Why? Because of Khashoggi? Because of Free Speech arrests? Honestly both of those aren't enough for me to hate him and I'm a Saudi myself, never we had a leader before him that gave me this much hope in the future of the nation. My life today is so much better. The women of my family finally can breath, they can drive, they can open bank accounts, they can own land and rent houses, they can educate themselves and wear whatever they want. All of these used to be either illegal or it required a permission from male family members. And all I have to do is to not say "Fuck MBS" on twitter with my face as the profile pic lol
Given the low supply of crypto on exchanges, this is an absolutely enormous volume that will have some contagion effects on crypto. ​ Just consider that Bear Stearns was desperate for a bailout and same for Lehman Brothers because they carried so much in MBS that there would be contagion affecting the global market. ​ Now put this on the scale of FTX and the scale of the much smaller crypto market.. the effects could be devastating.
I am honestly surprised MBS hasn't already demanded BTC in exchange for his oil. Why would he prefer fiat for his oil? Must be political reasons preventing him from doing so. He probably fears the wrath of the US Military who would need to bring "Freedom" quickly to SA.
Quantitative easing involves a country's central bank purchasing longer-term government bonds, as well as other types of assets, such as mortgage-backed securities (MBS). Economists tend to agree that QE works, but caution that too much of it can be a bad thing.
Have some copy pasta. This guy words it better than i ever could. *There's 4 big problems that I see with ETF's and I fully believe they will be at the heart of some future financial crisis.* *The 1st is that everybody is in them. Literally, ask anyone you know what is in their retirement portfolio, and 99% of the time it's almost all put into one of two things: an index-tracking ETF like SPY, VOO, or VTI, or some target retirement date mutual fund. If it's the latter, ask them what's in the fund - they'll probably have no clue, but guess what; i can guarantee it overlaps HEAVILY with those same broad ETFs. Look at the Vanguard Target Retirement 2060 Fund, which is what a lot of millenials would probably be in; 54% of its holdings are just sitting in another fund, the "Vanguard Total Stock Market Index Fund Institutional Plus Shares." The end result of all this is that virtually every single person on the planet super heavily invested into the same set of shares; AAPL, MSFT, AMZN, GOOG, NVDA, TSLA, BRK.B...you get the idea.* *The second is that literally nobody gets how these things work. Even the financial advisors who tout them as a sure thing don't have a clue what the mechanics of these things are. Besides all the operational shorting, something that a lot of people don't seem to realize is that a lot of them have liquidity multipliers that are used as part of allocations. Basically, they are built specifically to have only the most liquid securities, so that they can trade in mass (which is important for issuers because the fees are so low). The result of this, again, is that they are less diverse than you think - the same highly liquid securities are among the top holdings in almost any ETF you find.* *The 3rd thing is, they keep being presented to investors as diverse and "safe", when that couldn't be further from the truth. If nearly every single investor has a huge chunk of their savings in the same top 20 stocks, how is that diverse? You know how there's this weird phenomenon, that fund managers can no longer beat the market for more than a year or 2? That wasn't always the case. It's not that the fund managers suddenly all got bad at it at the same time; it's that these broad market index funds are carrying more risk than anyone cares to admit. More risk = higher returns, but when the market truly turns, its gonna be insane because whether you are selling SPY, VOO, or a retirement fund, you are selling the same shares as everyone else in the world.* *And 4th. The operational shorting. Watch Richard Evans on YouTube if you haven't, because he explains it really well. One of the reasons you have insane short interest and FTDs on ETFs is because AP's have learned to delay the purchase of shares. If there is some systemic event that creates a liquidity crunch in the underlying stocks, I could see the ETFs just straight up breaking.* [https://www.youtube.com/watch?v=ncq35zrFCAg&t=1s](https://www.youtube.com/watch?v=ncq35zrFCAg&t=1s) *It's terrifying and kind of mind-boggling if I'm being honest how we got to this point. It reminds me a lot of the MBS's that were being sold in mass leading up to 2008 - everyone keeps saying - "look, over time they always go up." Only its even worse because this time it's not just banks buying the bags of shit, it's basically everyone who has a retirement account. It's so strange to me how self-assured everyone is that the safest thing you can do is DCA into the SPY and never look back. They say things like "statistically this beats everything in the long run" - but if past results don't predict future returns why is this different? What makes everyone so damn confident?*
Lol simplifies. Doesn't really look that 'simple'. I'm not claiming to have some great understanding of how they work specifically either, just saying i straight up don't trust them, or the people who tout them as a guarantee. I'll copy out a comment that words it better than i could ever hope to. *There's 4 big problems that I see with ETF's and I fully believe they will be at the heart of some future financial crisis.* *The 1st is that everybody is in them. Literally, ask anyone you know what is in their retirement portfolio, and 99% of the time it's almost all put into one of two things: an index-tracking ETF like SPY, VOO, or VTI, or some target retirement date mutual fund. If it's the latter, ask them what's in the fund - they'll probably have no clue, but guess what; i can guarantee it overlaps HEAVILY with those same broad ETFs. Look at the Vanguard Target Retirement 2060 Fund, which is what a lot of millenials would probably be in; 54% of its holdings are just sitting in another fund, the "Vanguard Total Stock Market Index Fund Institutional Plus Shares." The end result of all this is that virtually every single person on the planet super heavily invested into the same set of shares; AAPL, MSFT, AMZN, GOOG, NVDA, TSLA, BRK.B...you get the idea.* *The second is that literally nobody gets how these things work. Even the financial advisors who tout them as a sure thing don't have a clue what the mechanics of these things are. Besides all the operational shorting, something that a lot of people don't seem to realize is that a lot of them have liquidity multipliers that are used as part of allocations. Basically, they are built specifically to have only the most liquid securities, so that they can trade in mass (which is important for issuers because the fees are so low). The result of this, again, is that they are less diverse than you think - the same highly liquid securities are among the top holdings in almost any ETF you find.