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I find this stage of the economic/business cycle to be truly fascinating. A lot of things happen in such a short amount of time that we typically only read abou

I find this stage of the economic/business cycle to be truly fascinating. A lot of things happen in such a short amount of time that we typically only read about or see in movies UBS's main calculus is risk, which is why the offer can double in a matter of hours. If the crisis is not stabilised, UBS could potentially be liable for tens of billions and face potential downfall. This is why UBS needed a guarantee from the Swiss National Bank and a MAC clause to proceed with the deal.

chii 4y ago
aka, they won't do it, unless there's some "free" profit they can get from doing the deal. Which means somebody gets a win out of this crisis after it's over, but the swiss taxpayer gets to take a loss if somehow it ends tits up.
- pc_edwin 4y ago
  I respectfully suggest that there may be a slight misunderstanding regarding the situation at hand. It is important to note that the Swiss National Bank (SNB) is the protagonist here, not UBS. Credit Suisse (CS) is hated by everyone, which has made it difficult to provide them with a direct bailout. However, allowing the bank to fail will lead to a crisis that surpasses the GFC. Therefore, the SNB sidestepped CS and its shareholders to craft a deal in such a way that it is too good for UBS to refuse. I would like to reiterate that neither CS nor UBS wants this, its being forced upon them by the SNB through the carrot (sweet deal) or the stick (coercion). I'm not absolving any of the individual parties from responsibility but I have to state the obvious here. The current state of affairs is a direct result of a chain of events that has led us to this point. The government implemented a set of measures including a lockdown and a dangerous stimulus and liquidity program. However, just as we were on the brink of hyperinflation, they began rapidly draining liquidity from the system. It is essential to acknowledge that it is not a mere possibility but rather an absolute certainty that something will break. Upon delving deeper into how the banking system operates, this becomes abundantly clear. The entire economy is built around deposit stability, without this stability, banks are unable to hold long-term assets on their balance sheets. These long-term assets include mortgages, business loans, corporate bonds, municipal loans, government bonds, and others. This is what is meant when people refer to the economy as a credit-based system.
- pc_edwin 4y ago
  To put it simply, the banking system essentially acts as a quasi-arm of the government, enabling the welfare state to function. The banks and the government have an implicit agreement that they will operate under the assumption that deposits are stable and, in exchange, the government will provide insurance against any potential volatility. Throughout the past century, numerous financial crises have occurred, all of which could have been prevented by passing a simple law. This law could be as short as a single page and would simply state that customer deposits cannot be utilized to purchase assets. If a bank wants to use these funds in such a manner, they would need to enter into an agreement with the customer, similar to the relationship between Limited Partners (LPs) and General Partners (GPs) in a venture capital fund. It is unlikely that such a law will ever be passed because it would have the potential to bring about the collapse of the nation-state as we know it. This is just the tip of the iceberg; as one delves deeper into the issue, they begin to realize that the government has largely transformed into a set of insurance programs. If we examine the budgets of major Western governments, we can see that the overwhelming majority of their expenditures are directed towards insurance programs and interest payments. These programs encompass areas such as military spending, healthcare, pensions, unemployment/food assistance, and education.

chii 4y ago

aka, they won't do it, unless there's some "free" profit they can get from doing the deal. Which means somebody gets a win out of this crisis after it's over, but the swiss taxpayer gets to take a loss if somehow it ends tits up.

pc_edwin 4y ago
I respectfully suggest that there may be a slight misunderstanding regarding the situation at hand. It is important to note that the Swiss National Bank (SNB) is the protagonist here, not UBS. Credit Suisse (CS) is hated by everyone, which has made it difficult to provide them with a direct bailout. However, allowing the bank to fail will lead to a crisis that surpasses the GFC. Therefore, the SNB sidestepped CS and its shareholders to craft a deal in such a way that it is too good for UBS to refuse. I would like to reiterate that neither CS nor UBS wants this, its being forced upon them by the SNB through the carrot (sweet deal) or the stick (coercion). I'm not absolving any of the individual parties from responsibility but I have to state the obvious here. The current state of affairs is a direct result of a chain of events that has led us to this point. The government implemented a set of measures including a lockdown and a dangerous stimulus and liquidity program. However, just as we were on the brink of hyperinflation, they began rapidly draining liquidity from the system. It is essential to acknowledge that it is not a mere possibility but rather an absolute certainty that something will break. Upon delving deeper into how the banking system operates, this becomes abundantly clear. The entire economy is built around deposit stability, without this stability, banks are unable to hold long-term assets on their balance sheets. These long-term assets include mortgages, business loans, corporate bonds, municipal loans, government bonds, and others. This is what is meant when people refer to the economy as a credit-based system.
pc_edwin 4y ago
To put it simply, the banking system essentially acts as a quasi-arm of the government, enabling the welfare state to function. The banks and the government have an implicit agreement that they will operate under the assumption that deposits are stable and, in exchange, the government will provide insurance against any potential volatility. Throughout the past century, numerous financial crises have occurred, all of which could have been prevented by passing a simple law. This law could be as short as a single page and would simply state that customer deposits cannot be utilized to purchase assets. If a bank wants to use these funds in such a manner, they would need to enter into an agreement with the customer, similar to the relationship between Limited Partners (LPs) and General Partners (GPs) in a venture capital fund. It is unlikely that such a law will ever be passed because it would have the potential to bring about the collapse of the nation-state as we know it. This is just the tip of the iceberg; as one delves deeper into the issue, they begin to realize that the government has largely transformed into a set of insurance programs. If we examine the budgets of major Western governments, we can see that the overwhelming majority of their expenditures are directed towards insurance programs and interest payments. These programs encompass areas such as military spending, healthcare, pensions, unemployment/food assistance, and education.