Silicon Valley Bank collapse

I was wondering where they will put it?

OK, so if I take my millions out of Silicon Valley Bank and put it into AIB. Now I am worried about AIB, but where do I go with it?
I can't take it out in dollar notes and keep it under the bed.

Brendan
Boss you haven't been paying attention. That's what bitcoin is for.
 
The ECB is also caught, they can't go much further with interest rates because it will affect the bond prices the banks hold and also the ability of governments to get funding, governments were big beneficiaries of the ultra low interest rate era
 
It seems to me there's a good chance year-on-year inflation could start dropping off anyway right? since we're now around the point the war in Ukraine started last year. Maybe the timing is lucky for them and they get away with inflation starting to fall without raising rates any more? Of course that's just one factor so maybe it's not enough, we'll see I guess.
 
More and more the analysts are blaming the central banks for this bank run because they left interest rates too low for too long and lulled the financial institutions into thinking that ultra low interest rates would persist, then they raised them much too quickly and now the bodies are appearing.
You can't really blame it on SVB or even Credit Suisse because these were just the weak links. Everyone one in the financial industry owes money and is owed money by others. If you allow them to be picked off one by one we'll then it will bring down Everyone because it is all based on confidence.
This is the price we are now paying along with inflation for having ultra cheap money for way too long
 
More and more the analysts are blaming the central banks for this bank run because they left interest rates too low for too long and lulled the financial institutions into thinking that ultra low interest rates would persist, then they raised them much too quickly and now the bodies are appearing.
You can't really blame it on SVB or even Credit Suisse because these were just the weak links. Everyone one in the financial industry owes money and is owed money by others. If you allow them to be picked off one by one we'll then it will bring down Everyone because it is all based on confidence.
This is the price we are now paying along with inflation for having ultra cheap money for way too long

I've some sympathy for central banks. They are primarily interested in keeping inflation low (but positive). Deflation is like poison to a central bank. There's not a lot they can do to stop it once it gets a foothold. Despite all the money they pumped out there was no sign of inflation taking off in the decade after the financial crisis. They were effectively printing money to stand still. The greater risk was always deflation.

Look at the recent past, a pandemic and the associated global shutdown with a war in Europe fast on its heels. The last 3 years have been anything but normal. I don't believe anyone was lulled into anything the central banks didn't have a crystal ball to say this would happen, no-one not even them foresaw the chain of events.

Would you have done it differently if you knew where we'd be today, possibility but I would imagine at almost every point over the last 10 years it was hard to argue with the stance they took. Act too soon and you might have tipped us into deflation. We might have been in a worse state going into the pandemic and we would still have had the inflationary effects of the war in Ukraine. So we'd have all been slightly worse off but we might have helped 3 or 4 banks....

Turning to the banks should we let poorly run banks effectively determine the pace of interest rate increases? A bank failure isn't good but neither is persistently high inflation. Likewise keeping a bad bank on life support indefinitely doesn't strengthen the banking system. Sometimes you've got to pull the plug.

As in any industry the stronger banks will survive and the poorly run banks will go under. Banks are not carbon copies of each other they all pick a slightly different business model and run with it. Can you blame the bank for is woes? Yes that all have risk management units. SVB was not your typical bank and it's their job to know the risks they face so they do have to take most of the blame. As for Credit Suisse it looks like everything they went near in the last couple of years collapsed in some shape or form. They took the risks and they didn't pay off. Not sure interest rates had much to do with their collapse more like the market got tired of waiting for them to turn it around and there were one too many missteps for markets to put up with.

Could policy makers have done more? In America it seems the answer is yes.. they had one rule for the big banks and another for the "smaller" ones. It sounds like a big bank would not have been allowed to do what svb did. Now we are seeing a flight to safety with depositors moving their money from the smaller banks to the larger, better regulated, banks.
 
It seems to me there's a good chance year-on-year inflation could start dropping off anyway right? since we're now around the point the war in Ukraine started last year. Maybe the timing is lucky for them and they get away with inflation starting to fall without raising rates any more? Of course that's just one factor so maybe it's not enough, we'll see I guess.
I don't expect inflation to fall when the US is haranguing the EU for sanctions against China. The worlds largest manufacturer. Prices are going to go up.
 
I've some sympathy for central banks. They are primarily interested in keeping inflation low (but positive). Deflation is like poison to a central bank. There's not a lot they can do to stop it once it gets a foothold. Despite all the money they pumped out there was no sign of inflation taking off in the decade after the financial crisis. They were effectively printing money to stand still. The greater risk was always deflation.
That's a comprehensive post you put up there. However I think deflation was a bit of a bogey man put up there , the risk of deflation was only there for a few years after the financial crash, by 2015 that risk was essentially gone. House prices globally were well on there way back up. The only laggard were the ultra low energy and commodity prices back then, I doubt the central banks were too worried about that though. I think the main reason for the continuation of ultra low interest rates for so long was to maintain cheap funding especially for weak governments

There was a good interview this morning on newstalk with a guy called John Murray, he was an executive with credit suisse but also a UK financial regulator during the financial crash. He said nobody knew who SVB were 2 weeks ago , they were not a systemically important bank in the US. Yet this bank very nearly brought alot of other banks down aswell because the systemically important banks were owed money by SVB and vice versa.
In the case of Credit Suisse bonds being liquidated to zero, these were probably owned by insurance companies and other big important banks. So everyone eventually bears the brunt of all this .
In the light of the credit suisse bond liquidation, other companies are going to find it very difficult to raise new capital and this will also hit the Irish and other weaker governments looking to raise new funding from those bond markets
 
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In the light of the credit suisse bond liquidation, other companies are going to find it very difficult to raise new capital and this will also hit the Irish and other weaker governments looking to raise new funding from those bond markets
Joe,
The bonds which were written down in Credit Suisse are fundamentally different to government bonds. There were AT1 bonds, which were issued with the specific purpose that they could be written down or converted to shares in the event that happened. They were 'risky' bonds, but the risk was priced wrong - nobody thought they'd ever be used.

The write down has actually pushed money to 'safe bonds' like government debt, so it's actually a positive, not a negative, for governments issuing debt.
 
That's a comprehensive post you put up there. However I think deflation was a bit of a bogey man put up there , the risk of deflation was only there for a few years after the financial crash, by 2015 that risk was essentially gone. House prices globally were well on there way back up. The only laggard were the ultra low energy and commodity prices back then, I doubt the central banks were too worried about that though.

The lower likelihood of deflation after 2015 might have been true but don't forget this was a time of central bank quantative easing. They were effectively trying to inflate prices. While the inflation rate was positive it was still fairly low considering the actions taken by the likes of the ECB.

Without that intervention it's reasonable to assume price growth would have been a lot less - if not negative perhaps uncomfortable close to zero.
 
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