* *The 3rd thing is, they keep being presented to investors as diverse and "safe", when that couldn't be further from the truth. If nearly every single investor has a huge chunk of their savings in the same top 20 stocks, how is that diverse? You know how there's this weird phenomenon, that fund managers can no longer beat the market for more than a year or 2? That wasn't always the case. It's not that the fund managers suddenly all got bad at it at the same time; it's that these broad market index funds are carrying more risk than anyone cares to admit. More risk = higher returns, but when the market truly turns, its gonna be insane because whether you are selling SPY, VOO, or a retirement fund, you are selling the same shares as everyone else in the world.* *And 4th. The operational shorting. Watch Richard Evans on YouTube if you haven't, because he explains it really well. One of the reasons you have insane short interest and FTDs on ETFs is because AP's have learned to delay the purchase of shares. If there is some systemic event that creates a liquidity crunch in the underlying stocks, I could see the ETFs just straight up breaking.* *It's terrifying and kind of mind-boggling if I'm being honest how we got to this point. It reminds me a lot of the MBS's that were being sold in mass leading up to 2008 - everyone keeps saying - "look, over time they always go up." Only its even worse because this time it's not just banks buying the bags of shit, it's basically everyone who has a retirement account. It's so strange to me how self-assured everyone is that the safest thing you can do is DCA into the SPY and never look back. They say things like "statistically this beats everything in the long run" - but if past results don't predict future returns why is this different? What makes everyone so damn confident?*
Because that wasn't a fault or flaw of ETF's, it was a fault of the ETF product (MBS). Here's how Bard simplifies how the ETF would work (Coinbase is the AP). An investor wants to buy shares of the BlackRock Bitcoin spot ETF. The investor places an order to buy shares on an exchange. The exchange sends the order to Coinbase, the authorized participant. Coinbase creates new ETF shares by buying Bitcoin on the open market. Coinbase deposits the Bitcoin into the ETF's trust. Coinbase delivers the new ETF shares to the investor. The opposite process happens when an investor wants to redeem shares of the ETF. An investor wants to redeem shares of the BlackRock Bitcoin spot ETF. The investor places an order to sell shares on an exchange. The exchange sends the order to Coinbase, the authorized participant. Coinbase sells the Bitcoin from the ETF's trust on the open market. Coinbase delivers the proceeds of the sale to the investor. Coinbase cancels the ETF shares. The ETF's NAV is calculated by dividing the total value of the Bitcoin in the trust by the number of ETF shares outstanding. As long as there is enough demand for the ETF, the APs will be willing to create and redeem ETF shares at the NAV, which will keep the ETF's price close to the price of Bitcoin on the open market.
This is directly relevant to XRPL because the derivatives markets themselves are illiquid and require central counterparties to operate. Central counterparties are commercial banks, aka government approved market makers. This is a problem because for example Lehman Bros was the largest private central counterparty for MBS prior to 2008'. They were also the most exposed to the fraud. The most common underlying assets for derivatives are stocks, bonds, commodities, currencies, interest rates, and market indexes. Contract values depend on changes in the prices of the underlying asset. Derivatives can be used to hedge a position, speculate on the directional movement of an underlying asset, or give leverage to holdings. These assets are commonly traded on exchanges or OTC and are purchased through brokerages. The Chicago Mercantile Exchange (CME) is among the world's largest derivatives exchanges. OTC-traded derivatives generally have a greater possibility of counterparty risk, which is the danger that one of the parties involved in the transaction might default. These contracts trade between two private parties, are unregulated, and facilitated by central counterparties.To hedge this risk, the investor could purchase a currency derivative to lock in a specific exchange rate. Derivatives that could be used to hedge this kind of risk include currency futures and currency swaps. Not all futures contracts are settled at expiration by delivering the underlying asset. If both parties in a futures contract are speculating investors or traders, it is unlikely that either of them would want to make arrangements for the delivery of a large number of barrels of crude oil. Speculators can end their obligation to purchase or deliver the underlying commodity by closing (unwinding) their contract before expiration with an offsetting contract. Many derivatives are, in fact, cash-settled, which means that the gain or loss in the trade is simply an accounting cash flow to the trader's brokerage account. Futures contracts that are cash-settled include many interest rate futures, stock index futures, and more unusual instruments such as volatility futures or weather futures This is directly relevant to the type of network and services Ripple has developed. They have a service that recreates all of the disparate types of exchange schemes into one platform that can create these markets and settle value without a central counter party. Tokenization of these assets being traded with the decentralized neutral bridge asset XRP that means you no longer need central counterparties makes this a big deal for financial services industry. Literally solves the biggest problem in banking and finance ATM, counter party risk.
Ripples service that utilizes XRP solves the largest problem in banking and finance. Central counterparty risk. This is the exact reason they were attacked by JPMorgan. The interbank settlements markets are facilitated by central counterparties in each market. Usually a handful and sometimes only one commercial entity creates a government approved market for whatever is being traded. I.e. the market maker. For example if you're in the market for the settlements of retail securities just like Robinhood then you would have to go to Citadel to be able to have the liquidity to settle the transactions. I think most people are aware of why this is bad at this point the AMC Wallstreetbets clusterfuck is well known. In every market there is a counter party and JPMORGAN is the largest private central counterpart for the settlement of international payments and their biggest client is Alibaba. Hmmm Or perhaps your familiar with Lehman Bros who was largest central counterparty for MBS in 08'. Side note former SEC Chairman Jay Clayton sold Lehman Bros just FYI JPM doesn't want a system like Ripplenet legal because now any small regional or even local bank can become a correspondence bank or investment bank because liquidity is on demand from an open market with no counter party risk I.e. no 3rd party in transactions in the interbank markets. Ripple has consolidated the entire interbank settlements market and all it's different trade schemes into a single platform. XRP has verticals in every interbank market not just Forex payments remittance.
