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Re: If SVB is insolvent, so is everyone else - US Treasuries, far from being safe, are the NEW Toxic Security!

By: Fiz in 6TH POPE | Recommend this post (0)
Tue, 14 Mar 23 4:26 AM | 32 view(s)
Boardmark this board | 6th Edition Pope Board 		Msg. 40970 of 58622
(This msg. is a reply to 40968 by Fiz)
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Kunstler has a way with words:

"The rot was plain to see in the banking architecture built on US treasury paper (bills, notes, bonds) as rising interest rates undercut the price of all the debt paper issued previously at lower rates. And this was the collateral that banks generally held the depositors’ money in. So, when it became necessary to declare a problem with the balance sheet, and cash had to be raised to cover it, the treasury paper could only be sold at a loss, liabilities exceeded assets, word got out, depositors rushed to secure the money in their accounts, and that was all she wrote for yon bank, in this case, Silicon Valley Bank, the first to crumble."

http://kunstler.com/clusterfuck-nation/money-troubles/

Sunday morning, Ms. Yellen told CBS News “bailouts, no way” but by the afternoon Mr. Powell cried “bailouts, way,” and they had to get their story straight. They offered up $25-billion to bail out depositors for a smoldering system that will arguably require a trillion dollars or more of liquidity to quench the spreading fires. One thing looks for sure: the interest rate hikes that Mr. Powell spoke of so confidently only days ago just got stashed into his folder labeled “Fuggeddabowdit.” So, the campaign to control inflation must now yield to the urgent need to create a whole lot of money to spray over those fires.

You may have noticed that the value of your money has been slip-sliding away the past year or so. Peanut butter at five bucks a jar, and all. The situation at hand kind of guarantees that we’ll be seeing a whole lot more of that. And then the gods of money will have lost control of the interest rate console altogether. No more tweaking the broken knobs. More inflation will prompt US treasury paper holders to dump what they can while there’s still some value to retrieve. But the US has to issue more debt for all the bail-outs and theoretical buyers of new debt will perforce bid up the rates to keep up with inflation… and yet the US can’t possibly bear the burden of paying higher interest on its debt. Looks like the business model for running the USA is breaking down before our eyes.

Luckily, Cap’n “Joe Biden” is at the helm of this steaming garbage barge.




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Re: If SVB is insolvent, so is everyone else - US Treasuries, far from being safe, are the NEW Toxic Security!
By: Fiz in 6TH POPE
Tue, 14 Mar 23 3:54 AM 		Msg. 40968 of 58622

Zim: "Am I right in thinking that that is only if one sells?"

I don't think that is how things work in accounting - nor in rational investing. HIDING losses for any of these PUBLIC institutions is, I'm sure, a felony (albeit in a country which no longer prosecutes felonies if you are politically connected enough...like Biden, Clinton, Bush, etc).

You LOSE the value of your investments when their mark to market price goes down — not when you sell. In ALL cases smart money would have not invested before the crash, but waited until after, if at all. A 50% paper loss requires a 100% paper gain...just to get you back to even, and 100% gains are not that easy to come by in conservative circles.

The banks which lent money long term when interest rates were at historic lows (and WAY below real rates which factored in inflation) SCREWED UP MASSIVELY. They GAMBLED that trees grow to the sky...and that
the Fed would never do what it did.

The really spooky thing to ask is what banks, pensions, insurance companies, etc. did NOT make long term loans when mortgages were at 2-4% and Treasuries were below 0.5%? If you lent fixed-rate, long-term on RE you are screwed. If you lent on 10 year Treasuries or blue-chip corporate bonds, you are also screwed.

I'm trying to think how I would find out the amount of such long-term paper losses held at various banks vs. their liquid assets. Maybe there is something I am not properly considering but, at the moment, I'm wondering if there are ANY commercial institutions which are still solvent on a mark to market basis. How could there be? Only if they didn't loan anything long term or didn't use any leverage (margin). But that doesn't fit ANY public institution I can think of!

If you have much money in any smaller banks (which are less likely to be politically connected enough) you might want to rethink that...quickly...before other people start rethinking it! Even below the FDIC insured level, there is massive risk as the FDIC didn't have even 1% of the money it would need to bail out the deposits it has supposedly insured ... and it is a quasi private institution. All this based on the last time I checked. (I actually took the time to call them once, a long time ago, to find out if this was all true...it was...but they told me not to worry because...well, just because!;!)

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