The Ripple Effect of a Common Banking Crisis: Escalating Bank Failures Will Trigger Mass Panic

by | Jan 6, 2024 | Bank Failures | 36 comments

The Ripple Effect of a Common Banking Crisis: Escalating Bank Failures Will Trigger Mass Panic




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A typical banking crisis can have far-reaching consequences that extend beyond the failing financial institutions. One of the most significant effects of a banking crisis is the domino effect, where the failure of one bank can lead to a chain reaction of additional bank failures and widespread panic. This domino effect can have a devastating impact on the economy and the stability of the financial system as a whole.

When a bank fails, it can trigger a loss of confidence in the entire banking sector. Depositors may start to panic and withdraw their funds from other banks, fearing that they too could fail. This can lead to a run on the banks, where a large number of depositors withdraw their funds simultaneously, putting further strain on the already fragile financial system.

As more bank failures occur, the availability of credit and financing for businesses and consumers decreases. This can have a negative impact on economic growth, as businesses may struggle to access the funding they need to operate and expand. In turn, this can lead to job losses and a decline in consumer spending, further exacerbating the economic downturn.

The domino effect of bank failures can also spread to other financial institutions, such as investment banks and insurance companies, leading to a wider systemic crisis. The interconnected nature of the financial system means that the failure of one institution can have ripple effects that spread throughout the entire sector.

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In response to a banking crisis, governments and central banks may step in to try to stabilize the financial system. This can involve providing financial support to failing banks, implementing emergency liquidity measures, or even nationalizing failing institutions. However, these interventions can come with their own set of challenges and risks, and may not always be successful in stemming the domino effect of bank failures.

Ultimately, the domino effect of a banking crisis can have a profound impact on the stability and functioning of the financial system, as well as the overall economy. It can erode confidence, lead to a credit crunch, and cause widespread panic among depositors and investors.

In conclusion, the domino effect of a typical banking crisis can be highly destructive, with far-reaching consequences that extend beyond the failing institutions. It is therefore essential for policymakers and regulators to work proactively to prevent and mitigate the risks of banking crises, in order to safeguard the stability of the financial system and protect the wider economy.

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36 Comments

  1. @justinfolk2832

    Who the hell is asking for all their money back and for what ? And where are they putting it?

  2. @terencethompson9505

    A couple days later…false break down below down trend, MACD flipping, big tech strong, yields down sharply and fed may pause.

  3. @michaeloliver9249

    Stocks are falling and bond yields are rising, but markets still don't seem convinced the Federal Reserve will pursue plans to keep increasing interest rates until inflation is under control. I'm still at a crossroads deciding if to liquidate my $100,000 stock portfolio, what's the best way to take advantage of this bear market?

  4. @nathane2890

    Really good video.

    Nice new format.

    Thumbs up from me.

  5. @mgraham2177

    There is absolutely no contagion…SVB were complete idiots they screwed up by investing in extremely low yielding bonds which were sold at a loss to meet their withdrawal demands, real banks didn’t make that mistake….. when you have ding dongs in charge you get this type of mistake, it’s a classic regional bank homegrown American problem and nothing else

  6. @Dutch79

    Buy Bitcoin!

  7. @HERRxc

    Useless Information

  8. @sebastienlinck4908

    The reserve requirement was reduced from 10% to 0% in March 2020. Your example of fractional reserve banking has changed. They can take in $1000, and no longer need to keep $100 in the banks as a reserve , they can literally have $0 now in the bank and loan out all money

  9. @mtBLANC10

    Get ready it invest. the big sale is coming.

  10. @bbryan195

    To my understanding this just proves how much we need an edge as investors because playing the market like everyone else just isn’t good enough. I've been quite unsure about investing in this current market and at the same time I feel it's the best time to get started on the market.

  11. @polok890

    Amazon zto400 posts are scams

  12. @SMoore-vj7bt

    Your analysis has really become myopic and unsophisticated lately. This is horrible analysis. The contagion has been stopped by the Fed removing the mark-to-market of Treasuries. A face ripping rally will soon be coming once the Fed signals they're near a pause. GAFC man. What the f*ck happened to you?

