Silicon Valley Bank Collapses

[EEVblog]

That is a bad idea and exactly why gold (or whatever) backed systems don't work. If you print extra money, you can get people to work on military stuff and improve (increase) the economy which in turns backs the value of the extra money. Government debt is only a problem when people stop to work so there is some carefull planning required (and why we have a limit on the debt versus GDP ratio in the EU). In a way you can even doubt government debt is an actual debt; more likely bookkeeping to show how much money was printed.

Be careful playing the Modern Monetary Theory game:

[SiliconWizard]

Oh yeah, that is working very well indeed!
 

[Rick Law]

Back to the SVB failure:
I accidentally posted this comment to another thread, but it belongs here.

Several right-wing American politicians stated that SVB failed due to "wokeness".
The New York Times fact-check department, pooping the party, checked the normal "D&I" and "ESG" scorekeepers for the financial industry and found SVB parked right near the middle/median of its peer group.
Facts are for losers.

Blaming risk management is always easy in hindsight.
In foresight, risk management, like safety, is often considered a cost center, rather than prudent management.
However, there are some risk management algorithms and tools that may not use appropriate statistical distributions:  the risk probability of future not-yet-announced interest-rate changes may not be normally distributed.

(bold added)

First, to Mr. TimFox.  In quoting you this way, it may appear I am arguing with you.  That is not my purpose.  I am however (respectfully) borrowing your words to point out how SVB failed their given mission.  No argument intended.

re: Several right-wing American politicians stated that SVB failed due to "wokeness".

That is probably because SVB was very outspoken about it.  Hiring based on equality, loaning based on equality, so forth.  Having a DEI department itself is not the issue.  The outspokenness on the issue suggests that they deem it more important than other less high-lighted issues.

re: Blaming risk management is always easy in hindsight.

Most if not all accounting department functions are on the costs side of the ledger.  If everybody pay their bills and did the numbers right, the math should automatically work out.  Most company have accounting department because they know "relying on it to just automatically add up right" is too risky.

For a bank that is heavy on the investment side, not having a CRO (Chief Risk Management Officer) is inexcusable.  It suggest they believe that investment of any kind will always work out, profit will just keep coming.  The need to distinct good investments vs bad investments should be in their DNA, their reflexes, their prefrontal cortexes, and their muscle memory 24/7.

Putting both quoted points together, it paints a very dark picture.  It gives the appearance that idealistic empty brains are running that organization.

SVB's mission statement in their own word is ""Our mission is to increase the probability of our clients' success."  How on earth do they expect to accomplish their mission with these kinds of decision making?  Only an empty-brain would decide like that for their given mission.

[james_s]

That is probably because SVB was very outspoken about it.  Hiring based on equality, loaning based on equality, so forth.  Having a DEI department itself is not the issue.  The outspokenness on the issue suggests that they deem it more important than other less high-lighted issues.

I haven't looked but I suspect they were hiring, loaning, etc based on *equity*, it sounds a bit like equality but is anything but.

[nctnico]

That is a bad idea and exactly why gold (or whatever) backed systems don't work. If you print extra money, you can get people to work on military stuff and improve (increase) the economy which in turns backs the value of the extra money. Government debt is only a problem when people stop to work so there is some carefull planning required (and why we have a limit on the debt versus GDP ratio in the EU). In a way you can even doubt government debt is an actual debt; more likely bookkeeping to show how much money was printed.

Be careful playing the Modern Monetary Theory game:

And? You can always prove that some governments are not able to rule / regulate their country properly. That doesn't make monetary money flawed. Are cars fundamentally flawed because some people crash them into a tree? IOW: you a using a straw man argument here.

[vk6zgo]

I wonder how this compares to resource wastage and environmental impact of gold mining.

It would be pretty disastrous to back a major currency with gold again too, yes.

Why?
You just have to peg a ratio.
Does mean you can't just print more out of thin air though, and well, they can't give up that magic ability.

