Featured Three US banks collapse in one week? Where's my money?

[AgnosticBoy]

Please don’t panic.

I'm a new investor so it's hard not to panic, lol. I'm not really concerned about my bank accounts. I'm more worried about my stock investments.

I'll manage though whatever comes of it.

 

[AgnosticBoy]

Just to vent, I think a lot of these banks failing is caused by them making too many risky investments, giving out risky loans, and greed. When the economy starts getting tough, it comes right back and bites them .
... Enuf venting...


Just finished watching a CBS 60 minute documentary on the FDIC and the 2008 recession. THe most important question was asked around the 7:35 minute mark regarding how many times can the FDIC bail out banks and what if they run out of money having to do so? The response by an FDIC official was very troubling to me. The official basically said that the FDIC "doesn't run out of money".

SO the FDIC has unlimited resources, as in they can just keep printing endless amounts of money. May as well ask, why can't the government just give everyone a million dollars.

I found one easy-to-read article that goes over the issue of what happens when the government prints too much money:

Why can’t we just print more money?​

“The answer, in one word, is inflation,” says Alan Cole, senior economic policy analyst at The Conference Board, a business-focused think tank. “[That’s] the binding constraint on governments, in the end, that keeps them from issuing gobs of currency and buying whatever they want with it.”

It goes back to supply and demand. Increasing the money supply by, say, $32 trillion only introduces $32 trillion more into the economy. It doesn’t magically conjure $32 trillion worth of goods.

More dollars chasing the same amount of goods would cause prices to spike — in a major way.

Sean Snaith, the director of the University of Central Florida's Institute for Economic Forecasting, tells me that we’ve experienced a little of this recently: The government pumped money into the economy when the pandemic hit in 2020, and three years later inflation is still at 6.4%.

Look at increased rent, egg and car prices. Paying a bunch for basics is “not terribly pleasant,” Snaith says, and that’s nothing compared to what would happen with $32 trillion extra floating around.

Forget high inflation — we’d see hyperinflation, where prices could increase by millions of percentage points, Snaith says.

A scenario like this “grinds an economy to a halt. Prices don't really function the way they should, and because money doesn’t hold its value, people don’t want to accept it as payment,” he says.

Source: Money.com

 

[bbyrd009]

supposedly when an economy's borrowing interest reaches 100% of the economy's gdp, the monetary unit goes bust, a la "Full Zimbabwe." i just heard this week that the US is at something like 125%? i guess being the USD gives it a bit more room, but let's face it, Central Banks crash economies, as sure as democratically elected governments dont overthrow themselves

 

[bbyrd009]

btc anyone? lol

 

[AgnosticBoy]

btc anyone? lol

Ha!.. Bitcoin is also on the move , 19k to about 27k (up 32%) since this recent banking crisis!

Source: CoinDesk

 

[Multicolored Lemur]

supposedly when an economy's borrowing interest reaches 100% of the economy's gdp, the monetary unit goes bust, a la "Full Zimbabwe."

I really think this claim is mostly urban legend.

Okay, in mid-September 2008, the “investment” company Lehman Brothers went bankrupt. And two days later AIG tettered and almost went bankrupt. In fact, the Bush administration bailing out AIG was the key linchpin which prevented the whole thing from becoming much worse. And this is what people mean by phrases such as “near-collapse of major financial institutions,” because if AIG, meaning American Investment Group, had gone bankrupt, there would have been a domino effect.

We were already in a recession, which is what caused various speculative investments such as “Credit Default Swaps” to go bad. And the recession continued till June 2009 when we again started experiencing positive GDP growth.

But jobs recovery was slow.

And sometimes around (?) 2012 2010, two economists published a paper with data showing that when govt debt was above 90% of GDP, economic growth is slower than you want it to be. It later came out that even this conclusion is not as set in stone as first thought.

But “slower growth” is quite a bit different than going bust, and that’s why I’m saying urban legend.

These two economists are Carmen Reinhart and Ken Rogoff. I’m by no means an expert, just a little bit used to discussing the 2008 - 2009 Great Recession in forums such as this one.

* I have only two college courses in economics. Please keep that in mind.

 

[Multicolored Lemur]

The Reinhart and Rogoff magical 90 percent threshold loses its magic?

One of the most influential findings in the never-ending debate over American fiscal policy came from a 2010 paper by economists Carmen Reinhart and Kenneth Rogoff—“Growth in a Time of Debt.” They claimed to have identified a clear debt ratio (total public debt divided by gross domestic...

www.epi.org

Please note that Economic Policy Institute is a liberal organization.

Carmen Reinhart: “please point out to me what episodes from 1800 to the present have we had advanced economies who carried high levels of debt growing as rapidly or more rapidly than the norm.”

And she says, It’s Belgium after World War I and that’s about it.

To me, this is a good point.

I’d question the direction of the causation arrow. Because if an economy starts getting into trouble and its growth slowing down, well, a lot of govt expenditures will continue and some even increase. So, the slowdown can come first and then the bad ratio.

=====================

PS The evolving dynamic of U.S. politics seems to be that Republican administrations run up deficits, and Democratic administrations pay them down! with some exceptions of course.

 

[bbyrd009]

I really think this claim is mostly urban legend.

Okay, in mid-September 2008, the “investment” company Lehman Brothers went bankrupt. And two days later AIG tettered and almost went bankrupt. In fact, the Bush administration bailing out AIG was the key linchpin which prevented the whole thing from becoming much worse. And this is what people mean by phrases such as “near-collapse of major financial institutions,” because if AIG, meaning American Investment Group, had gone bankrupt, there would have been a domino effect.

We were already in a recession, which is what caused various speculative investments such as “Credit Default Swaps” to go bad. And the recession continued till June 2009 when we again started experiencing positive GDP growth.

But jobs recovery was slow.

And sometimes around (?) 2012 2010, two economists published a paper with data showing that when govt debt was above 90% of GDP, economic growth is slower than you want it to be. It later came out that even this conclusion is not as set in stone as first thought.

But “slower growth” is quite a bit different than going bust, and that’s why I’m saying urban legend.

These two economists are Carmen Reinhart and Ken Rogoff. I’m by no means an expert, just a little bit used to discussing the 2008 - 2009 Great Recession in forums such as this one.

* I have only two college courses in economics. Please keep that in mind.

interesting
know of any other economies where their debt finance is over 100% of their gdp?
i mean, how does debt finance even work in that case?

 

[AgnosticBoy]

* I have only two college courses in economics. Please keep that in mind.

That's better than most. I only have one from high school. I'm also a self-taught investor if that counts for anything.

 

[Multicolored Lemur]

interesting
know of any other economies where their debt finance is over 100% of their gdp?
i mean, how does debt finance even work in that case?

I don’t know.

I am interested in the “Asian Tiger” economies as examples of successful govt intervention which has actually built up their countries.

Plus, I generally support the mixed economy approach, somewhere in the neighborhood of 70% capitalism and 30% socialism. This strikes me as about the sweet spot.