Ever notice when you overfill a machine with lubricating oil (money?) it spills and creates an unbelieveable mess that has to be cleaned up before it gums up the works, and can even stop the machine if not removed.
Dr Funkenstein
1 year ago
Senator Fauxahontas ever notice that Barney ”My Boy Lollipop” Franks is on the SVB board of directors? Or has she been drinking too much firewater?
Six000mileyear
1 year ago
Sociopaths never take responsibility for their wrongs.
8dots
1 year ago
Exogenous events to remember : In June 1967 Gamal Abdul Natzer closed the Suez canal, after he lost the Six Days War // TNX 1M log : BB #1) Aug 1966/ Mar 1967, 5.51/4.45. BB #1 led to BB #2 and #3. There is a downtrend line coming from Nov 1994 @8.162 to Jan 2000 @6.823. // In May 2022 this line was breached and popup to BB #1. Since it’s rejection TNX osc in the space in between. It might reach BB#1 center, or top, before dropping sharply.
8dots
1 year ago
M1. // Something is wrong : RRP sharp drop in June 30 2022, when the CPI reached 9.1%, might be a Backbone.
RRP might be In accumulation. JP sucked liquidity since Mar/Apr 2021. In June 30 2022, within a year, RRP was $2.33T, rising faster than FFR. Today, $2.26T. // The media is curvas. Step #1 RRP to $2.33T. Step #2 : FFR to 5%
Salmo Trutta
1 year ago
There used to be a “money multiplier”. It was called required reserves (the truistic monetary base).
Charles Hugh Smith Blog | Bank Reserves And Loans:
The Fed Is Pushing On A String | Talkmarkets
Link: Daniel L. Thornton, May 12, 2022:
“However, on March 26, 2020, the Board of
Governors reduced the reserve requirement on checkable deposits to zero. This
action ended the Fed’s ability to control M1.”
So, the money supply in March might not be related to the FED’s balance sheet.
ga7pilot
1 year ago
Agree with the first 11 points.
Before the crisis, there were 10% reserves and hardly any excess reserves as far back as you can look. But aren’t reserves in the banking system like 60% of demand deposits right now? If reserves make banks so much safer, then this should be the safest banking system we have ever had.
8dots
1 year ago
In June 2022 inflation was 9.1%, on the cusp of 10%. At that time the Fed already extracted $2T liquidity and raise FFR rates to 1.68%.
1.68% isn’t good enough. The Fed didn’t test it because they knew the answers. SIFI are safe. The regional banks average account is $4K/$5K, SVB for the tech elite was deleted. The elite are protesting in the streets because two exogenous events changed the rules of the game. The banking panic will soon be over. Wall street collected enough goodies at wholesale prices. It might be the finale.
Just taking a breather. Delinquencies building, but the credit losses have yet to arrive (in force) … especially in commercial real estate. Good luck to current loans (if hanging on by a thread) that have to roll this year into higher rate.
But before that we have debt ceiling issue to be settled (by June). Once raised Treasury will FLOOD the market (at least $500 billion) with high yield treasury bills. Another run on bank deposits as savings account money takes notice. If a bank tries to stem flow by raising interest rates .. well, there goes its profit margin.
Tony, what under the mattresses is a common knowledge. Option, besides all the other bearish options : when people are depressed it’s time to invest. The Dow might rise to a new all time high, to 38K/39K area, BU above Jan high, an UT, before taking it down, before the shark bite the econ. Investors whose mood flipped from manic depression to euphoria will be taken to the cleaners. What is good for the 10Y is bad for the shadow banks.
Preventing Bank Failures is Not the Job of Regulators
Senate and House banking committee hearings about the
Silicon Valley Bank and Signature Bank failures will probe what happened and
what regulators did — and didn’t do — in the run-up to the banks’ closures and
FDIC takeovers. Underlying these hearings will be the belief that such failures
should be preventable. Bryan Hubbard, former public affairs chief at the Office
of the Comptroller of the Currency, says this is a mischaracterization of
regulators’ role.