They invested in one of the safest investment vehicles available because they needed to put the deposits to work at the time they were received. They could’ve hedged against inflation/interest rate risk, and probably should’ve, but it’s hard to anticipate one of the most aggressive interest increases in history. Then - through no fault of their own - other regional banks that DID take significant risks begin to fail due to deposit flight. Fear spreads, other (well managed) banks fail, and the issue perpetuates. If no one pulled their deposits and the banks were allowed to ride the bonds to maturity, none of this would be a problem. People also read negative headlines about *share* price and think their *deposits* are at risk. This isn’t banks getting heavily over leveraged on MBS and CDOs gambles…
Probably. Issue is that there's less one concerted bubble in the US like MBS/banking and more every sector is bloated due to inflation and not enough corrections. It makes it very hard to track or predict what will happen. Likely an external factor (Chinese real estate, OPEC controls, Ukraine war, environmental like Pakistan's flooding a while back, more banks failing causing a run, BRICS influence) will start a cascade for the US economy over a lengthy period that spreads out to the world. The government has enough controls that it will progressively get worse but not pop over small domestic fears, at least probably not soon without a catalyst.
Weekly Recap 1) 🇫🇷 $10 trillion asset manager BlackRock Paris headquarters taken over by protestors. 2) 🇲🇾 Malaysia Prime Minister says there's no reason to continue to depend on the US dollar. 3) 🇸🇦 Saudi Arabia's Crown Prince MBS says he is no longer interested in pleasing the US. 4) 🇺🇸 Former President Trump says "our currency is crashing and will soon no longer be the world standard." 5) #Bitcoin whitepaper is hidden on every Apple MacBook computer running recent versions of macOS software. 6) 🇺🇸 US presidential candidate Robert F. Kennedy Jr. warns the Federal Reserve's 'FedNow' digital currency will result in financial slavery and political tyranny. 7) 🇺🇸 Bank of America, JPMorgan & other major banks subpoenaed over President Biden's family financial records. 8) 🇺🇸 Three US congressmen introduce 'Gold Standard Bill' to stabilize the US dollar's value. 9) Twitter updates its website logo to Dogecoin DOGE. 10) 🇨🇳 Chinese Yuan replaces US dollar becoming the most traded currency in Russia. 11) 🇨🇳 China to invest $39 billion in Malaysia. 12) 🇺🇸 US Treasury says decentralized crypto markets threaten national security. 13) 🇷🇺 Russia and India abandon Europe-dominated oil price, agree to use Dubai oil price benchmark. 14) Almost nobody paid taxes for crypto in 2022, Bloomberg reports. 15) 🇺🇸 Former President Trump says China will probably displace the US dollar as number one currency in the world. 16) 🇺🇸 FED official says Federal Reserve will need to raise interest rates above 5% and hold them there for a while. 17) 🇹🇭 Thailand opposition leader promises $300 crypto airdrop per citizen if elected Prime Minister in May. 18) 🇺🇸 Former President Trump's NFT sales have increased by 251% following his arrest. 19) 🇺🇸 Florida Governor Ron DeSantis says a Federal Reserve digital dollar threatens US financial freedom. 20) 🇺🇸 Arkansas passes bill to protect Bitcoin and crypto mining .
US and the western allies kinda fucked up USD/SWIFT by weaponising it. US froze and took Afghan Central Bank money to try to repay 9/11 victims and now we have US and western allies freezing Russia assets/properties in hope to use that to fund rebuilding of Ukraine. Sure it's the moral right thing to do when Russia invaded Ukraine without any provocation, but the 2/3 of the world are not in line with US "moral value" Now Xi, MBS, Putin, Raisi know that their US denominated assets can be frozen anytime US decided to. So an alternate currency and payment system is welcome from their perspective to hedge against the risk of holding USD and China took the opportunity to increase RMB circulation
A couple crypto projects have registered with the SEC before. It's not wholly impossible. Maybe once some regulation is clearly laid out, an existing entity broker like Fidelity will start tokenizing their MBS. If 'the law is gray' is the reason not to do it, it just means we're early - not it can't or shouldn't be done. MBS doesn't grant you ownership to a house, either. Only ownership over the debt. Crypto is finance foremost so I think a scheme like this would be extremely efficient over typical broker-broker-broker trades.
Ripple's product ODL solves the biggest problem in international finance. Ripples product updates the infrastructure of the financial system. Ripplenet is essentially capable of doing exactly what a correspondence bank like JPM does for 10000x less overhead, it does payments with settlement instantly 3-4 sec, it shows you the quote before transfer and has no 3rd counter parties like traditional transfers. There are 9 main interbank markets with multiple players providing liquidity and playing 3rd party central counterparty for a fee as market maker. There are multiple convoluted protocol and market types in interbank markets. XRPL is connected to 98% of fiat/cash equivalent payout markets Ripple developed interoperability between "Request for quote" (RFQ), "central limit order books" (CLOBs), "anonymous streaming", and "match auctions" for interbank settlements so it can all be done seamlessly with no counter parties. Ripplenet is an on demand liquidity system for banks to borrow financing instantly. That's important because of what's happening right now with the banking system instability. Banks were encouraged by the FED after 08' collapse to hold long duration treasuries the FED printed to save systemically important banks, it devalued treasuries when they bought MBS and distressed assets this flooded the market with liquidity. It hoped those treasuries would be enough to keep the bank's balance sheets healthy. As long as they could hold till maturity. The collapse of Silicon valley Bank was because it's a regional bank that put a lot of money into long duration treasuries.most regional banks don't have the infrastructure for interest rate swaps to offset this. The FED hiked rates very fast because of the delay it has in data. This caused the SVB to have to sell treasuries to meet withdrawal demands, On top of a gloomy venture capital market it began selling 1.25% treasuries into a 5-7% environment. The market ate them alive. Had Silicon valley Bank been an ODL customer they could have used ODL to meet demand instantly. Now it seems Wallstreet is aware of about 100+ other banks in a similar position, now it's short the banks hunger games happening. The interbank settlements markets are $500-700 trillion a year because this number includes all the complex financial instruments /derivatives used by the banks to reduce counterparty risk. Ripplenet ODL has no counterparty risk. It levels the playing field between financial institutions with frictionless fiat transfer without counterparties. Exactly why they're being attacked by the bank cartel that has a monopoly on interbank settlements because they are the central counterparties.
