Does the ongoing turmoil in the banking world constitute a “Minksy moment”? Daniel Neilson, assistant professor of monetary economic at Bard College at Simon’s Rock and author of “Minsky” (2019), argues yes. Neilson explores the potential of contagion within the banking world, and he makes the case that the Federal Reserve’s Bank Term Funding Program (BTFP) as well as the FDIC backstop might make this banking crisis short-lived. Neilson shares with Jack Farley several in-depth charts on the Fed’s balance sheet that might indicate a turning point and the pair share their views on the Federal Reserve’s meeting on March 22, 2023.
Filmed the afternoon of March 21, 2023.
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Daniel Neilson’s article on Silicon Valley Bank: https://www.soonparted.co/p/silicon-valley-bank
Daniel Neilson’s article on Fed’s BTFP and other refinancing channels: https://www.soonparted.co/p/svb-ii
Daniel Neilson’s chart pack on the SVB Panic: https://www.soonparted.co/p/svb-iii
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Follow Daniel Neilson on Twitter https://twitter.com/dhneilson
Follow Jack Farley on Twitter https://twitter.com/JackFarley96
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Timestamps:
00:00 Intro
05:08 “This Is A Minksy Moment”
18:04 The Takeover of Credit Suisse
28:30 Permissionless
29:33 The Fed’s Bank Term Funding Program (BTFP) vs. The Fed’s Discount Window
39:32 Can The Banking Panic Be Stopped In Its Tracks?
43:33 Blockworks Research
44:37 First Republic Bank ($FRC) and Bank Profitability
49:32 The Fed Readies Its Dollar Swap Lines
55:43 The Federal Reserve’s New Hiking Path
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.
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This episode was AWESOME. Thanks guys. Blockworks rocks
Economic investigator Frank G Melbourne Australia is still watching this very informative content cheers Frank 🇦🇺
Another excellent interview Jack !
Excellent interview, thank you for sharing.
pls make sure guest have better audio :/
None of you YouTubers know the actual facts and what is going to happen but I as an outside observer Know It for Sure.
All you MerryCun Bastards are going to get fucked very hard and your fraud Merryca will be the New 3rd World that you MFkers have long Despised.
The Turtle Destruction wave has already been unleashed you Morons.
KaMeHaMeHa..! ☯️
Is it that the same people that perpetrated the 2008 Fiasco let me know if I'm wrong but! If it is these people they should be put in jail
Bitcoin!
The US national debt is more than $31 trillion, with roughly 28% of it held by foreign countries. The US also has $38 trillion in unfunded Medicare liabilities and $17 trillion in unfunded Social Security liabilities.
The US dollar is the dominant reserve currency, backed by its perceived strength, allowing the US to print unlimited dollars as long as the world maintains trust in it. The US dollar is the backbone of US power, and any actions that undermine confidence in the currency threaten to destabilize its position of dominance. Each unilateral sanction imposed by the US risk damaging the stability and credibility of the US dollar, leading to dire consequences for the nation's power and influence. The US is the only country actively undermining the strength of the US dollar. The freezing of Russia's $300 billion currency reserve by Western governments may lead countries to reconsider investing their funds in US Treasury bonds.
A significant portion of US dollars is held outside the US, estimated at 60-70% of all US dollars in circulation, due to its status as the dominant reserve currency and wide use in international trade and finance. The one trillion dollar trade deficit of the US is a consequence of being the reserve currency, as a strong dollar makes it difficult for US businesses to export goods and services while simultaneously making it easier for other countries to sell to the US. Countries are shipping goods to the US in exchange for green pieces of paper.
The US budget deficit is $1.38 trillion in 2022 which must be paid for by selling more Treasury bonds. The interest on this debt is greater than the military budget. To pay the interest on its debt, the government sells more Treasury bonds, leading to a cycle of increasing debt. The US printing of dollars has been exporting inflation in other countries for decades, but will eventually increase US inflation. Raising interest rates to fight inflation decreases consumer and business spending, increases the trade deficit, and higher interest payments on government debt. Other countries will respond to the US raising of interest rate by raising their interest rate, risking global recession. The Plaza Accord addressed this issue in the past, but it will be challenging to implement such measures now.
A well-run country collects taxes to fund essential services and infrastructure. In the US political system, wealthy corporations and individuals can lobby for tax breaks. The shortfall in funding for the US government has reached $31 trillion. Instead of collecting taxes from wealthy corporations and individuals, the government pays interest to them.
Banks hold Treasury bonds for their safety, liquidity, regulatory compliance, and potential profitability. When interest rates on Treasury bonds rise sharply, the decrease in bond values reduces liquidity and makes it harder for banks to raise cash quickly. This causes depositors to lose confidence, triggering a bank run. In response to the current bank run, the government is issuing Treasury bonds to raise funds to compensate depositors for any lost funds.
The new Bank Term Funding Program (BTFP) help prevents discounted bondholders from taking losses when they have to sell them urgently. The BTFP accepts discounted bonds at face value to be used as pledges for loans to inject more money into the economy. More inflation.
It's a Ponzi scheme. A Minsky moment?
Rising rates don't automatically translate into making money for the banks. Rising rates mean borrowers will pull back on their borrowing, particularly when rates have risen too fast as they have.
Financing cost is as of now at 4.75%(8th rate climb since Spring last year) Expansion at 7% and mortgage rates is at more than 7.5% yet the lowest pay permitted by law continues as before and my retirement portfolio has endured immensely these previous years, so my inquiry is what way do senior residents resign and live off such temperamental economy. The drawn out game is clearly not really for me as of now.