  13. @Margaret22-

    SVB's collapse hasn't made anything better. I feel sad that even though I am investing, I don't have the brain power to dig through how each company is doing, is this a good time to buy stocks or not, my reserve of $450K is laying waste to inflation and I don't know what to do at this point tbh, I need solid data on market trajectory

  14. @johnowens4334

    You couldn’t update ur video for today?

  15. @therecoveringsaver9097

    Sorry, but inaccurate/outdated information regarding fractional reserve banking.

    No capital reserve requirements since 2020 (you stated 10%)

  16. @twisted4872

    The Best part is . . . .The Rating Agencies . . . .S&P, Moodys and Fitch . . . .not a peep or a whisper . . .these harbingers of Doom have the balls to down grade entire countries . . .but Just like 2008 these shit stains were playing violins while the Titanic sinks. Why have these bandits who facilitate Banking and Financial Fraud by misleading investors and clients not been shut down?

  17. @jagulba

    Why 1.6billion is massive?

  18. @markhunt5019

    Characterizing the gross incompetence as a Black Swan is a little unreasonable. Black Swan’s, by definition, is a surprise. Even the depositors were grossly failing to do their due diligence and allowed themselves to be coerced by SVB to largely limit their banking to SVB—which should have scared them aware. This is simply a weeding of the garden. The weeds sprung up, inevitably, during an insane amount of QE. Do that level of insane QE, and SVB-types recklessly spending, without hedging, like drunken sailors is going to happen—it’s inevitable, and therefore, not a Black Swan.

  19. @neagcatalin1116

    Banks don't need to keep 10%as reserve anymore !

  20. @Sunset4Semaphores

    I play shorting banks finally paid off!!!

    Shorting banks is always like asking for your hand to get stuck in a (insert machine).

  21. @keithbernstein7436

    Not 100% correct. The reason for SVB collapse, is the the stunning decline in start-up “capital raises” over the past 12 months. This interrupted SVB’s deposit inflow, and forced start-ups to draw heavily on previously raised cash balances. SVB did not recognize the new trend, and had to liquidate bonds at losses. This is SVB specific. Few other Banks have this customer concentration.

  22. @Surendra_1

    fed stepping in will make it more worse in long run.. its better fed lets market clean itself on its own.. Is what i think..

  23. @jimbaker5110

    Banking failures more than likely will lead to a pause in interest rate hikes by the Fed. Isn’t that bullish for the stock market?

  24. @alexanderboyle762

    I look forward to your videos! Much appreciated dude!

  25. @withoutwroeirs

    The at risk banks should be allowed to fail. Capitalism should be allowed to prevail. It is outrageous at risk businesses should be bailed out by the taxpayer.

  26. @krisbkey

    The fractional reserve lending example you show in this video is actually incorrect at this moment in time. As part of quantitative easing that started in 2020, the federal reserve eliminated the reserve requirements for all lending institutions. Instead of only being allowed to lend up to 9 times what they have in reserves they can lend as much as they want. This actually makes the potential for bank failures much more likely than it was before the pandemic happened.

  27. @andrewstewart9063

    In 2018 Republicans diluted the effectiveness of the Dodd-Frank Act and here we are again.

  28. @Duds192

    Thank you bro! Amazing

  29. @user-kf1el7jb8x

    Increased cash from 5% to 15% today, and is planning to add another 25% cash. Other portfolio includes gold mines and silver, Bond ETFs and a little industrial dividend paying stock (junk old dying industries). Still feel worried.

  30. @shaunsprogress

    Actually, I think you'll find they removed the need for ANY RESERVE in April 2020!! Now there is just FDIC insurance up to 250k.

  31. @MrZrryan2

    so, the investment firm Charles Schwab, does a LITTLE bit of banking for premium investment customers. But most of their income is from the investment firm. Searched and found that 100% of their investment deposits are secure (hence the name, "securities"), and 95% of all banking deposits are less than 250K…. it is a rock solid business, and yet, they are down over 50%. If you don't smell a serious opportunity to make some historically awesome returns, then I can't spell it out any more clearly. I am loading up on SCHW and JPM and CITI at the moment.

  32. @sngb63

    Great video.

  33. @sare890

    Let your voice be heard the ZTO400X army is there to make the change we need, not all heroes have capes you know

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