this point to prevent the bank from collapsing completely. The bailout may be in the form of a loan or equity investment aimed at shoring up the bank’s capital to cover its losses. The goal is to prevent the bank from defaulting on its debts and to restore its credibility and solvency.
However, bailouts are not without their own risks. By rescuing a failing bank, the government is effectively bailing out its investors and not its depositors. This can lead to a moral hazard, where investors speculate on high-risk investments, knowing full well that they will be bailed out in case the investment goes bad. Bailouts also impose a burden on taxpayers who have to bear the cost of rescuing a troubled bank when the investors who made the risky investments are not being held accountable.
Bailouts also have a tendency to exacerbate the economic crisis rather than alleviate it. They encourage banks and investors to take unnecessary risks by creating an illusion of security for investors. The consequence is that the economy is eventually saddled with systemic risks that can threaten its stability.
The financial crisis of 2008 is a case in point. The US government bailed out banks to prevent a systemic crisis. While the banks were saved, the economy was hit hard, with millions of households losing their homes and jobs. The bailout spawned a wave of populism, anger, and mistrust against the banking system.
In conclusion, while bank runs and bailouts are unlikely to disappear anytime soon, they are undesirable events that portend risks for the economy. They highlight the need for a robust regulatory framework that will address systemic risks before they reach the point of no return. The lessons from the past should be heeded to minimize the risks of a banking crisis to the broader economy.
London Paul I believe stated that if the global south is rejecting federal reserve notes, why would they accept CBDCs? I believe that the FED would like to go to a CBDC but if BRICS maintains a commodity backed currency, I don't believe any commodity producing country will accept Fed CBDCs, meaning the program will go nowhere. We are already seeing foreign nations selling treasuries and decoupling from the petrodollar.
The main problem with professor Keane and his climate alarmist friends is that they would rather enslave people than wait for solutions to be developed naturally in a market. Even though they probably think their cause is sufficient justification for building a neo-feudal society they still are just another batch of fanatic totalitarians!
Crypto as money laundering idea: not terribly credible. Not that it isn't happening, but that any crypto money laundering is highly unlikely to be for the entirely of the much larger areas of crime excluding cyber crime. Drugs? They've been successfully laundering for decades. Hot money flows/bribes? Delaware, Switzerland, Singapore, Hong Kong are all still there.
There is also the issue that the "value creation" of the crypto boom was far higher with the retail money flooding in vs. "institutional" or "whales". And if you posit that a large part of that retail is really money laundering – difficult to argue given the massive money printing that occurred in the COVID era plus the massive jump in deposits in places like SVB.
It’s obviously a bailout. Who do you think is paying for the FDIC insurance? Not the bank! They’ll pass it down to bank customers!! Which is all of us taxpayers! Geez!
I don’t agree this was “all” caused by the Fed! SVC was irresponsible. They had no risk management for much of 2022. This is a huge problem!
If they’re going to ding social media for reporting on the bank run, they ought to prosecute the VC’s who called their clients advising them to withdraw their money from SVC.
between stocks, cryptos, gold, silver….. what banks have to offer in terms of store of wealth? LOL
btc as a digital doomsday asset for payments? why not crypto backed by gold for the same purpose?
Wow everything pretty much unfolded before you could even get this thing posted
Ahhh yes, boomers criminals money laundering with crypto. Why would they do that on a system they know nothing about instead of using their banks like they have for decades. I couldn’t imagine someone going to their crime boss telling them to use crypto
Can someone post a link to the debate that they reference between professor hunt and doomberg? I cant seem to find it
The precedence for curtailing free speech isn't 'shouting fire in a theater.' – it's what just happened yesterday with covid. Did you already forget, for God's sake? Or did you not notice?
The solution to disinformation is more information.
I like doomberg… But why does no-body understand that there is a tremendous difference between bitcoin and crypto…. It's embarrassing at this point.
I don't know. With so many so-called sophisticated investors at SVB, why did they take the risk of having all your money at one institution? The simplest of YT financial channels preach diversity of banks. Have as different banks as possible. But yet, the sophisticated money did not have diversity of banks. Why?
My 2 cents: the US financial and political elites clearly want to choke cryptos, and when BTC falls below $xxK, the big boys will take over BTC, and then Congress will make rules for their benefit. May take 1 yr or longer. While, China and other countries, are creating regulations to open up cryptos.
I certainly would prefer to be paid in gold and silver as opposed to bitcoin. Fairly easy to sell to a reputable dealer. While bitcoin has the advantage of being fully electronic, click of a button, it’s not a challenge for a small business to have enough gold coins in a safe for a payroll or two. That $250 000 limit is about 130 1 oz gold coins, 5 rolls of 25 and some smaller fractional. Fits in a small box, and in less space than cash.
Dude, you need a USA, a unique selling advantage!!!
Steve Keen is sick!!!!!!
Excellent discussion. Doomberg is always a must-listen.
Great show, thank you both!
Well the best way to launder money is via a carwash business in Albuquerque.
Wen tether crash?