I’m neither a banker nor an economist, nor do I play one on TV, but the following is not complicated. It’s just connecting the dots; each of the observations below is a dot.
Massive spending by the Biden Administration required the printing of trillions of dollars, which drove up inflation. The only tool the Fed has to address that is to raise interest rates, and they delayed doing so for political reasons. That delay meant that, rather than gradual increases leading to a lower peak interest rate, they had to drive up rates quickly and to higher levels.
In order to get any sort of return, Silicon Valley Bank (SVB) had a lot of long-term US bonds in its portfolio. With rising inflation, the rate paid by even those long-term bonds fell far below inflation. This drove down the value of those bonds, which means SVB had to sell them at a loss when depositors began withdrawing their funds. This was one main causes of the failure of SVB (and others) and it will cause more banks to fail.
No doubt you’ve heard that the FDIC ensures deposit accounts up to $250,000. The point of that is the “little guy” doesn’t have the time, resources, or expertise to carefully research various banks and determine which are safe. It is assumed that the big-time investor and his accountants are savvy enough to research a bank and determine how safe it is. That expectation of due diligence is why the FDIC only covers those smaller “little guy” accounts. But with SVB, whose investors include a long list of Democrat cronies, the Biden crew has decided that the FDIC will cover not just those accounts, but also the uninsured accounts at SVB – even those with $10 million or more. As a result, the FDIC will have expended pretty much all the money it has on hand and will be out of money to cover other failures.
However, the combination punch of inflation and high interest rates means that other banks will fail, so the FDIC will have to cover more accounts. The government will have to print more money to make up the shortfall until the FDIC’s fees can replace it. More money being printed will cause inflationary pressure which will drive up interest rates even more which will cause more banks to fail requiring FDIC to cover even more failures. The trend is ominous.
The FDIC charges fees to have the funds to cover failures, so this will require the FDIC to raise fees. Banks will pass on those fees to customers, which means the overdraft fee the single mom or other just-getting-by worker has to pay for guessing wrong when floating a check and hoping the paycheck beats it to the bank will go up.
Biden & crew are bailing out their millionaire cronies on the backs of the people struggling to make ends meet. This will force more people onto government programs, requiring even more money to be printed. The cycle is vicious.
There you have Democrat fiscal policy at work, merrily ruining the lives of myriad ordinary people as well as our economy. More importantly, every bit of this was entirely predictable; plenty of people even warned about it. The only possible conclusion is that it’s all intentional
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Intentional is an understatement.