When the Spanish, in the 15th Century, started looting those societies in the New World which had a lot of already processed gold & silver, as well as establishing new mines, "treasure ships" full to the gunwales with precious metals streamed back to Spain, initially to great joy & celebration, but the huge increase in the quantities of gold & silver held in that country soon caused a fall in their value.

This lead to inflation, which in time, spread across Europe.

https://en.wikipedia.org/wiki/Price_revolution.

[vad]

Be careful playing the Modern Monetary Theory game:

Dave, what makes you believe that Robert Mugabe's regime followed any modern economic theory at all?

USSR, on the other hand followed Marxist theory and played the Gold Standard game.
Each ruble had equivalent of 0.987412 grams of pure gold between 1961 and 1991.
Here is a picture of typical Soviet grocery from late 1980s:



Correct me if I am wrong. US dollar was pegged to gold when Great Depression began, was not it?

[iMo]

Germany 1923..

[nctnico]

Keep in mind that gold being valuable is just an imprint in western culture. Like a religion obsessing over a tangible object instead of an imaginary deity.

[DavidAlfa]

[tom66]

That is a bad idea and exactly why gold (or whatever) backed systems don't work. If you print extra money, you can get people to work on military stuff and improve (increase) the economy which in turns backs the value of the extra money. Government debt is only a problem when people stop to work so there is some carefull planning required (and why we have a limit on the debt versus GDP ratio in the EU). In a way you can even doubt government debt is an actual debt; more likely bookkeeping to show how much money was printed.

Be careful playing the Modern Monetary Theory game [...]

Hung on my living room wall, my father grew up in Rhodesia (to Dutch/South African parents) and left just after it became Zimbabwe.  He left it in his will to me.

(He may have had a few, err, "opinions" about Mr Mugabe.)

[tooki]

Correct me if I am wrong. US dollar was pegged to gold when Great Depression began, was not it?

Well yes, it was, but it was pegged to gold for decades before and after, too. (1900-1971 pegged to gold, 1792-1900 pegged to a mix of gold and silver.)

[coppice]

Keep in mind that gold being valuable is just an imprint in western culture. Like a religion obsessing over a tangible object instead of an imaginary deity.

If you think the west is obsessed with gold you've never been to the east. In the east it has to be 99.99% pure to interest them. Its not just a value thing. Its a purity thing too.

I think the only people without an interest in gold are remote tribes who have never encountered it.

That said, its a funky form of stored value. Although it has had an unmatched level of stability over the centuries, changing uses or massive discoveries could change that at any time (e.g. the rapid influx of plundered gold from South America to Spain). Remember when the rich served dinners on aluminium plates to show off that they were not the kind of paupers who would use gold?

[james_s]

Keep in mind that gold being valuable is just an imprint in western culture. Like a religion obsessing over a tangible object instead of an imaginary deity.

Has there ever been a culture that didn't value gold?

Even if people didn't find it attractive it's incredibly useful stuff. If it was cheap all kinds of stuff would be gold plated to prevent oxidation.

[nctnico]

Keep in mind that gold being valuable is just an imprint in western culture. Like a religion obsessing over a tangible object instead of an imaginary deity.

Has there ever been a culture that didn't value gold?

Has there ever been a culture that didn't worship some kind of god?

AFAIK the Azteks and similar cultures didn't assign monetary value to gold. They used it for creating items for worshipping purposes.

For use as money, gold and other rare materials (some cultures used seashells as coins for example) are nothing more than means to prevent counterfeiting. Nowadays that is no longer necessary due to better printing & fabrication techniques and (digital) wire transfer.

[james_s]

I don't know, I've never worshiped any god and kind of wish it was not a thing but it seems to be hardwired into the human brain. The fact that the Aztecs used gold for religious purposes doesn't suggest it lacked value, on the contrary it suggests it was of extreme value, too valuable for common use by regular people. Many cultures put their greatest resources into religious matters, take the Egyptian pyramids, Mayan temples and the cathedrals in Europe for example.

[Marco]

Regardless of your opinion on the possibility of hyperinflation due to current debt levels, what backs money is entirely irrelevant for this kind of bank run. A 5% interest rate rise is nothing to a gold backed currency, happened all the time. What backs the bank deposits is relevant ... fractional reserves weren't a fiat based central bank invention.

