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> Do you have an actual argument that falsifies what I've said? I'm all about owning up to my mistakes but right now I have no reason to believe I'm being stupi

> Do you have an actual argument that falsifies what I've said? I'm all about owning up to my mistakes but right now I have no reason to believe I'm being stupid. There are two key things that I think you're misunderstanding: 1) the bank didn't lose the money. A lot of it is locked up in long-term securities that would have to be sold at a loss to access the money now. But, at maturity, all of the money would be paid back. The money is there, but it's illiquid. A bank with the same investment but more liquid assets would have no problem 2) The investors are going to get screwed, and the depositors will likely be made most of the way whole. This is without a government bailout. Given that the assets are there, I'd be surprised if a big bank didn't gobble them up for the goodwill of future tech unicorns. I'd be upset if there was an investor bailout. I'd question why we needed a depositor bailout. I don't think either are necessary or going to happen

matheusmoreira 4y ago
> 1) the bank didn't lose the money. A lot of it is locked up in long-term securities that would have to be sold at a loss to access the money now. But, at maturity, all of the money would be paid back. The money is there, but it's illiquid. A bank with the same investment but more liquid assets would have no problem Also known as being literally insolvent. They can't pay back what they owe. People have bills to pay tomorrow, so nobody really cares that the money is gonna be there 10 years from now. Peopld want their money, and the bank can't pay it back. They might as well have taken the money and thrown it into a black hole. > 2) The investors are going to get screwed, and the depositors will likely be made most of the way whole. This is without a government bailout. Given that the assets are there, I'd be surprised if a big bank didn't gobble them up for the goodwill of future tech unicorns. I suppose it's moral as long as not one cent of public money is used to pay anyone off. That includes "backstopping" bank runs or whatever it is the Fed does. That also includes literally any measure that could conceivably increase inflation which is an indirect way of making us all pay for it.
- mind-blight 4y ago
  > They might as well have taken the money and thrown it into a black hole. It entirely depends on the circumstances, and those circumstances are extremely important to this discussion. A bank with sufficient liquidity wouldn't have a solvency issue holding these assets - they would exist and be paid out in time, and nobody would no the difference but the bank's accountants. That is extremely important because it means the money exists - it was not lost. That makes purchasing SVB viable for a bank that can handle the securities' long maturity. That would not be the case if they head actually lost the money. > That also includes literally any measure that could conceivably increase inflation which is an indirect way of making us all pay for it. I would encourage you to read about Spain's economy during the late 1500s. Specifically, why they were advertising across Europe to convince Jews to move to Spain - you'll get to learn why the Jewish banker stereotype exists (racism meets fiscal policy meets religious doctrine) and see an interesting example of how a society changes with proto-moderm banking introduced. In my experience, most proponents of "inflation is theft" propose financial systems that fail to account for critical problems that were addressed in modern finance so long ago that they've been mostly forgotten
  - matheusmoreira 4y ago
    > In my experience, most proponents of "inflation is theft" propose financial systems that fail to account for critical problems that were addressed in modern finance so long ago that they've been mostly forgotten Sounds interesting. Please elaborate on these problems. It's definitely gonna be a lot more interesting than discussing a failed bank. As far as I'm concerned, the main problem solved by banks is the exponential growth problem. They solve it by providing credit, enabled by depositors. Entire nations and empires were developed by this scheme. Especially in the 1500s, the age of european colonialism. Doesn't mean it's sustainable.
    - violenceislaw 4y ago
      [dead]
    - mind-blight 4y ago
      > Sounds interesting. Please elaborate on these problems. It's definitely gonna be a lot more interesting than discussing a failed bank. Lol, fair. In the 1500s, Christians and Muslim were barred from giving loans with usury (interest), so there was no financial incentive to give anyone but friends and family money. The European aristocracy was either Christian or Muslim (Portugal and Spain for a while). Essentially, if you weren't already well connected to the rich, you couldn't access capital. Jews didn't face the same religious restrictions, and they were barred from many other jobs in society, so they often fell into the role of bankers where they lived (since they could charge interest and make money). These banks facilitated wealth transfers between the wealthy and people with few means and connections. It resulted in economic booms (and there are plenty of legitimate criticisms of exponential growth), but it spread the wealth to people who wouldn't have otherwise had access. And that's the double edged sword: loans can facilitate wealth transfer from wealthy to folks with limited means, but doing that causes inflation. Rich people have since found tons of ways to manipulate the system, and we've added layers of regulation that are supposed to make that harder. Some of that has worked, and some of that has failed. But, I do think that inflation is a necessary side effect of preventing capital from being hoarded in walled gardens
- gamblor956 4y ago
  Also known as being literally insolvent. They can't pay back what they owe. No, insolvency is a legal and accounting term indicating that liabilities exceed assets. If assets and liabilities are equal, but the liquidity of those assets did not match the term of the liabilities., that is illiquidity, not insolvency. That being said, the CFPI said in its order shutting down SVB that the bank was both illiquid and insolvent so it appears that their assets, even adjusted for value at maturity, were not sufficient to cover liabilities. And that's probably why the banks they reached out to about taking over SVB Thursday night did not.
  - matheusmoreira 4y ago
    Makes sense. Thanks for correcting me.

