I think a simpler explanation of why rising yield means lower prices is that if I have an asset promising less yield than the obvious alternative (say, US treasuries) I have to discount my asset cheaper to "sweeten the deal" and bring it up to match the yield Nobody is going to buy a bond from me giving 2% return when they could get a bond from the US Gov giving 5% return, so I have to reduce the price until my bond is competitive with the newly issued bonds
@about 30:00, Jeff Deist notes that a rich person would be willing to pay a high service fee, like 5% p.a., for a perfectly "safe" deposit account. Actually, EVERY person who holds currency (i.e., green paper "money") in excess of immediate requirements pays a very high and uncertain service fee in the form of inflation.
@18:00 In light of Bobs point, why did SVB fail? If Bob is right, SVB did not have to take a loss! Something is wrong here. The FED should have bought these bonds in this circumstance! ALSO: There is the issue of SVB not having a RISK MANAGEMENT OFFICER FOR THE LAST YEAR! IMHO
We now have various approximations to 100% reserve checking banking, probably the closest is Glint, in which you can have a claim on gold which is linked to a Mastercard. Also: gold vaulting, safety deposit boxes, or simply buying your own safe to hold precious metal or currency (all of which suffer from being unavailable for use in payment processing, unlike Glint)
This ties to what extent banknotes and deposits should be used. In Britain before 1914, people used coins for purchases up to £5 (in 1914 money, so about £440 today). What's more, there were £1 and £5 gold coins. Banks are not all that important for payments.
While I do agree to a certain extent, they also didn’t have the internet, computers, and smartphones at that time. . We live at a time where the average person has several online subscriptions and pays for several different kinds of online services where you could never pay with cash. So that’s an issue…
I think I'm going to say something fairly obvious here, but I think I just feel I need to say it. I can definitely see how CBDC'swe pitched as the solution to these sort of Bank runs. And in a way they actually would be. That is to say, the bank runs would be impossible if the controller of the currency could stop money movements on a dime. That is to say, it would be pitched like circuit breakers on a stock. Pitch to stop the fear and create stability.... Oh, and the only thing that we would pay for this with is a total lack of physical currency, and then if course the full traceability of every single cbdc currency unit. (Which quit could of course turn into negative interest rates, carbon credit score rankings, and all kinds of other horrible means of tracking down the road to control us)
They would only lose out if they sold before maturity, which they had to. If they didn't sell and held to maturity they wouldn't. (Per John Tamny). Bob said that at one point.
“Black letter law” is that that the relationship between depositor and bank is a creditor to debtor relationship. So yes, you are “lending” your deposits to the bank (and paying them for the privilege). This why banks also do not owe you fiduciary duties as a depositor.
If a customer wants interest on an account then they need to open a non-demand account, savings accounts, CDs, money market, etc.. Marketing interest bearing demand accounts is fraudulent. (Contract case-law has long recognized a difference in validity between legitimate standard clauses and slight of hand clauses.)
One of the reasons the banking system itself doesn't want to have any individual Banks being 100% Reserve Banks is that that would pretty much guarantee Bank runs. That is to say in times of stress, people using fractional Reserve Banks would instantly be moving their assets to these fully Reserve Banks. You can see that happening right now not with fully Reserve Banks but with the larger more stable stable deemed too-big-to-fail Banks picking up assets from people fleeing the smaller less stable Banks. Imagine if a fully Reserve Bank existed, people would fly over there. You could argue that gold serves a similar purpose except that gold is difficult to get in and out of in the physical realm, and it has its own costs of storage, translation and transaction..... It is very much outside the banking system, where a fully Reserve Bank would be nestled inside that system.
So a full reserve bank couldn't write a $200k, 30-year mortgage unless it had depositors willing to buy $200k worth of 30-year certificates of deposit. How many 30-year mortgages would it write? Practically nil. In the early 20th century and earlier, mortgages required 50% down payments and had five-year terms.
It is true commercial banks had high down payment requirements and low repayment terms, BUT a good portion of home purchases in that time period were done through building & loan groups at very favorable, accessible terms.
Silicon Valley Bank created the Chinese finger trap that they ultimately got caught in. They were a couple of other things. One of the requirements of some of their speculative loans were required to be deposited in the bank. This is one of the reasons they had such a high percentage of money not covered by FDIC. The other thing that they did by marking their securities to maturity rather than marking them to Market is it they created a bigger asset base from which to give those loans out! This is why I say they built the Trap that they themselves were trapped in. Why all fractional reserve banks have susceptibility to bank runs, they set up the conditions that amplified that possibility! It may not be that they did not want to hire a risk manager/director, maybe nobody wanted to work they're in that fiduciary position given their risky bent ... That last point is just speculation on my part..... The first two points are things that I heard about that bank and their situation.
I think a simpler explanation of why rising yield means lower prices is that if I have an asset promising less yield than the obvious alternative (say, US treasuries) I have to discount my asset cheaper to "sweeten the deal" and bring it up to match the yield
Nobody is going to buy a bond from me giving 2% return when they could get a bond from the US Gov giving 5% return, so I have to reduce the price until my bond is competitive with the newly issued bonds
@about 30:00, Jeff Deist notes that a rich person would be willing to pay a high service fee, like 5% p.a., for a perfectly "safe" deposit account. Actually, EVERY person who holds currency (i.e., green paper "money") in excess of immediate requirements pays a very high and uncertain service fee in the form of inflation.
