Monetary policy can only ignore fundamentals – or indulge crank theories – for so long before ultimately having to pay a price for restoring normalcy to the price of money.
Something was always destined to blow up in financial markets as part of the painful adjustment to the end of the ultra-cheap money era. At this stage,does not appear to have exposed global financial crisis-style systemic problems in the American banking system.
, which broke former US Federal Reserve chair Alan Greenspan’s complete faith that free and open markets would always function, was spawned by cheap money, excessive financial leverage and social engineering from Depression-era government lending bodies that extended mortgages to borrowers who could never repay.
This time it is different. Established in 1983, SVB was the go-to bank for founders and entrepreneurs in the world’s pre-eminent technology precinct. It was awash with cash deposits from start-ups funded by investors searching for yield amid ultra-cheap money. It put much of these deposits into supposedly safe US Treasury bonds. But when the Fed jacked up official interest rates to fight the post-pandemic inflation outbreak, SVB found that the value of those bonds fell just as their yields rose.
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SVB rivals benefit from start-ups seeking new home for funds“We are advising our entire portfolio to have two bank accounts going forward,” said Josh Chapman, managing partner at Konvoy Ventures.
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Canadian banks erase more than $20b in value on SVB contagionLarge Canadian banks have acquired regional US banks in recent years, increasing their exposure to the banking fallout from the failure of Silicon Valley Bank.
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SVB depositors face prisoner’s dilemmaThe future for Silicon Valley Bank could one of two scenarios: a merger and recapitalisation or the start of a series of bank runs.
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Global markets in turmoil as SVB Financial’s sudden collapse leaves billions strandedSilicon Valley-based lender SVB Financial has become the largest bank to fail since the 2008 financial crisis. The sudden collapse of the business has disrupted global markets and left billions of dollars stranded. The shutdown has had major implications for a number of cryptocurrencies, whose value has plummeted as a result.
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Could there be an SVB style run on Australian banks?Local players have learnt the lessons of the global financial crisis and put considerable effort into change. But it would be naive to give them the all clear.
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Bank runs expected as SVB collapse upends rate forecastsBank runs and sharemarkets routs following the second-biggest bank collapse in US history has financial markets reassessing their bets on the Federal Reserve’s next interest rate moves.
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