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The NEW Banking Crisis In One Chart (Hint: Inflation = Fed Rate Hikes = Treasury/MBS Duration Increases = Bond Losses = Bank Runs) Bond Volatility Highest Since 2008
Confounded Interest ^ | 03/16/2023 | Anthony B. Sanders

Posted on 03/16/2023 9:07:54 AM PDT by Kaiser8408a

So, the Biden Administration made a horrible error by guaranteeing deposits at Silicon Valley Bank for deposits over $250,000. Essentially, Biden bailed out big tech that kept their deposits at SVB.

But what triggered the run on SVB and other banks? Simple. Biden and Congress spent like drunken sailors with Covid and The Federal Reserve went nuts printing money. Viola! We got inflation. But with inflation came The Fed’s attempt to get inflation back to its 2% target (difficult since Biden/Congress refuse to return spending to pre-Covid levels). But as interest rates rise, duration (weighted average life of MBS) rose dramatically meaning that risk increased. But banks like SVP ignored the risk, or didn’t hedge, or were spending time worrying about non-bank related issues.

So, what happened? Banks are holding Treasuries and MBS (orange line) that are getting clobbered with rate hikes (yellow line).

Talk about volatility. Today, the 2-year Treasury yield is up over 20 basis points as bond volatility hits levels last seen in 2008, just prior to the subprime credit crisis.

So, Biden’s bailout of SVP depositors stopped the deposit run for the moment. But if The Fed keeps hiking rates, banks are going to be hurting worse and worse. They could rebalance their portfolios and/or hedge. But with Uncle Spam (Biden) at the helm, bailouts are always on the table.

(Excerpt) Read more at confoundedinterest.net ...


TOPICS: Business/Economy; Food; Government; Politics
KEYWORDS: banks; biden; rates; recession
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Biden is killing us.
1 posted on 03/16/2023 9:07:54 AM PDT by Kaiser8408a
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To: Kaiser8408a
Hint: Inflation = Fed Rate Hikes = Treasury/MBS Duration Increases = Bond Losses = Bank Runs

Complete the circle:

Inflation = Fed Rate Hikes = Treasury/MBS Duration Increases = Bond Losses = Bank Runs = Bailouts = Inflation (repeat cycle)

2 posted on 03/16/2023 9:15:30 AM PDT by SSS Two
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To: Kaiser8408a

“ Biden is killing us.”

On purpose


3 posted on 03/16/2023 9:16:03 AM PDT by Gary from Dayton (Scary unvaccinated American )
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To: Kaiser8408a

MBS=mortgage backed securities?


4 posted on 03/16/2023 9:16:45 AM PDT by rightwingcrazy (;-,)
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To: Kaiser8408a

And we’re letting it happen.


5 posted on 03/16/2023 9:16:51 AM PDT by Carriage Hill (A society grows great when old men plant trees, in whose shade they know they will never sit.)
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To: Kaiser8408a
This guy's charting skills suck.

And he puts TWO charts in the article, utilizing sensational wording.

I guess it doesn't matter as long as he keeps the fearporn flowing and makes a living off of it.

6 posted on 03/16/2023 9:17:20 AM PDT by DoodleBob ( Gravity’s waiting period is about 9.8 m/s²)
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To: Kaiser8408a
Voila, not viola.
7 posted on 03/16/2023 9:18:31 AM PDT by Fungi
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To: Kaiser8408a

Governments crushed economies with needless “covid” lockdowns and then devalued their currencies by pumping out phony “stimulus” to ostensibly alleviate the economic hardshipswhich they created.

It’s almost as if the people in charge wanted there to be high inflation and financial crisis.


8 posted on 03/16/2023 9:19:17 AM PDT by BenLurkin (The above is not a statement of fact. It is either opinion, or satire, or both.)
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To: Kaiser8408a

Mortgage rate news is excited that we are back below 7% (6.92% for a 30 year) from the 9% high point last June.