By Bryan Hubbard, former Deputy Comptroller for Public Affairs at the
OCC
-guessing
and public excoriation of the regulators and bankers involved in the failures
of Silicon Valley Bank and Signature Bank are kicking into high gear in
Washington. Along with this comes blaming individuals and policies championed
by one political party or the other.
Finding
fatal flaws in the system and determining what can be improved is critical, of
course. Yet I am reminded of advice two influential people in my life have
given me, things that participants in the current debate should keep in mind.
• The first
came during the 2008 financial crisis. One busy Friday evening, the chief
national bank examiner at the Office of the Comptroller of the Currency
reminded me:
“It is not the regulators’ job
to prevent a bank from failing.”
• The second
came from an even more influential source — my mother. She advised me to never
make important decisions while angry.
Absolute
Protection of Banks and Banking Freedom Can’t Co-Exist
vanderlyn
1 year ago
YOU are very confused Mr. Mish. the FED has but one mandate. keep their owners in high cotton. citibank, jpm and few others. that’s it. they don’t care about what you think they do. the regionals will be fed into the mouths of the big fish. like past century. go see who owns them. institional investor did a nice short article on it. not some crazy tin foil man……….
Strange how both central banking and fractional reserves have a long, consistent historic relationship with fraud. At least they got rid of the fractional reserve! I’m sure the zero reserve will work out great.
On the matter of blunders, since central banking and fractional, and now zero, reserves are both nothing more than legalized fraud, the age old question of who benefits should always be examined when things go south. As they always do. As someone who lives in Florida, I can tell you that it’s never good when things go south. Especially if they have a New York accent!
well i was born and raised in a well to do hood in NYC. everyone work on the street. all our fathers worked on the street. there is no more brutal gangster than the wing tipped shoe men i grew up with at the yacht clubs. vile people. but they do run the empire. the middlebrows are just fodder. the real insight is amerika not only used the us military for a protection racket for petrodollar but the imperial lords in NYC who own DC also waged war on much of amerika since the 60s. a new twist. basically colonizing their own citizens. evil empire 101. i still think most financiers have no clue to what and who the FED serves. mish and most are mistaken as all get out. amerika is a democracy that loves warfare and imperialism. if the volks wanted a change they’d get it. most too dumb or too lazy or too fat. the ancient roman trick of panem et circenses stands true today. nothing more is needed for most humans. i happen to have italian citizenship too. we are just like rome. another evil empire. i’ll be passing by the NYFED tomorrow and will tip my hat at the greatest scam ever. even mish does NOT get it. he thinks THEY are dumb. which is quite funny. in itself. mish is great at r/e analysis. for sure. his fed watching prowess is quite pedestrian. i had an advantage being born into the yacht club.
I met a man here in my little town whose grandfather had founded the state bank in New Jersey. Great person, and he couldn’t stand the way his family felt that money was the sole measure of a person. Didn’t matter how it was gotten; just having it was all that mattered. He definitely understood where we’re going.
I do disagree on a couple of minor points. We’re a republic (in theory), not a democracy. Just a minor pet peeve of mine. Two: The 60s were just another stage in the war on us. Remember, even as far back as the beginning, when that jerk Hamilton, got with another jerk to setup a central bank. The bank promptly broke the country. Even before then, Shay’s Rebellion was a result of the very wealthy having extra privileges. Wall Street is the enemy. But look at all the brain dead slugs here who think they’re sophisticated because they fund the very people who brought us communism in Russia. They’re just too stupid to understand, and too self-absorbed to care. Wall Street is the heart of what’s wrong with the world.
agree 100%. my pet peeve. republics are just a form of democracy. i vote in italia. greeks and romans invented this stuff. we amerikans vote for world wide imperial slaughter of innocents for a few lousy shekels. a hollow empire of drugged out gun nuts who suicide themselves in many different ways. too dumb to live correctly. maybe in another few centuries.
I think the tough times coming are going to change things considerably. A lot of people weren’t tough, or lucky, enough to survive the last depression. And they weren’t so pathetically out of shape by any measure, as people are today. If we’re right, and I hope we’re not, we’ll “blunder” our way into another global depression. The good news is that liberty will win out. It’s inevitable.
