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Yeah, I don't know anyone saying "it's just SVB since 2000". They're saying SVB is the first major bank in a long time (and hopefully not a harbinger of things

• latency-guy2 4y ago
  It sure is, and I hope congress and the Fed learns their lesson this time, seeing as some of the same people who worked in previous economic failures are still around, I doubt it.
  • Grimburger 4y ago
    What lesson is that? To allow inflation run rampant in order to protect Basel exempted businesses from their own bad decisions? Inflation must be tamed, it's detrimental longterm effects is magnitudes worse than a bank deservedly going bust for it's lack of risk management.
    • saveferris 4y ago
      Not the poster you asked. But, a lesson we continue to ignore is that there are other options to tame inflation besides raising interest rates. The problem is the option isn’t politically expedient so Congress just raises its hands in mock exasperation and says well, it’s the Fed’s mandate to manage inflation. Congress are cowards and won’t do what should be done - raise taxes. That is likely the fastest least painful long term solution to quickly climbing inflation I say likely solution because at this point economies are so complex I’m not certain there are solutions without any butterfly effect consequences
      • tines 4y ago
        I know nothing about economics. Can you help me understand how raising taxes helps deal with inflation? Is the idea that the federal government "deletes" some of the money it receives through taxes, like the opposite of printing more money which cheapens the existing supply?
        • convolvatron 4y ago
          that would .. actually make sense. I can't imagine anyone who is winning in the status quo being anything but horrified at the thought. has any currency ever done this? isn't there a risk of a Japanese-style concurrent inflation and recession?
        • frankfrankfrank 4y ago
          Yes, on the face of it. The issue with what appears to be the same old game is that those who absconded with the wealth pillaged through funny money, are not going to be the ones getting punished to “fix things”. This opens up a whole different set of cascading consequences because now on top of the moral hazard we had, we’ve gone well beyond that because the perpetrators have learned there are not only no consequences, but that you will be rewarded for your evils. Combined with other factors too numerous to really go into here, we are seeing the emergence of essentially an aristocracy in the USA and Europe, consisting of, as the earlier aristocracy, of the pillagers of their own people and the people of the rest of the world.
        • AnimalMuppet 4y ago
          That is an interesting idea, but it won't happen, because Congress won't "delete" the money. Instead, they'll spend it.
        • lifeisstillgood 4y ago
          You have stated Modern Monetary Theory precisely. Yes that is the new modern argument - government prints money, spends it on hospitals etc thus putting it in circulation and deletes it by taxation. One HN comment == ten years of economic debate. :-)
          • adolph 4y ago
            Too bad malloc gets called significantly more often than free.
        • deleted 4y ago
          [deleted]
      • mxkopy 4y ago
        > Congress are cowards and won’t do what should be done - raise taxes. They're still cowards for not doing it but what should've been done is an increase in interest rates half a decade ago.
        • lazide 4y ago
          The fed tried - and the chairman almost got fired for it. Remember? [https://www.cnbc.com/amp/2018/12/22/trump-reportedly-wants-to-fire-fed-chair-powell.html https://www.cnbc.com/amp/2018/12/22/trump-reportedly-wants-t...] Almost 5 years ago exactly.
          • asimpletune 4y ago
            Yeah it's crazy bc everyone's talking like it's just the rise in rates that's to blame for the asset/deposit mismatch, but really it was the 0% interest rates that came before that really did it. It was during that time that SVB had a lot of extra deposits, but no short term way to back it, since short term t-bills were paying practically 0% interest.
          • deleted 4y ago
            [deleted]
      • dantheman 4y ago
        Wouldn't it be better for congress to spend less? That's way better than raising taxes.
        • mindslight 4y ago
          That doesn't address inflation. The point is that money needs to be taken out of the system. That used to be done by high tax rates on high incomes, and the estate tax. Both have basically been neutered. But all things considered, 5% is not really a high interest rate. People are just acting as if it's unreasonable because they'd become accustomed to ZIRP. Personally I hope rates stay above several percent for the foreseeable future, for climate/resource reasons.
          • dantheman 4y ago
            Not spending takes it out of the system.
            • mindslight 4y ago
              I don't really know what you're try to say with this short blurb. Yes, money has to be taken out of the system via taxes and then not re-spent in order to successfully shrink the money supply. But compared with the current approach of creating new money and spending it, raising money through taxes for that spending will be an improvement. Also focusing on executive spending is a bit of a red herring given how much outflow has occurred from the Fed itself over the past few decades via low interest rate loans. Basically rather than letting the gains from technology and offshoring accrue throughout society (via price deflation), or be spent purposefully (executive spending), the Fed has been squandering these gains to create an asset bubble.