I like this overall explanation of QE, but the increases in the reserves arent really inflationary and dont have a direct effect on consumer prices. The BTFP allows the Fed to accept collateral from banks in the form of MBS and UST at par value in exchange for liquidity and a 5% rate and repayment in a year The increase you see on the Fed’s balance sheet isnt policy-related as its actually the collateral theyve accepted for BTFP and will be returned to the banks next year All this being said opening swap lines is usually a sign of easing as other central banks will no doubt need that ez $
What would happen if a bank invested in #Bitcoin and hyperinflation/hyperbitcoinization were to occur? Would #Bitcoin be considered a hedge bet for a bank? Would such a banker be seen an smart? Or a traitor? If bankers can buy nickel and MBS and rocks, can they buy #Bitcoin ?
When the government can just pump more fiat out to satisfy demand, as more people withdraw, more is pumped into the system, thus the value of fiat will *decrease* during a bank run. The reason the value of the dollar increased during the bank runs of the great depression was because there was only a fixed quantity of dollars because of the gold standard. In 2008, the value of the dollar increased due to a rush to safe haven assets, but then sharply decreased once the fed implemented QE and bought MBS. Bitcoin has a fixed supply and a known minting rate, if there were to be a "run" on bitcoin, the value would increase. It's simple supply and demand.
Right on man! Thanks for the discussion as well. >Can’t compare SVB to WF, JPM, BAC. SVP is a drop in the bucket compared to those 3. Oh I'm not, but alot of the banks are way over leveraged. >Will it take down a big bank? Nope. Full disclaimer, I work for one of them and the risk Culture definitely changed since 2008. Yes, I'm aware there are policies in place to try and mitigate risk. I just think it's going to be something else other than MBS this time. Most Americans have very little in savings and alot of debt. What happenes when they start losing their jobs due to the recession? We keep hearing unemployment is at all-time lows, the economy is great, ect. But it doesn't appear that way in the real world. History doesn't always repeat itself but often times it rhymes. >Either way, remind me in 6 months so I can apologize if I am wrong or bask in my 10 second glory debate win. Haha like wise!
> By trading in their bonds and MBS. No money creation or incremental liquidity happened. At par value, so significantly above their market value. I’d say that this definitely counts as “incremental liquidity”. Yes it’s for a limited time and they get the loan at a rate of OIS + 2bps. It buys struggling banks some time, but it remains to be seen whether banks will be able to resolve their liquidity issues or if they’re going to need additional help.
By trading in their bonds and MBS. No money creation or incremental liquidity happened. Banks trade in their bad bonds and MBS investments that could sink them if contagion (bank run) occurs for cash at par value. However it comes with a 4.5% interest rate. Historically speaking banks taking money from the discount window is embarrassing for them and not good for their business so they're incentivized to pay that back quickly. There's a lot of parallels here to 2019. QE is coming but it hasn't arrived. The Fed just bought themselves more runway.
Let me explain, since Powell is mostly inept at his job, along with the rest of the banking cartel. The Fed has established a long-term goal of 2% inflation, as measured by the Personal Consumption Expenditures (PCE) price index. The target was officially adopted by the Fed in January 2012, replacing the previous informal target of 2% inflation or lower. These are the primary arguments by the FED, but I will also list the real reason, which is much easier to understand. **FEDs arguments for:** Avoiding deflation: Deflation, or a sustained decrease in the overall price level, can lead to a variety of economic problems. Consumers may delay purchases, anticipating lower prices in the future, which can lead to a decrease in demand and economic growth. Deflation also makes it harder for individuals and companies to repay debts, as the real value of the debt increases. In extreme cases, deflation can lead to a vicious cycle of decreasing demand, lower production, and further price decreases. By targeting a 2% inflation rate, the Fed aims to avoid deflation and its negative consequences. Promoting economic growth: Moderate inflation can stimulate economic growth by encouraging consumers and businesses to spend and invest. If prices are expected to rise, individuals may be more likely to make purchases now rather than waiting, while companies may be more likely to invest in new projects. Inflation also allows the Fed to lower nominal interest rates, which can make borrowing cheaper and promote economic activity. However, high inflation can be detrimental to economic growth by reducing the purchasing power of consumers and eroding confidence in the economy. Historical evidence: Empirical evidence suggests that a moderate level of inflation can be beneficial for the economy. For example, during the 1990s and 2000s, the United States experienced a period of relatively low and stable inflation, which coincided with a period of economic growth and prosperity. Similarly, during the 1970s and early 1980s, the United States experienced a period of high and volatile inflation, which was accompanied by slower economic growth and higher unemployment. The 2% inflation target represents a balance between promoting economic growth and avoiding the negative effects of high inflation. International standards: The 2% inflation target is also consistent with the inflation targets of other central banks around the world. For example, the European Central Bank and the Bank of Japan both have a target of 2% inflation, while the Bank of England has a target of 2% inflation with a tolerance range of +/- 1%. This consistency helps to promote stability and predictability in the global economy. **The real and only reason the FED targets this:** GDP growth. GDP, or gross domestic product, is a measure of the total value of goods and services produced in an economy. Inflation affects GDP growth in several ways: Inflation can stimulate demand: As noted earlier, moderate inflation can stimulate demand by encouraging consumers and businesses to spend and invest. This increased spending can lead to an increase in GDP. Inflation can lower real interest rates: The Fed can use monetary policy to control inflation by adjusting interest rates. Lower nominal interest rates can stimulate borrowing and investment, which can lead to increased economic activity and GDP growth. Inflation can also lower real interest rates (nominal interest rates adjusted for inflation) which can further stimulate borrowing and investment. Inflation can promote investment: Inflation can also promote investment in productive assets, such as real estate or equipment. If the value of these assets is expected to increase with inflation, investors may be more likely to invest in them, leading to increased economic activity and GDP growth. **So what is the FED doing?