matheusmoreira 4y ago

> 1) the bank didn't lose the money. A lot of it is locked up in long-term securities that would have to be sold at a loss to access the money now. But, at maturity, all of the money would be paid back. The money is there, but it's illiquid. A bank with the same investment but more liquid assets would have no problem Also known as being literally insolvent. They can't pay back what they owe. People have bills to pay tomorrow, so nobody really cares that the money is gonna be there 10 years from now. Peopld want their money, and the bank can't pay it back. They might as well have taken the money and thrown it into a black hole. > 2) The investors are going to get screwed, and the depositors will likely be made most of the way whole. This is without a government bailout. Given that the assets are there, I'd be surprised if a big bank didn't gobble them up for the goodwill of future tech unicorns. I suppose it's moral as long as not one cent of public money is used to pay anyone off. That includes "backstopping" bank runs or whatever it is the Fed does. That also includes literally any measure that could conceivably increase inflation which is an indirect way of making us all pay for it.

mind-blight 4y ago
> They might as well have taken the money and thrown it into a black hole. It entirely depends on the circumstances, and those circumstances are extremely important to this discussion. A bank with sufficient liquidity wouldn't have a solvency issue holding these assets - they would exist and be paid out in time, and nobody would no the difference but the bank's accountants. That is extremely important because it means the money exists - it was not lost. That makes purchasing SVB viable for a bank that can handle the securities' long maturity. That would not be the case if they head actually lost the money. > That also includes literally any measure that could conceivably increase inflation which is an indirect way of making us all pay for it. I would encourage you to read about Spain's economy during the late 1500s. Specifically, why they were advertising across Europe to convince Jews to move to Spain - you'll get to learn why the Jewish banker stereotype exists (racism meets fiscal policy meets religious doctrine) and see an interesting example of how a society changes with proto-moderm banking introduced. In my experience, most proponents of "inflation is theft" propose financial systems that fail to account for critical problems that were addressed in modern finance so long ago that they've been mostly forgotten
- matheusmoreira 4y ago
  > In my experience, most proponents of "inflation is theft" propose financial systems that fail to account for critical problems that were addressed in modern finance so long ago that they've been mostly forgotten Sounds interesting. Please elaborate on these problems. It's definitely gonna be a lot more interesting than discussing a failed bank. As far as I'm concerned, the main problem solved by banks is the exponential growth problem. They solve it by providing credit, enabled by depositors. Entire nations and empires were developed by this scheme. Especially in the 1500s, the age of european colonialism. Doesn't mean it's sustainable.
  - violenceislaw 4y ago
    [dead]
  - mind-blight 4y ago
    > Sounds interesting. Please elaborate on these problems. It's definitely gonna be a lot more interesting than discussing a failed bank. Lol, fair. In the 1500s, Christians and Muslim were barred from giving loans with usury (interest), so there was no financial incentive to give anyone but friends and family money. The European aristocracy was either Christian or Muslim (Portugal and Spain for a while). Essentially, if you weren't already well connected to the rich, you couldn't access capital. Jews didn't face the same religious restrictions, and they were barred from many other jobs in society, so they often fell into the role of bankers where they lived (since they could charge interest and make money). These banks facilitated wealth transfers between the wealthy and people with few means and connections. It resulted in economic booms (and there are plenty of legitimate criticisms of exponential growth), but it spread the wealth to people who wouldn't have otherwise had access. And that's the double edged sword: loans can facilitate wealth transfer from wealthy to folks with limited means, but doing that causes inflation. Rich people have since found tons of ways to manipulate the system, and we've added layers of regulation that are supposed to make that harder. Some of that has worked, and some of that has failed. But, I do think that inflation is a necessary side effect of preventing capital from being hoarded in walled gardens
gamblor956 4y ago
Also known as being literally insolvent. They can't pay back what they owe. No, insolvency is a legal and accounting term indicating that liabilities exceed assets. If assets and liabilities are equal, but the liquidity of those assets did not match the term of the liabilities., that is illiquidity, not insolvency. That being said, the CFPI said in its order shutting down SVB that the bank was both illiquid and insolvent so it appears that their assets, even adjusted for value at maturity, were not sufficient to cover liabilities. And that's probably why the banks they reached out to about taking over SVB Thursday night did not.
- matheusmoreira 4y ago
  Makes sense. Thanks for correcting me.