Gold bankers in my country invented fractional reserves and people have been running on banks ever since ... then with the memory of gold fish they chase that couple percent interest rate on deposits the next day.

[floobydust]

SVB ex-CEO was spotted in Hawaii, Greg Becker and his wife have escaped to their Maui townhouse worth $3.1 million source
Must be nice to cash in $3.6M of stock ($84M over the past 2 years) and sit on a beach.

[EEVblog]

SVB ex-CEO was spotted in Hawaii, Greg Becker and his wife have escaped to their Maui townhouse worth $3.1 million source
Must be nice to cash in $3.6M of stock ($84M over the past 2 years) and sit on a beach.

That's the CEO game.

[james_s]

SVB ex-CEO was spotted in Hawaii, Greg Becker and his wife have escaped to their Maui townhouse worth $3.1 million source
Must be nice to cash in $3.6M of stock ($84M over the past 2 years) and sit on a beach.

That's the CEO game.

Yeah I'm not even surprised even a little. The same happens with politicians, seems like every time a natural disaster occurs here the governor of the state where it happens has jetted of to their vacation home. On one hand it pisses me off, on the other hand, can I really claim I wouldn't do the same given the means? I accept as a fact that when push comes to shove, the vast majority of people are going to look out for themselves first.

[SiliconWizard]

Yeah of course.
Now that just looks not very, uh, moral or ethical.
We're kinda far away from the ship's captain who will sink with his boat if that saves a single person. Oh well.

[Black Phoenix]

Well one more on the wake of the Silicon Valley one:

https://www.ft.com/content/5746165a-3a0c-42c7-9a2e-cb7cf5f33f46

Switzerland is preparing to use emergency measures to fast-track the takeover by UBS of Credit Suisse, according to three people familiar with the situation, as the banks and their regulators rush to seal a merger deal before markets open on Monday.

Under Swiss rules, UBS would typically have to give shareholders six weeks to consult on the acquisition, which would combine Switzerland’s two biggest lenders.

The Swiss cabinet met for an emergency meeting on Saturday evening to discuss the future of Credit Suisse. The cabinet assembled in the finance ministry in Bern for a series of presentations from government officials, the Swiss National Bank, the market regulator Finma, and representatives of the banking sector.

The boards of the two banks are meeting this weekend. Credit Suisse’s key regulators in the US, the UK and Switzerland are considering the legal structure of a deal and several concessions that UBS has sought.

UBS wants to be allowed to phase in any demands it would face under global rules on capital for the world’s biggest banks. Additionally, UBS has requested some form of indemnity or government agreement to cover future legal costs, one of the people said.

[BravoV]

Situation in Swiss is pretty simple, as its turning into non-neutral country (taking side, not like it used to/ well known to), and start to seize and steal rich people money illegally that are trusted to be kept in Swiss because of geo-political reason (like sanctions), just to trash their own trusted image as "safe" money heaven.

There you go, rich people or rich countries are drawing out their money and sucking Switzerland dried as the trust is gone, yes, its pointless now to keep bailing out, as its like keep throwing money into a deep sink hole.

The main selling point where Swiss for "reputable" banking is now gone, they made it themself, stupid eh ?

Imagine you're rich oligarch say like rich Arabs or Asians that put your money in Swiss, looking what they did to rich Russian oligarch (even they're Putin's haters  ) and just seize and steal your wealth, ever thinking to pull your money out ?

[tom66]

Russia is now a pariah state.  Swiss won't hold money for N Korea (well, not "knowingly", wink-wink) or other such pariah states.  So they have to do this, because otherwise they risk sanctions and diplomatic action from EU.   I don't think they had a choice. 

[BravoV]

Russia is now a pariah state.  Swiss won't hold money for N Korea (well, not "knowingly", wink-wink) or other such pariah states.  So they have to do this, because otherwise they risk sanctions and diplomatic action from EU.   I don't think they had a choice.

Yep, that what Swiss believes, that willingly to sacrifice them self for the sake of freedom and democracy.