9 posted on 03/16/2023 9:28:28 AM PDT by KC Burke (Diversity, Inclusion and Equity is not another way to spell GOD but it is a way to spell DIE.)
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To: Fungi
Voila, not viola.

Be kind; we're all strung out at the moment. At least a viola doesn't fret.

(Actually, I thought, "at least he didn't spell it 'wah la'" 🥸 )

10 posted on 03/16/2023 9:30:43 AM PDT by chajin ("There is no other name under heaven given among people by which we must be saved." Acts 4:12)
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To: Kaiser8408a

It seems the Fed is in a straight up “catch-22”

Raise interest rates to “fix” inflation - and watch bond portfolios held by banks decline even more.

The economy needs SUPPLY-SIDE fixes for inflation and debt - more production, more efficiency, more growth - particularly energy.

That’s completely outside the control of Central Bankers. Its a government/politics issue. Neo-Marxist central planners in DC don’t even mention this.


11 posted on 03/16/2023 9:40:42 AM PDT by PGR88
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To: Kaiser8408a

YoY two times in the same day!


12 posted on 03/16/2023 9:50:30 AM PDT by webheart
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To: SSS Two; Kaiser8408a

The vicious circle did not take into account the MAIN SOURCE of the cycle. Let’s add what was missing :

It’s a vicious cycle.

Government Overspending = Inflation = Fed Rate Hikes = Treasury/MBS Duration Increases = Bond Losses = Bank Runs = Bailouts = Inflation (repeat cycle)


13 posted on 03/16/2023 9:51:16 AM PDT by SeekAndFind
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To: chajin

Perfect.


14 posted on 03/16/2023 9:55:45 AM PDT by mykroar (what is extraordinarily important is this—who will count the votes, and how. - J0eStalin)
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To: SSS Two

Government Spending = Inflation = Fed Rate Hikes = Treasury/MBS Duration Increases = Bond Losses = Bank Runs

It ALL started with the Puppet Biden spending agenda. The collapse was caused by the Golden Calf puppet masters.


15 posted on 03/16/2023 9:56:59 AM PDT by Flavious_Maximus (Tony Fauci will be put on death row and die of COVID!)
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To: Kaiser8408a

The over-printing of money due to overspending and borrowing with no valuable anchors (gold, silver, etc.) is a serious problem.

It’s funny that while all schools and parents are teaching “don’t live beyond your means”, the US government is doing just that, living beyond it’s revenue.


16 posted on 03/16/2023 10:02:12 AM PDT by SeekAndFind
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To: PGR88
The economy needs SUPPLY-SIDE fixes for inflation and debt - more production, more efficiency, more growth - particularly energy.

Exactly! There are two ways to cause deflation. One is to ramp up supply: let the farms grow all the food they can, let the oil companies drill and pipeline all they can, let the market decide when EVs should become commonplace if ever, bring manufacturing back home--in short, all the things Trump was trying to do.

The other way is to squeeze the money supply and cause a Great Depression.

Guess which one the revolutionary Left wants.

17 posted on 03/16/2023 10:07:46 AM PDT by chajin ("There is no other name under heaven given among people by which we must be saved." Acts 4:12)
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To: BenLurkin
How to Pump and Dump the Peons for Fun and Profit.
18 posted on 03/16/2023 10:31:07 AM PDT by Aevery_Freeman (Wow, they shut down FOX News pretty quickly!)
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To: SeekAndFind

Wondering what gov’t. spending would look like if they ever actually decided to do away with all NON-ESSENTIAL spending? I don’t think the gov’t. now has any idea what that would look like, but as citizens we are more or less forced to these days, and sometimes even that isn’t enough.


19 posted on 03/16/2023 10:33:49 AM PDT by oldtech
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To: Kaiser8408a

Killing energy = Inflation = Fed Rate Hikes = Treasury/MBS Duration Increases = Bond Losses = Bank Runs...


20 posted on 03/16/2023 10:33:56 AM PDT by Bonemaker (invictus maneo)
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