5 ms·
This whole thing feels like Toilet Paper Crisis 2.0 - purely created by consumers acting irrationally.
by tristanb 3y ago
This whole thing feels like Toilet Paper Crisis 2.0 - purely created by consumers acting irrationally.
- initplus 3y agoIs it irrational to pull your uninsured funds from an insolvent bank?
- deleted 3y ago[deleted]
- albatross13 3y agoThere's nothing irrational about not trusting banks, especially when they're directed by the federal reserve to have 0% of their deposits on hand.
- ilyt 3y agoNot really; at least in case of SVB they did took risks they shouldn't and paid for it.
- jdminhbg 3y agoYeah, removing your uninsured deposits from an insolvent bank (which, marked-to-market, they were at times), is not customer irrationality.
- joecot 3y agoIt's all the consumers' fault, except for the part where the bank leadership was making exceptionally risky investments, and also actively and successfully lobbied to be allowed to work around reserve rules designed to explicitly keep this from happening.
- anonporridge 3y agoThey weren't making risky investments. They failed because they over invested in near 0% interest US treasuries, and then the Fed rapidly hiked rates to 5%, quickly collapsing the value of those low interest treasuries on the market. The investments themselves, and the promised return, were always "risk free", but the house of cards collapses when everyone demands their money now. And when people are looking at their savings interest rate of 0.1%, and seeing other banks offering 4%, it becomes very easy for a bank run to start as people simply move their money chasing yield. The problem seems multi-faceted and complex, and like most complex problems, true blame is likely diffuse and shared amongst everyone, the customers, the banks, and the Fed. This is usually the kind of situation where societies elect a scapegoat to murder so they can all go about their business pretending to solved the problem and purged the evil from amongst their ranks.
- Fervicus 3y ago> They failed because they over invested in near 0% interest US treasuries, and then the Fed rapidly hiked rates to 5% Shouldn't they have been ready for that scenario and hedged against it though?
- anonporridge 3y agoSure, although the Fed at the time was signalling no chance of raising rates any time soon, then they turned around and jacked them at the fasted pace in recent history. A big lesson there, beyond don't fight the Fed, is don't trust the Fed.
- _uhtu 3y agoOver investing in treasuries IS a risky investment. Especially when bank accounts are supposed to be the least risky place to put money. Treasuries have interest rate risk that needs to be hedged.
- throw_pm23 3y agoThey are the similar in the sense that in both cases the narrative blamed the consumers while the fault lied somewhere else.
- sytse 3y agoI heard that even the TP crisis made sense, people stopped using TP outside of home (work/school/etc.) and that put stress on the home TP supply chain.
- anonporridge 3y agoThere was plenty of TP, it was just packaged incorrectly for individual consumption. The supply chains couldn't quickly change the packaging. There were even stories of TP available from Mexico that couldn't legally be sold because the labeling was in Spanish and not up to American regulations. Same thing happened for other items like flour. Suddenly everyone was baking at home and restaurants weren't buying 50lb sacks of flour anymore. Plenty of flour, improperly packaged.
- some_random 3y agoIt's kind of crazy to me that we all lived through that and most people still don't understand why it happened. Like you said, many all working from home more, so demand for TP went up. Suddenly shelves are empty more and the news starts talking about a TP shortage, so next time you're at the store and see TP in stock you buy a case even if you don't need it yet. Actually who knows when it'll be in stock again and at what price, you so might as well buy another case too. The shortage got worse and worse, and in order to absolve themselves of any personal responsibility people imagined that evil preppers were going around and buying up all the TP and hand sanitizer and PPE. The problem is that in reality the system was irrational (people buying TP they don't really need) but individuals were behaving rationally (stock up when you can).
- klyrs 3y agoThat definitely caused the TP "crisis" but it was sustained by lag on the supply side. Paper manufacturing was tooled up to make "commercial" toilet paper, which saw an immediate drop in demand when we suddenly stopped going to the office. Manufacturers had to re-tool for residential toilet paper, which saw an immediate and sustained rise in demand. In retrospect, I'd say that the first wave of people overstocking TP weren't totally irrational.
- some_random 3y agoI'm not seeing a lot of consumer irrationality here to be honest. Actually there wasn't a lot of consumer irrationality in the toilet paper shortage either, that's the trouble with bank runs and supply shortages, they make the rational decision for the individual the one that hurts everyone.
- DANmode 3y agoThis seems to ignore two things: The bank's only moral imperative (a misnomer for a bank, I'm aware), per their agreement with you, is to have your money safe when you come for it (even if "you" is everyone). The TP company, they want to use just-in-time inventory, and that works 90%+ of the years, fine, but don't go blaming the consumer because they did too much of a good thing for you, and your workflows were too fragile to scale up.
- lostlogin 3y ago> they did too much of a good thing for you I laughed. I know you weren’t talking about customers shitting, but that’s where I went.