** Simply resetting the market. They crash the economy for the vast majority of Americans, drive up unemployment and reset the market. Then to re-stimulate the economy, they lower interest rates again, and participate in quantitative easing. The FED has been aggressively purchasing up MBS, and Treasury securities for the past year, so right now, the declining market has put them in a hole to the tune of 1.2T dollars on the FEDs balance sheet. For normal banks like Silicon Valley bank, their assets vs liabilities and free cash on hand to service customers caused a bank run and a collapse. But with the FED it's different, they get to print money out of nothing and inject it into the money supply with no real consequences to themselves because the only customers they have are other banks. If you look at how Silicon Valley bank actually ran itself, it's not too dissimilar to how the FED is operating. The historical evidence shows that to drop inflation by 2% correlates to a 3.5% increase in unemployment, and we are currently sitting at 6% inflation and 3.6% unemployment. So the FED wants to drop it by another 4%. To do that means that the unemployment rate has to increase by 7%, for a total unemployment of 10.6%. Once that happens, people will be losing their homes, cars, and not be in competition for those assets/liabilities for a long time. The reason they won't be in competition for those things for a long time is because those people will have massive damage to their credit, as we all saw in the last economic crash of 2008. Those people that went into default from losing their jobs, substantially tarnished credit, which in turn effected those individuals from being able to get home loans, vehicle loans etc. The net result is that this will cause a decrease in demand, because those people can't afford, nor get, credit to purchase. Asset values will decrease, not only from demand, but because of an increase in supply due to foreclosures. Then those assets get to be repurchased at a substantial discount, and they ride up the wave of inflation again as the FED injects money into the economy and lowers rates. The interest rates will slowly decline, as this will allow all the real estate assets to be refinanced at a lower rate, with increases in appreciation that lets real estate owners re-fi the debt, and pull imaginary equity out as real estate assets start to rebound in price. The cycle is really simple. Crash economy, drive up unemployment, remove purchasing power out of the market, which drives down demand because those people can't compete for those assets/resources. Once asset values have depreciated enough, last time it was between 20%-30% depending on the asset, and unemployment was 9.9% in 2009, they started acquiring again, and purchasing up distressed real estate. Then as the FED lowered rates to stimulate the economy again, and increase demand, prices for those assets started to increase, and then they could cash out refi to pull equity that had magically appeared due to the increase in demand from the lower rates, and lower the debt service on the commercial property. They do this every 12-24-36 or 48 months, just depends on the bank, how much equity they will let the owner pull (usually 70%-75% of the equity can be pulled). They ride this cycle in the inflationary market of steady decreasing rates, which lowers the debt service on the commercial asset, and the imaginary appreciating quality of the real estate asset as demand increases with the lowering of rates. Once they have done this multiple times, and the market hits a peak, they crash the economy again and start over. But when they start over, they have secured their real estate assets with usually historical lower debt service on their mortgages, and have built a cash-flowing portfolio that has little risk of default since most real estate portfolios are well diversified for the reset. So when it's time to start purchasing again, at the bottom of the next crash, they will have increased borrowing power against their already existing portfolio's, so they can scoop up more real estate assets this time than before.
Lol they got burned by duration mismatch on US treasuries and MBS bought during decades of low interest rate policy, rekt by JPow in 1 year of 500bs hikes. This is a policy failure because it is in no way isolated to the scapegoat tech banks that didn't get the fed liquidity infusion to keep them upright. [Tech/Trump didn't do this](https://content.fortune.com/wp-content/uploads/2023/03/BANKING-FINANCE-Unrealized-losses-at-U.S.-banks-graphic-from-FDICs-Gruenberg.png?w=1280&q=75).
The other Fed inflation-fighting policy tool is QT (quantitative tightening) where the long treasuries and MBSs that were bought during the easy money times are sold off or allowed to roll-off at maturity. Current policy caps treasury sales / roll-off at 95b per month. MBS balance is reduced by pass-through principal payments. Fed could accelerate QT by raising the 95b cap and start selling MBSs outright. This would raise long interest rates (including real estate mortgage interest rates).
And so the FED stepped in and basically said they'd absorb all of those losses as I understand it? Am I getting that right, that any bank can trade in their bonds or MBS products to the FED and the FED will give them the "at par" value, essentially absorbing their loss? Won't all banks cash in on that ASAP, basically giving a $600B print to the banks?
Absolutely, note that a bank that has not been called out in this, Wells Fargo, is also facing issues with MBS. Just this weekend people started reporting issues with missing deposits and balances not showing correctly. Completely separate from crypto, be sure to have cash on hand and withdraw fiat, everyone.
Someone wants profit of course. Plus it’s a liquidity question - try to get 100 million dollar in cash in the first place. That is available in the form of swaps and bonds of course but as the actual delivered cash? No. It isn’t too bad if you do this via treasury notes and similar things. Really. Because that lifts the credit quality of the collateral at least somewhere near the credit quality of the US. Of course you could… try to come up with reasonable bounds on that. Like at least 90% of the collateral must be cash or cash-like notes. Which is what large banks need to fulfil and which is part of Basel II/III after 2009. You can thank the orange numbnut for letting smaller banks like SVB just run around and fuck their collateral strategy. This is what you get then. It’s again MBS, it’s again no risk management, it’s all the things again that were problems in 2008. Slightly different instruments around them but it’s the same issue. You can reinvent finance in crypto but the CONNECTION to classical fiat NEEDS to play first class with the financial regulatory frameworks. But you have tech bros that still play by the “move fast and break things” mantra doing that.
Yes, you were right on depositors being made whole. It is however creating new money that wouldn’t otherwise exist (equal to par minus actual bond value) which amounts to monetary inflation coming in the form loans at OIS (I believe) + 2bp. Inflation screws over those without debt financed assets, i.e., people with no assets aka the poorer part of the population. I wonder also what this does to bond pricing. MBS are also eligible for instance, and I wonder if BTFD has the potential of bonds becoming mispriced (fetching a higher price and so lower yield than they should). Also, the perverse incentive here is that firms learned that they don’t have to care about the stability of a bank they engage with. Firms only have to consider the terms offered — this in turn may incentivize banks to become more reckless in their offerings.