Why would you say "Fed can put it on its balance sheet and hold to maturity without trouble". It was time Fed lowered it's balance sheet, and it's all about the opportunity cost meaning a more legit intervention tomorrow, is not anymore possible. Just let risky banks fail and rich depositors wiped out. There is no other sound way. In the end the public will always pay higher taxes due to such schemes. Stop thinking y'all are financial ENGINEERS. You're not, engineering don't work that way.
This looks really messy. The one bailing out (US Gov) is not in a better position herself. With 31.8 trillion in debts and annual 2 trillion deficits the US bonds are going to be toilet papers soon
Basically the guy just said things we already knew.
Minsky moment: insufficient fund flow to service debt.
This guy is a bullshitter, he hasn't a clue. A very simple explanation for what is around the corner is the incredible level of debt worldwide. Prepare for impact.
Ok that dude is so young, he probably could be my son. He is probably also smarter than me, so I have reason to hate him, at least a little bit. But why are we not talking about this High Yield Default Avalanche that will soon get in motion? This will hit banks balance sheets as well.
I'm celebrating a $30k stock portfolio today. I started this journey with 4k. have invested on time and also with the right tearn now I have time for my family and the life ahead of me
For some reason, the mainstream press is not making a big deal about the 7 insurance companies that went under in Florida. But insurance companies are big investors too, so the loss if additional investors to the markets adds to centralization.
I feel one Of the greatest challenges that we first timers face in the ma rket is that we end up losing all we have, making it difficult to find ourselves back to our feet. My biggest advice is to always seek the services of a professional just like I did when I ventured into it for the first time. Big thanks to Christopher Diaz. I now make huge profits by weekly through his services while still learning to stand on my own.
After a long search for a professional trader with consistency matched with good profit, i often come across Christopher his exploits in the trading world but i have no idea how to reach him .
Amazing interview 😊
US house of cards tumbling and ripple effect begins. Why would one can think that printing money freely and irresponsibly, use US dollar as a weapon where everyone has started to forego US dollar plus sky-high debt have no consequences? This bubble busting is in the works for many years already and yet the people here are burying their heads in the sand for ages.
Great to see Matt Damon on Blockworks 👌
I'm really concerned about a lot more if a bank the size of SVB may fail, I have a friend who manages a fast-growing startup and was severely impacted by the bank run. I've taken more than $340K out of my bank, the FDIC only provides coverage up to $250K. Moreover, the collapse may have negative effects, presently I want to invest in the stock market… does anyone have ideas on how I might proceed?
China China China China
US household don’t have money – the top 10% do.
Thanks Guys!
This is all good stuff, but how did we not touch on CRE and that regional banks have done the most lending on these? Vacant office space, strip malls, etc all over. Also, the Fed stopped buying MBS 8 months ago. The biggest buyer of these has left the market. Now whenever they make loans, it's sitting on the regional banks balance sheets. Credit is going to dry up RAPIDLY.
and Credit Swiss . Some American banks closing around the world
Amazing video and thank you for breaking it down!! Despite the economic downturn, I'm so happy 😊I have been earning $ 60,000 returns from my $9,000 investment every 12days.
So the interviewee is essentially saying he has no idea what will happen next?
The intro/outro music reminds me of being on a heavy dose of a psychotropic.
Will there be a problem with the banks around April 19th when everyone pays their taxes? 🤔
$2.3 trillion of commercial real estate mortgages funded by regional banks at record low interest rates, are now coming for refi in the next couple of years, at twice or more, the old rate. This will be happening into a major recession. The regional banks, with a nominal capital of $2 trillion, have current unacknowledged losses of $600 billion in underwater securities, plus another $500 billion in near non-performing loans. Next year will wipe most of them out completely!
As I'm listening to this, great guest BTW, and I'm decently educated in the modern financial system. I'm listening and I'm realizing how truly convoluted our system is. It's actually kind of wild.
Thanks Guys
I'm really worried about the current bank crisis. If a bank as big as SVB could fail, I fear for a lot more. I know a friend who is running a high-growth startup, and was badly hit by the bank run. I have pulled out more than $340k from my bank. After all, the FDIC covers only up to$250,000, and the implosion could have bad effect. Looking to invest into the stock market now. Does anyone know how I could go about it?
*<<😇I am so fortunate that I made productive decisions about my finances that changed my life forever. I am a single mum living in Melbourne Australia , bought my second home in September and is hoping to retire next year at 50 if things continue to go smoothly for me💞💞>>*
$300 billion in one week is on a scale of US annual deficits. It used to be that the US deficit was on the order of $200 billion/year, meaning imports exceeded exports by that amount. So this move was like 1.5 years of trade deficit. But today trade deficit is on the order of Trillion (s). A consequence of moving manufacturing overseas. The consumer society has to stop buying things it can t afford.
The only nice thing I have to say to you, is YOU DO NOT HAVE A CLUE !
WAKE UP, AND GET OUT OF THE BARREL YOU LIVE IN !
It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007–2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. What happened with SVB is only the beginning of what will happen if nothing is done to address the current situation.
Let's get rid of MacroAlf. Let's ban him from posting on this channel. His lies and deliberate manipulation of data are disgraceful. Stop MacroAlf!
Considering the bank crisis, it appears improbable that the market will register substantial gains in the immediate future. Therefore, it is advisable to temper one's expectations and acknowledge the potential length of the market's recovery period. It is my professional opinion that it would be prudent to defer any significant investment decisions until the economic environment stabilizes in areas of concern. Until then, exercising caution and refraining from engaging with the current turbulence would be the most judicious course of action.