Tony Bennett
1 year ago
No argument with your points.
But I have no problem with Powell past 12 months. A lot of water under the bridge, for sure; but doing what needs to be done now.
In contrast can you imagine past year with Bernanke / Yellen at the helm?
I have a problem with Powell prior and for the last 12 months. As Mish outlined, the dot plots are just stupid and tie their hands. The Fed, and Powell are responsible for the safety and soundness of the financial system. They should have and could have seen the problems with raising rates at the speed they did. Don’t they have any models? If they needed the now in place backstop of liquidity, they could have provided it before the collapse and avoided the “crisis”. Instead, we move from one crisis to the next without any forethought.
We have seen the unrealized losses in banks but what about the unrealized losses in the insurance business and pensions? I guess we can just ignore these until they become a crisis.
Each crisis and it’s solution seems to lead directly to the next crisis.
Bailing me out? Robbing the working poor, and potentially viable startups, via debasement, so that I didn’t have to take a loss for acting like a (or more like not acting like a non-) moron?
Rate hikes are always good. No exceptions. At least until 20 USD buys an ounce of Gold. Ditto QT. So yes, when the broken clock comes around to do those, the broken clock will be right as well.
Equity wiped out. Bondholders took haircut. Yes, DIF (depository insurance fund) took a $20 billion hit … which will be restocked with special assessment on banks.
QE is when Treasury issues debt – which primary dealers purchase – then turn around and sell to Federal Reserve at a profit (via open market auction). $$s flood the system.
Recent balance sheet expansion a far cry from QE. Banks not making a profit, instead paying a usurious loan rate + having to surrender collateral with recourse.
There was no “printing” (didn’t we already go over this?)
The balance sheet grew because commercial banks went to Federal Reserve (as lender of last resort) to borrow. Shows duress in banking system (deflationary). Yes, $US put out into the banking system, but banks had to surrender collateral + pay pecuniary rate to borrow.
Compare it with no Fed involvement at all: Bond holders would take bigger haircuts.
Plus, the most important one: Equity, and bondholders, and depositors, and….. would be wiped out at many other, including much bigger, banks as well, once runs on those got moving due to knowledge that The Fed would no longer reliably backstop them.
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The Fed Is Pushing On A String | Talkmarkets
Governors reduced the reserve requirement on checkable deposits to zero. This
action ended the Fed’s ability to control M1.”
link to thefinancialbrand.com
Senate and House banking committee hearings about the
Silicon Valley Bank and Signature Bank failures will probe what happened and
what regulators did — and didn’t do — in the run-up to the banks’ closures and
FDIC takeovers. Underlying these hearings will be the belief that such failures
should be preventable. Bryan Hubbard, former public affairs chief at the Office
of the Comptroller of the Currency, says this is a mischaracterization of
regulators’ role.
By Bryan Hubbard, former Deputy Comptroller for Public Affairs at the
OCC
-guessing
and public excoriation of the regulators and bankers involved in the failures
of Silicon Valley Bank and Signature Bank are kicking into high gear in
Washington. Along with this comes blaming individuals and policies championed
by one political party or the other.
Finding
fatal flaws in the system and determining what can be improved is critical, of
course. Yet I am reminded of advice two influential people in my life have
given me, things that participants in the current debate should keep in mind.
• The first
came during the 2008 financial crisis. One busy Friday evening, the chief
national bank examiner at the Office of the Comptroller of the Currency
reminded me:
“It is not the regulators’ job
to prevent a bank from failing.”
• The second
came from an even more influential source — my mother. She advised me to never
make important decisions while angry.
Absolute
Protection of Banks and Banking Freedom Can’t Co-Exist
I think the tough times coming are going to change things considerably. A lot of people weren’t tough, or lucky, enough to survive the last depression. And they weren’t so pathetically out of shape by any measure, as people are today. If we’re right, and I hope we’re not, we’ll “blunder” our way into another global depression. The good news is that liberty will win out. It’s inevitable.