Exchanges going bust has nothing to do with crypto’s value proposition, and BTC/ETH are not Ponzi schemes Banks loading up on treasuries and MBS at the top & the fed’s aggressive rate hikes to try and correct their monetary policy of the past decade+ led us here
MBS? They bought US TREASURIES. Literally the least risky investment on this earth. The fed doesn't know anything about good monetary policy and raised interest rates so high so quickly that almost every bank in the US right now would collapse from a bank run. This is a systemic issue because of the gov, not an isolated bank running wild 🤦♂️
Yes MBS are still generally very safe. We don’t have the same situation related to MBS that we did back in 2008 where almost all MBS were packaged repackaged junk loans. One thing we have done well at least since the housing market crash is so better at checking people trying to buy a house etc.
It is not the Fed’s job to handhold risk managers. Every company in the world, including every other bank, has had to deal with higher rates. You don’t see all of them going belly up. The fact of the matter is SVB had awful risk management. Taking short term deposits from startups who may need to withdraw at any moment and using them to purchase long dated treasuries and MBS at sub 2% rates is simply terrible terrible risk management.
> invested in ten year MBS that they can't liquidate without a significant loss. afaiu, they have 50%+ US government bonds. Both Bonds and MBS have resale/market values for cash, but even with good credit ratings for their securities, if they bought at 2%/3%, and current yields are 4%/5%, then, only if they sell for cash, they have to post a loss on that sale. They did not do anything risky, afaiu, but their liquidity is trapped by accounting appearances. > This is something the bank's risk analysts are supposed to care about. The black swan is that no... there is no actual risk of losses in bonds. There is risk from appearances caused by having to sell them when interest rates go up. Risk is not "lost profit opportunities". The black swan risk is "if major banks, and their US government puppets/masters, want to help crypto fail by not bailing out/investing fairly in SVB", then they can screw it over, along with tech/innovation industries, so that old money cronies can prevent disruption and maintain their role at the top of the subjugation chain.
Their entire job as a bank is to hedge themselves against exactly the kind of risk that caused this. Lots of other banks have long term investments but not like 80% of their balance sheet invested in ten year MBS that they can't liquidate without a significant loss. There may be a couple more banks that fail due to the same issue, but most large banks should be well insulated against this as "The fed raising interest rates" is an entirely predictable, entirely telegraphed occurrence. This isn't a black swan event. This is something the bank's risk analysts are supposed to care about.
SVB main failing was the overexposure to just ONE type of depositors. They should have gone to the Federal Reserve for help IMMEDIATELY. The fed should have been the lender of FIRST resort. Feds could have bought those trash commercial MBS off SVB's hands. Fed could also have bought the low yielding 10 year treausries for face value as well. SVB could have also created shares out of thin air and swaped them to the Fed for much neede reserves. The regional Fed was asleep and should have helped SVB.
SVB owned lots of Commerical real estate MBS. Covid destroyed commercial office rentals. Which meant SVB's assets were shit. Their only good assets were USA treasuries, yielding less than 2%. It was fine but they were forced to sell their safety net USA treasuries during the bank run. Which meant their tier 1 capital was gone. Which meant regulators HAD no choice but go and shut down SVB.
Acted too soon probably. The feds are going to bed bail out SIVB most likely. If not they will have a buyer for ir before Monday… can’t blame you for acting so soon, but the situation is nothing like the Terra Luna implosion. SIVB has HTM assets (the long dated MBS, treasury bills) that will lose at most ~15% if aold at-market.
You are right. It's not my explanation but here it is: - In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. - As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!) in mortgage backed securities (MBS) with these deposits for their hold-to-maturity (HTM) portfolio. - 97% of these MBS were 10+ year duration, with a weighted average yield of 1.56%. - The issue is that as the Fed raised interest rates in 2022 and continued to do so through 2023, the value of SVB’s MBS plummeted. This is because investors can now purchase long-duration "risk-free" bonds from the Fed at a 2.5x higher yield. - This is not a liquidity issue as long as SVB maintains their deposits, since these securities will pay out more than they cost eventually. - However, yesterday afternoon, SVB announced that they had sold $21bn of their Available For Sale (AFS) securities at a $1.8bn loss, and were raising another $2.25bn in equity and debt. This came as a surprise to investors, who were under the impression that SVB had enough liquidity to avoid selling their AFS portfolio.
1. As the Fed increases the federal funds rate, commercial banks are incentivized to hold their reserves at the fed and get paid that interest rate. They lend out less money because people are less likely to borrow at higher interest rates. Since we are a credit based economy, less lending = less money in the economy. 2. The fed is no longer purchasing assets like MBS and Treasury bonds. When they purchase assets, they inject money into the economy. When they just let maturing assets "roll off" their balance sheets, money is "destroyed". Once again, this is what happens in a credit based economy.
Ummm. Okay. * By their books, Silvergate employees costs amounted to around half their expenses and they fired 40% of staff at the year's start. * They made a $1 Billion loss mainly due to having to sell securities(mainly treasuries and morgage-back securities) at a loss to cover withdrawals post-FTX. The value of those MBS's have fallen again about 1% since then. * They should have enough assets to cover these losses although *just barely* as they should have just a few hundred million left over. * If anyone defaulted on loans since last year, they should have actually made a profit on those since they took BTC collateral which increased massively this year. * They should have more than enough deposits to cover current loans. Silvergate Network allows for depositors to transfer payment to each other. A fairly big losses but crypto transfer on-chain are fast and simple such that I can see the Network just being an extra non-performing expense. However, a number of exchanges have scaled back operation with Silvergate leading to deposit losses and hence less profits from fees. Nothing here shows Silvergate surely failing if I'm fair. But they are certainly well-stressed.
This is the opposite of what the Big Short was about. People who didn't have enough money or secure income were allowed to make risky home investments that they shouldn't have been allowed to make if proper vetting were in place. Remember the part where they go to the strip club and driving around the suburbs investigating homes? That's entirely what that was illustrating about the problem. The whole point is that people should have been more limited than they were but there were corrupt incentives in place (MBS) to ignore the guardrails. Accreditation is an income verification guardrail. Yes, the movie is about how rich investment funds are predatory but it had nothing to do with investments that they are allowed to make that poor people aren't. A lot of middle and lower income families were invested in Mortgage Backed Securities.
