BUCKLE UP FOR THE FINANCIAL NEW NORMAL
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BUCKLE UP FOR THE FINANCIAL NEW NORMAL
Silicon Valley Bank – what its collapse is really saying
By Jasmine Birtles
IF IT hadn’t been for the Gary Lineker story, the big news of the week would have been the crash of Silicon Valley Bank (SVB) and the subsequent take-over (for £1) of its UK wing by HSBC.
Apparently no Government money was involved in this take-over – a relief to the already hard-pressed taxpayer, which is still the major shareholder in the ‘zombie bank’ NatWest – but I suspect some sort of tax-sweetener or other incentive was waved at the HSBC executives to encourage them to take on a failed bank, sight-unseen.
It’s pretty clear to all now that the SVB collapse was a case of ‘go woke, go broke’ as many of its eye-wateringly stupid ‘investments’ and projects have come to light.
What it also shows, though, as the blood-letting in Big Tech firms over the last few months has also manifested, is that we have come to the end of the low-inflation, low-interest-rate environment that we have enjoyed since 2008.
In the last 14 years or so many have come to believe that money would be cheap for ever, not thinking that simply printing money like it’s going out of fashion (as central banks have been doing, particularly since 2020) might not be the way to run economies properly.
At some point the music is going to stop and the merry-go-round will come to a juddering halt, throwing off all those who were enjoying the ride.
We may see consumer and investor jitters quietened down over the next few weeks as governments and central banks make soothing noises and, in all likelihood, print more money to paper over the cracks and make it look like we’re ‘back to normal’.
But there will be more convulsions, more banks that sway and then topple over. The collapses could help to usher in an apparent need for Central Bank Digital Currencies (CBDCs) to give us a ‘more secure’ form of currency together with a banking system that is ruled by the central authority. That’s the enemy waiting in the wings and it’s up to us to stay vigilant and resist attempts to control and devalue, our money.
In the meantime, spread your money, keep only a small amount in any one banking institution (even the FCA is now encouraging people to have no more than £10k in their bank accounts) and support alternative, grassroots currency systems where you see them.
Buckle-up. We’re in for a bumpy ride.
BUCKLE UP FOR THE FINANCIAL NEW NORMAL
Hi, could you give a link to the FCA advice on not keeping > £10k in accounts? Thanks.
When financial systems become distressed marginal entities collapse first, naturally. Individual institutions may be marginal due to factors such as poor management, location and in the case of banks characteristics of bank assets. SVB was a marginal case but the forces which took it down are systemic, currently affecting the entire financial system. Banks often fail first due to inherent financial leverage but institutions across the entire system will become ever more distressed as distorted asset prices, a consequence of decades of central bank interest rates suppression, inevitably decline in the face of rising rates. And we are now at the point where central banks can't foment another speculative mania because nominal rates were driven to the ultimate ludicrous level of zero! We should now anticipate a secular resolution of decades of monetary distortion, meaning a very painful decade or two if history is any guide. Given that every currency in the world is now fiat we can anticipate an inflationary global secular collapse.
Tangible assets offer refuge, particularly liquid tangibles (e.g. precious metals). But most individuals and institutions must hold all the bad paper all the way down.