Unintended Consequences

 

The Silicon Valley Bank was declared insolvent today by the FDIC and it’s deposits taken over … see: CNBC Story. This has caused nervous ripples throughout the stock market.

Read the above for the details … but, here, I want to delve into the bigger picture … the unintended consequences of the Federal Reserve’s recent actions.

The Fed watched the Biden administration spend like drunken Deep Staters and the resulting inflation come-along. It, and the Bidenistas, called this inflation ‘transitory’ and declined to start increasing interest rates … and kept buying our government’s debt to monetize it to the tine of $5 trillion (that’s with a “T.”)

When our inflation didn’t prove to be temporary, the Fed was forced to raise interest rates further and faster than prudent.

Enter Silicon Valley Bank. This bank like many such banks during the extreme liquidity of the early Biden days, bought oodles of low yield government bonds with the flood of deposits to cover the tiny interest needed to pay for these deposits.

However, as the Fed pushed up rates, all these depositors started asking for higher yields too … forcing the bank to sell its government bonds at a loss … as rates go up, prices go down. This obviously wrecked havoc on the bank’s balance sheet.

Then, to compound things, all the layoffs in Silicon Valley combined with the bank’s inability to pay higher rates on its deposits caused many to ask for their money … a classic bank run … and resultant insolvency.

All which can be traced back to Biden’s fire-hose spending, inflation and the Fed’s unwillingness to respond early enough with higher rates

Afterward: Just discovered that the Boston Private Bank is owned by SVB … with branches in Boston, Newton, Wellesley and elsewhere in MA.

Afterward — see: Agreement

STAND UP TO FISCAL MADNESS!