US debt is the primary fuel (collateral), for the wholesale portion of the monetary system (repo). Treasuries underpin the vast majority of global "money". There's an astonishing demand for them.. not as a safe return vehicle... but as the most liquid, accepted, and transferable collateral available. ...when a debt instrument has questionable composition, or if it's perceived that the interest payments can no longer be meaningfully paid... then that collateral stops being accepted. E.g. Mortgage Backed Securities used to be frequently accepted as collateral in the wholesale system... until one day, a counterparty questioned the safety of the instrument (and requested better collateral). The MBS' underlying mortgages could have been fine, but the perception of meaningful payment was the issue. ...this was 2007/08, and the monetary system collapsed due to a shortage of quality collateral. Not enough treasuries to go around, and no market participants were accepting MBS'. ...now.. what happens if the perception of US treasuries weakens?
Honestly didn't think about that, but it makes sense why would a bank go away from a fractional reserve system that works so well that your allowed to over-leverage to the tits, so the smallest oops becomes a huge fuck up. I was looking through the financial reports and saw that they hold a good amount of mortgage backed securities(MBS), which I think are one of the most toxic assests out there. According to their last 10-q filed for the quarter ending Sept 3 they have 4.93 billion worth of residential and commercial MBS's that are for sale. With the current state of intrest rates I think those MBS are gonna be on the books for a minute. two thing going against them, if btc spikes based on what you said, could put them up a creek without a paddle or if people start defaulting on their mortgages again due to the FED intrest rate hikes we could possibly see another 08 and that could also be very bad.
It's how they make money. Originate mortgage. Sell it. Pocket immediate $500 bucks or whatever. Incentive to ask for good credit worthiness is quite low. If they couldn't create a MBS and dump it on others they wouldn't issue mortgages to everyone with a pulse. Now also don't forget who lived in a house better then yours and which they knew they couldn't afford. "Those" consumers. The ones who took advantage of easy credit and then defaulted. Plenty of blame to go around but it's not the bank's fault deadbeats couldn't pay what they agreed to.
>Blockchain didn't cause the MBS, CDO, CDS, synthetic bonds crisis of 2008 and enslave 98% of the world's population. >Blockchain didn't drop 2 atom bombs on humans or perform 100s of nuke tests in the 50s and 60s that seriously jeopardized the environment (funny all the climate grift and recycling tree huggers never understand or complain that the earth's atmosphere, oceans were severely damaged by gigaton thermonuclear explosions conducted during the cold war arms race) >Blockchain does not fly on jets or airplanes that pollute the atmosphere and cause global warming every hour >Blockchain didn't go to epstein island to abuse and sacrifice kids to Moloch >Blockchain didn't issue money printed out of thin air So far
Blockchain didn't cause the MBS, CDO, CDS, synthetic bonds crisis of 2008 and enslave 98% of the world's population. Blockchain didn't drop 2 atom bombs on humans or perform 100s of nuke tests in the 50s and 60s that seriously jeopardized the environment (funny all the climate grift and recycling tree huggers never understand or complain that the earth's atmosphere was severely damaged by gigaton thermonuclear explosions conducted during the cold war arms race)
One day you'll realize that everyone book Michael Lewis has written, even Moneyball have a real estate element to the financials of whatever he's writing about. Fun thing, the budget constrained real estate developer Steve Schott who owned the A's at the time of Moneyball was played in the movie by non-actor, and Blizzard Activision CEO ***Bobby Kotick***. Back story intriguing. Both Michael Lewis and Kotick studied "Art History" for their B.A. in college and Lewis makes an odd choice to apply for Lehman Brothers in 1982, but gets rejected. He goes to Business School in London for Masters in Economics and thru his royal/nobile peerage family he's at one of the Queen Mother's fundraisers/mixers in the UK and his British peerage cousin introduces him to the wife of Salomon Brothers chief in London. She goes and brags about how intelligent Michael Lewis is (The, author we know, then the son of a New Orleans Corporate Lawyer... in Louisiana....civil law based on spanish and french legal system). Michael Lewis being intelligent and having priv. hookup thru nobile british peerage gets him job in New York running MBS and CMO plus other repackaged MBS at peak 80's Wall Street culture working at the Salomon Brothers underneath... Lewis Rainieri. By 87 Rainieri is fired. Lewis claims he stayed after hostile acquisition by Citigroup but retired from selling MBS to become a writer in 1988 for good. 1989 write about the prequel if you will to the Big Short in 1989's Liar's Poker about it half auto-biographical journey to Rainieri, and also about the culture of MBS and CMO, MBS - derivative products in the heigh of Rainieri's wall street career. I guess it's interesting Lewis's book Moneyball had real estate developers involved in paying for the team with a focus on economics. It's funny the Moneyball 2011 movie cast Activision Blizzard CEO Bobby Kotick tho, considering the Microsoft Corp acquisition is about more than just gaming on a worldwide scale. It's about everything that links Michael Lewis' so called life and non-fiction books together in hard to see ways until you read the books - and question the motives? ​ So Lewis and Fried had a meeting in his home on campus in the CDP Stanford, California area. Where he's pledge a house that comes with Stanford police road blocks and powerlines and dumpsters questionably tied to the private university grid/system too. It's weird that can bond one out. But given all the real estate being pledged to bond out, and Alameda county, Lewis' home in Berkeley, Alameda's first office in Berkeley, it's a big story. One I will only hope you take this an maybe we all piece together to get answers. And hopefully some idea of why it's all being done this way. I mean SBF met and made a deal with IEX and Brad Katsuyama - the main character in Lewis's 2014 Flash Boys.... It's not non-fiction, it's not-fiction. I have a feeling its been written on the fly tho. We live in a country that's limited by its ability to regulate and even impose criminal charges if there is no direct precedent to base a decision on. I think the level of globalization and innovation has brought markets to a halt. Something has to fix this. Maybe a circus is the formula. We're still not recovered from 2008 btw. Loose ends exist. Real Estate and home ownership is not fixed. So we shall see.
