You

 

really gotta ask at this point?

Are banks on the edge of another 2008-style precipice?

"Northern Rock, Bear Stearns, Countrywide Financial and Alliance & Leicester. Back in late 2007 and early 2008, when they all failed or were rescued, none of the above was systemically important. And few observers would have predicted the nightmarish crisis that was to strike within the year, felling behemoths from Wall Street’s venerable Lehman Brothers to Royal Bank of Scotland, then the biggest bank in the world.

"Fifteen years later, after a week in which four banks — Silicon Valley Bank, Signature and First Republic in the US, and Credit Suisse in Europe — teetered and were propped up in one way or another, it is no wonder that investors are questioning whether we are facing 2007-style problems that could soon spiral into another full-blown 2008-style disaster."

"There are good reasons to hope not. The primary causes of the 2008 crisis — a glut of poor-quality subprime mortgages that had been spread round the world via derivatives on to the balance sheets of poorly capitalised banks — do not apply in 2023. Credit quality remains decent. And bank capital is two to three times stronger than it was a decade and a half ago."

(I just dont buy it that these banks are so much more capitalized than they were 15 years ago. Not after they weakened Dodd-Frank I dont.

What I fear is this:

"The sale of Credit Suisse to UBS is the most dramatic moment in global banking since the financial crisis of 2007-08"

And it was almost a nonexistent story the next day.

Why?)

"Such reassurances have felt empty though in the face of the market panic afflicting bank shares."

(Maybe because people know this playbook by now?

Maybe?

Perhaps?

Maybe even a slight chance?

Nah...nothing to see hear, keep spending, move along...)

"Markets were not exactly calm by the end of the week but they had stabilised somewhat. This came after CS made use of a $54bn “bazooka” liquidity intervention by the Swiss National Bank, while the risk of US bank runs was offset by deposit guarantees, new Federal Reserve liquidity facilities and a Wall Street whipround.

(This is big:

"new Federal Reserve liquidity facilities"

and gives away the pickle we find ourselves in:

the fed cant fight inflation on one hand

(raising rates)

and cause it on the other:

by creating: 

"new Federal Reserve liquidity facilities".

All you are doing is increasing the $ supply,

which is what caused the inflation they say they are trying to fight in the first place!

So yeah:

"Such reassurances have felt empty"

Cause we know whats up and where this goes and how it ends.)

"Of course such interventions were not supposed to be necessary after the drama of 2008. The vast package of post-crisis regulatory reforms was designed to ensure there could be no repeat of the domino collapses of banks on both sides of the Atlantic. New minimum levels of equity capital were devised, regulatory stress tests were introduced and liquidity ratios were toughened, dictating that more ready funds should be available to meet customer withdrawal requests."

(It reads like a laundry list of what we should have done but didn't, or didn't do enough of.

"New minimum levels of equity capital were devised"

Just because your bank meets "minimum levels of equity capital"

That doesnt mean it will have all your $ when your time comes to get it.

See, the banks trick is to make you THINK you have $.

You dont have it.

They do.

Push comes to shove?

refer back to the Spanish courts or the Swiss government in the post previous.

"regulatory stress tests were introduced"

And then promptly circumvented/clever accounting etc.

(See credit Suisse example in earlier post)

It's the illusion of security they sold you, not the fact that things are all that different than they were in 20068.)

"This week’s problems in the US were explicitly caused by a failure there to apply these rules to anything other than the eight biggest banks."

(The big banks issues moved to the smaller and regional ones, that weren't being regulated as much...nice, thx.

"On March 14, 2018, the Senate passed the Economic Growth, Regulatory Relief and Consumer Protection Act exempting dozens of U.S. banks under a $250 billion asset threshold from the Dodd–Frank Act's banking regulations. On May 22, 2018, the law passed in the House of Representatives. On May 24, 2018, President Trump signed the partial repeal into law.'

(I wonder why on earth they would do something like that for?

and here we are again watching a rerun of a TV show that wasn't supposed to ever be renewed but it's no big deal...Move along...keep spending plz...Keep your $ in the bank yall...Nothing is goin on here etc...)

"There is even less fundamental reason to distrust the viability of European banks more broadly. Credit losses are low, capital levels are strong and they have come through stress tests."

(I'm just gonna say it like I would if I was at my buddy's garage:

FUCK YOUR STRESS TEST!

Thats what you gonna put your faith in?

Not me, I know better.

It aint gonna stand up to nothing.

Might slow things down somewhat, maybe some are in a lil better shape than they were in 2008...You just gotta understand that these types of players? At these levels? They will do whatever they wanna and they got the $ to make it happen and we have seen it time and time again...but I understand, this time is different etc...

This time is different alright.
Count on that.)

"But this bullish assessment is still being trumped by bearish nerves — and some logic. Central bank efforts to tame inflation will produce recessionary pressures, pushing banks’ loan losses higher and potentially eating into capital buffers. At the same time unexpected damage may be inflicted on less regulated, but similarly important, parts of the financial system that have got used to ultra-low interest rates, possibly including pensions, private equity and hedge funds. The gilts crisis in the UK pensions market last autumn was a warning sign of such risks."

("and some logic?

Seems like plenty of logic to me.

Central banks can not fight inflation and create it at the same time.

Seems like i remember somebody saying they dont have the tools to deal with his over three years ago right when Covid hit.

it is doing exactly what it was designed to (who created everything again?) in terms of ripple effects.

("unexpected damage may be inflicted on less regulated,

 but similarly important, parts of the financial system 

that have got used to ultra-low interest rates"

Who been talking about how:

"got used to ultra-low interest rates"

Screwed us this time around?

Peter Schiff, myself, a few others, not many...

What saved us before?

"ultra-low interest rates"

Is our achilleas heel now.

It was the lowest they ever were for longer than they ever were.

Everybody accepted it as their new normal.

Deep sea fish?

They dont know about the air at the top of the ocean.

Just because it's all you have ever experienced?

(Low interest rates/ deep sea living?

Doesnt mean it's all there ever was.

Air/higher interest rates

All we did was put the pain off 15 years.

And why does the unexpected damage always show up where it has been

"Less regulated?"

So yeah..."Some logic"

More like tons if you ask me.)

"Even if the chances of another full-blown financial meltdown are low, our ability to deal with it may be less. Back in 2008, policymakers were able to slash interest rates, launch quantitative easing and flood the banks with rescue capital and liquidity. With government balance sheets today far more stretched, and interest rates needing to rise to combat inflation, the weaponry at their disposal is dangerously diminished."

(It's not:

"chances of another full-blown financial meltdown are low"

 Recent events have shown it's a greater probability 

and 

"our ability to deal with it may be less"

May be?

Did he really just say that?

May be?

Our ability to deal with it is 

SUBSTAINIALY LESS

than it used to be.

"Back in 2008, policymakers were able to slash interest rates"

(Cant do it now, inflation runs out of control.)

"launch quantitative easing and flood the banks with rescue capital and liquidity"

(We cant do it again it's what increased the % supply and created the asset bubbles we have today.)

"With government balance sheets today far more stretched, 

and interest rates needing to rise to combat inflation, 

the weaponry at their disposal is dangerously diminished."

If you were at Central Baptist Church in Hawesville KY Bible study the day before KY went into Covid lockdown?

You would have heard somebody saying the same exact thing three years ahead of time.

"This hits the supply and the consumer side at the same time, the central bankers are not gonna have the tools to deal with this."

Knowing the future is solely the providence of God.

Period.

I'd think about those last couple of sentences if I was you.