          • imtringued 4y ago
            >Personally I hope rates stay above several percent for the foreseeable future, for climate/resource reasons. I don't know what this has to do with climate or resource reasons. Cutting down the rain forest, polluting the planet with CO2 and sitting on interest payments are optimal in that scenario. Ultimately positive interest rates encourage corruption and short term thinking because earning money today ,no matter the cost, is better than earning money in the future. Meanwhile with lower interest rates the future isn't discounted anymore and it is worth it to invest in emission reductions.
      • nico 4y ago
        Unfortunately, the current tax structure disproportionately affects not-as-wealthy people/companies. So raising taxes would probably be a very unfair move to most people. My fantasy would be for the government to abolish taxes altogether and just print the money they need, then use whatever mechanisms they have to take enough money out of the market to keep inflation in check. That way we wouldn't have to pay taxes and the government could just get whatever money they need when they need it. I mean, they already do, so why make people jump through hoops and threaten them with jail for not paying taxes properly, if they could just do without taxes in the first place? It kinda feels like the whole system is a scam to keep control over the population.
        • mindslight 4y ago
          > then use whatever mechanisms they have to take enough money out of the market to keep inflation in check. What mechanisms would these be, if not taxes? The other main contemporary mechanism is raising interest rates, which only works on money that has been previously loaned out at a lower rate, and thus isn't a long term sustainable mechanism for recapture.
          • nico 4y ago
            Great question. I don’t know, that’s why it’s a fantasy. But I’m guessing that taxes isn’t the only or even the biggest way in which money is taken out of circulation. In fact, if you ask google “how is money taken out of circulation?”, the first few answers don’t mention taxes at all.
      • di456 4y ago
        The notion of managing "core" inflation ignores huge cost increases for housing, energy, education, and healthcare All of those are to me basic infrastructure to support a healthy economy.
    • TheOtherHobbes 4y ago
      Inflation is caused by profiteering and opportunism aided by the occasional supply shock. Trying to control it solely with interest rates makes as much sense as trying to fly a beach ball to Mars.
      • frankfrankfrank 4y ago
        Those are simply common correlate effects. Inflation is really rather simple, it is inflation of the money supply, i.e., printing more Monopoly money for oneself, knockoff purses, using chemicals to create fake honey, it’s what counterfeiters do … whether it’s some North Koreans or the federal government … its fraud, criminal, illegal, immoral, evil, and a clear indicator of illegitimacy of this or any government that does what this fake government has done.
        • imtringued 4y ago
          Except that view is divorced from reality. https://economicsfromthetopdown.com/2023/01/17/is-stagflation-the-norm/ https://economicsfromthetopdown.com/2023/01/17/is-stagflatio...
    • dragonwriter 4y ago
      > What lesson is that? That there maybe shouldn't be as many: > Basel exempted businesses’
    • raziel2701 4y ago
      In my opinion the Fed should be more decisive and data-dependent. In 2021 the Fed stubbornly stuck to an "inflation is transitory" narrative that meant they did not start raising rates all of 2021 when most people could see the excess and the mania of a bubble. Rates should have started to be raised since the summer of 2021, they could've done a slow and steady pace. Instead, once things got super hot inflation-wise, then they flip flop and start a very rapid pace of rate hikes, unsurprisingly something broke and here we are once more talking about bailouts, about more QE. We're frenetically going from rapid tightening of financial conditions, to potentially, rapid loosening of said conditions. The Fed is supposed to raise rates in two weeks, I'm not sure if they will change their mind given what just transpired this last week. I agree inflation must be tamed, I criticize the Fed's inability, or unwillingness, to start addressing it at least a year earlier. From my cynical perspective, keeping rates super low is a fucking party to the stock market and lots of powerful people want to keep the party going and they closed their ears to the inflation alarms. Now we're facing the possibility of another crisis (we'll see how things play out next week) and we know that the proposed solution will be to lower rates and accommodative policy that actually contributes to inflation. It's a shit show I'm tired of seeing repeat.
  • chimeracoder 4y ago
    > It sure is, and I hope congress and the Fed learns their lesson this time, seeing as some of the same people who worked in previous economic failures are still around, I doubt it. Don't bet on it. One of the big changes after the 2008 crisis was the passage of Dodd-Frank, which was then repealed in large part in 2018. Some of the repealed provisions in Dodd-Frank would likely have mitigated or even prevented this bank run, due to the capital and liquidity testing requirements.
• saalweachter 4y ago
  I'm actually curious if SVB failed because it had so many highly connected "big" customers. A panic moves a lot faster if each person is pulling 8+ figures from the bank, and you have a lot more incentive to panic if you have more than the 6 figures of FDIC insured balance in the bank. There's also a measurable difference in hearing crazy Jim down at the pub pulled his $400 out of the local credit union because he heard the fed was raising rates and hearing from the VC on your startup's board that three guys -- guys you know and think are cooler than you -- have pulled their next year of runway from SVB because they're worried for vague handwaving macroeconomics reasons that sound plausibly impressive to you.