Silicon Valley Pank
LMAO really though 🤣 for some reason Bob kept calling it SVP
@18:00 In light of Bobs point, why did SVB fail? If Bob is right, SVB did not have to take a loss! Something is wrong here. The FED should have bought these bonds in this circumstance!
ALSO: There is the issue of SVB not having a RISK MANAGEMENT OFFICER FOR THE LAST YEAR!
IMHO
Jeff's hair is the inverse of Bob's hair
Goodness, he needs a haircut!
are we not returning to quantitative easing?
Peter Thiel advising people to take their money out hours before the run seems rather suspicious.
You know it's gonna be good when it has the word "malfeasance" in the title 😂
i live for this
We now have various approximations to 100% reserve checking banking, probably the closest is Glint, in which you can have a claim on gold which is linked to a Mastercard.
Also: gold vaulting, safety deposit boxes, or simply buying your own safe to hold precious metal or currency (all of which suffer from being unavailable for use in payment processing, unlike Glint)
Money printer goes brrrr. brr. Cough cough brr.
This ties to what extent banknotes and deposits should be used. In Britain before 1914, people used coins for purchases up to £5 (in 1914 money, so about £440 today). What's more, there were £1 and £5 gold coins. Banks are not all that important for payments.
While I do agree to a certain extent, they also didn’t have the internet, computers, and smartphones at that time.
.
We live at a time where the average person has several online subscriptions and pays for several different kinds of online services where you could never pay with cash. So that’s an issue…
Governments don’t bail out banks, depositors do. The FDIC is you paying yourself your money the bank lost.
I think I'm going to say something fairly obvious here, but I think I just feel I need to say it. I can definitely see how CBDC'swe pitched as the solution to these sort of Bank runs. And in a way they actually would be. That is to say, the bank runs would be impossible if the controller of the currency could stop money movements on a dime. That is to say, it would be pitched like circuit breakers on a stock. Pitch to stop the fear and create stability.... Oh, and the only thing that we would pay for this with is a total lack of physical currency, and then if course the full traceability of every single cbdc currency unit. (Which quit could of course turn into negative interest rates, carbon credit score rankings, and all kinds of other horrible means of tracking down the road to control us)
They would only lose out if they sold before maturity, which they had to. If they didn't sell and held to maturity they wouldn't. (Per John Tamny). Bob said that at one point.
“Black letter law” is that that the relationship between depositor and bank is a creditor to debtor relationship. So yes, you are “lending” your deposits to the bank (and paying them for the privilege). This why banks also do not owe you fiduciary duties as a depositor.
SVP - Silicone Valley Pank :)
Fractional reserve banking is not a cause of this. Also, if banks could just "multiply" money then no bank would ever fail.
If a customer wants interest on an account then they need to open a non-demand account, savings accounts, CDs, money market, etc.. Marketing interest bearing demand accounts is fraudulent. (Contract case-law has long recognized a difference in validity between legitimate standard clauses and slight of hand clauses.)
One of the reasons the banking system itself doesn't want to have any individual Banks being 100% Reserve Banks is that that would pretty much guarantee Bank runs. That is to say in times of stress, people using fractional Reserve Banks would instantly be moving their assets to these fully Reserve Banks. You can see that happening right now not with fully Reserve Banks but with the larger more stable stable deemed too-big-to-fail Banks picking up assets from people fleeing the smaller less stable Banks. Imagine if a fully Reserve Bank existed, people would fly over there. You could argue that gold serves a similar purpose except that gold is difficult to get in and out of in the physical realm, and it has its own costs of storage, translation and transaction..... It is very much outside the banking system, where a fully Reserve Bank would be nestled inside that system.
Welcome to the Gilded Age Part Deux.
So a full reserve bank couldn't write a $200k, 30-year mortgage unless it had depositors willing to buy $200k worth of 30-year certificates of deposit. How many 30-year mortgages would it write? Practically nil. In the early 20th century and earlier, mortgages required 50% down payments and had five-year terms.
It is true commercial banks had high down payment requirements and low repayment terms, BUT a good portion of home purchases in that time period were done through building & loan groups at very favorable, accessible terms.
Good. The correct amount of mortgages a bank should offer is zero.
So your idea is I would take my money to a bank and they would not lend it out? They would just sit on it?
Technically banks still perform this service in the form of a safety deposit box but it can't be used like a chequing account.
Silicon Valley Bank created the Chinese finger trap that they ultimately got caught in. They were a couple of other things. One of the requirements of some of their speculative loans were required to be deposited in the bank. This is one of the reasons they had such a high percentage of money not covered by FDIC. The other thing that they did by marking their securities to maturity rather than marking them to Market is it they created a bigger asset base from which to give those loans out! This is why I say they built the Trap that they themselves were trapped in. Why all fractional reserve banks have susceptibility to bank runs, they set up the conditions that amplified that possibility! It may not be that they did not want to hire a risk manager/director, maybe nobody wanted to work they're in that fiduciary position given their risky bent ... That last point is just speculation on my part..... The first two points are things that I heard about that bank and their situation.
Time for bitcoin
Jeff your hair is out of proportion