This past friday, March 10, the Silicon Valley Bank, the 16th largest bank in the US, collapsed and was seized by the US govt’s FDIC. In my morning Alternative Visions show, as this was happening, I discussed some of the implications of the crash. Since friday, March 10, two more small banks associated with the tech industry also failed and were seized, and the US Treasury and Fed came out on Sunday with emergency bail out measures for depositors in the banks (but not bank stockholdlers or bondholders). The govt continues to struggle to contain the contagion, now spreading to other small banks, Bank and Junk bond ETF stocks, the crypto market, and elsewhere. What actually happened at SVB, and why its collapse, when the Fed’s annual bank stress tests said all US banks were solid? What will be some possible consequences of the collapse in coming days and weeks? Is this a 2008 financial crash all over again? Is SVB the ‘analog’ to the March 2008 crash of the Bear Stearns hedge fund that set subsequent crashes in motion later in 2008 (Fannie Mae, WaMu, Lehman, AIG, etc.? And what will SVB now mean for further Fed rate hikes that were planned this month and after? In turn, is the Fed’s fight against inflation over? Is that now on hold and the Fed will abandon it in order to save the banking system? If so, then the deepening recession coming will be accompanied by continuing high inflation–i.e. a stagflation condition with dimensions the worse ever seen.
In 2017, in my book “Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression” (see sidebar), I predicted the Fed next crisis would not be able to raise interest rates very much without precipitating a financial instability event. The financialized and globalized US economy of the 21st century won’t allow it. Repeatedly over this past year I have also been predicting the Fed could not raise rates much above 5% without provoking the same (see my various blog articles and radio interviews). Is the SVB collapse evidence for these predictions? Is US Fed and monetary policy now ‘neutralized’ and, if so, what can US capitalists and political elite do to deal with simultaneous recession, inflation, and financial system instability?
In the following Alternative Visions radio show I discuss the SVB crash in its early emerging phase. A more comprehensive details article will soon follow to assess subsequent events to the crash of SVB (and other banks now). Stay tuned.
To Listen to the Alternative Visions radio show of Friday, March 10, 2023 and the initial assessment of the SVB events, GO TO:
RADIO SHOW ANNOUNCEMENT:
Dr.Rasmus discusses the collapse of the Silicon Valley Bank in California in last 24 hrs and what it means for the Tech sector and potential financial instability. Stocks & bond mkts plummet in response. Fear of uncertain contagion effects over the weekend. 250 companies with potential asset losses + SVBs largest investor: US Home Loan Bank (yes, believe it or not). What SVB and financial instability means for the Fed’s rate hike policy, as rates get pushed to 6% now. Why Fed won’t continue to hike rates to 6% if financial instability happens. And if so, why Fed rate hikes won’t be sufficient to reduce even Demand inflation. Today’s jobs report shows another 311,000 jobs, making rate hikes more likely. Rasmus shows, however, most jobs are part time service while layoffs in tech, transport, warehouse already rising. Why contradictions in economic policy are intensifying and hard landing recession more likely.
Leave a Reply