Staking is offering your money to the liquidity pool for an APY - that is debt financing. Now, depending on how much debt exists and the APY, there is serious risk of a default contagion, even with overcollateralization. See the 2008 MBS crisis…
They are targeting people who are currently wealthy. It's just what MBS did with his extended family, when he rounded them all up in a hotel and only let them leave, once they handed over their holdings to him. In times of crises, the money has to be moved to the leader, so he can stay relevant. And before Putin runs out of money, everyone else with money will end up dead.
Oh my goodness. This is exactly why people should not be in Bitcoin or any other investment without some sophistication. The us dollar did not exist in this era as we know it today. Dollar was a denomination of value and anyone could issue tokens and say they were redeemable in a certain amount. In fact you can do that today and banks regularly do it via the issuance of mortgage backed securities and other notes they issue. What's different is that since the federal reserve bank, which is also a private entity, not owned by the government, issues a note guaranteed to have some value by the us government, no one would possibly want to use MBS notes or stock certificates to trade goods. Better to use dollars. However if the federal reserve did not print dollars then these notes would find more use.
tbh for most people crypto has the same smell now as that of a '08 financial derivative-CDO's, MBS's,etc. And SBF is the face of it. Trust on the whole thing is gone...very publicly. I feel like the CEX's need to be regulated and the anarchist, libertarian wild wild west comes after you own some crypto. Good thing is people who think Cryptos are ponzi-schemes and unicorn shit are out already, and people who are in are slightly risk loving anyway. Wasn't the case with '08 where these things probably had the reliability of a stock or an index.
Shouldn't be labeled as comedy. This is literally what will happen soon. Once the gears of credit markets start to dry up, the contagion spreads very quickly, and the **only** way to stop it from collapsing is with a massive injection of grease (liquidity). The context is different, but the end result is the same as '08. Back then they raised rates into financially unhealthy markets, and the leveraged MBS plays were the first to go. The main difference now compared to then is our current Fed is far more nimble. Just look at March 2020. They swooped in propped up the entire friggin economy with infinite QE. The Fed Put is still in play. Anyone who thinks it is not, who thinks this era is ANYTHING like the era of Volcker, is missing some very important context here. Get ready. That printer is already on and in standby mode.
Thanks to the derivative CDO's market a sovereign going bankrupt would likely have the same effect as the MBS crisis. Commercial banks at this scale are systemically important to the global financial system. Credit default swaps are absolutely blasting through 2008 all time highs. Higher default swaps means the market believes CS and Deutsch Bank will fail. A CDS is a derivative that allows an investor to swap or offset their credit risk with that of another investor. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse them if the borrower defaults. Same situation as 08' different securities market.
Yes, although other than being a real estate derivative / MBS, there isn't much of a comparison here to the subprime mortgage crisis. Whilst I admire your distaste for TradFi, it would be naive to say that the values (greed, hypocrisy, market-wide crime) have not always been present in DeFi too. The risk of having your investment being eaten by a crypto-based hedgefund is present throughout DeFi and crypto. In a decentralized environment, there simply can't be an effective equivalent to the SEC. The government may well get involved. Cryptocurrency regulation is in its infancy and is an evolving concept. Given this part of the broader debate on cryptocurrency and the global financial system, we can only speculate.
Wasn't there some issues with off-chain MBS/derivatives back in oh, '08 ish? How will being on-chain be any different? particularly by the use concentrated liquidity and automated market making, won't you just be further embedding the issues of trad-fi (greed, hypocrisy and market-wide crime) into the crypto economy? If people gain on-chain liquidity from their own real-estate collateral, who gets the house in a pump and dump? Not saying its a bad idea - but putting it on-chain without addressing the crime is going to cost a lot of people a lot of money, just like its trad-fi counterpart does. How will you reduce the actual risk of my investment being eaten by a crypto based hedge, market maker or broker equivalent who knows I can't do shit about it? At least trad-fi has the SEC (lol). Running an MBS derivative market on crypto seems more like shifting towards trad-fi than away, and will only create more pressure for regulation and control of the crypto space. The trad-fi derivatives market is worth quadrillions, thousands of trillions. How big do you think the on-chain market will get before a government decides to get involved? Could you prevent that?
Ive heard of MBS (Mortgage backed suasages).... are they really pulling a playbook out of wall street and the USD and trying to create CBS (Celsius backed sausages) of subprime debt garbage. This nonsense is exactly what caused the 2008 crash.
> Bitcoin Chart on Weekly Timeframe (200 Weekly MA in Green) Honestly the weekly chart is the scariest one if you are long crypto. In its entire history, BTC has never gone below the 200MA and then bounced up and turned that into resistance.. All the times it hit the 200MA it bounced back of that support. This includes the 2018-20 bear and even March 20 covid crash. The 200MA has always been the most prolific support. Now, it has dropped below and turned this 200MA into resistance. This is ominious. All of BTC's bull markets have come when the money printers were on (helicopter money/QE, fed buying junk). Now the tide has changes, fed is cutting rates, letting MBS expire and offloading other bonds shrinking its balance sheet. People should be ready for some pain.. whether it bottoms at 15k or 8k is anyone's guess at this point but macro driven
I am a very conservative person politically. While the spending that Biden has done since coming into office has not helped inflation, we cannot act like the Trump administration was any better, Trump also spent like a drunken sailor. The real blame for this inflation getting out of control lies with the Federal Reserve keeping interest rates at zero for 6-12 months too long and continuing quantitative easing, including bizarrely buying mortgage backed securities (commonly referred to as MBS), when the the stock and real estate markets were already overheated. The continued purchasing of MBS for a year, after mortgage rates had been at sub 3% for a decent chunk of time and the real estate market was already overheated, makes no logical sense and was a huge policy error. The inflation from increased rents and housing prices is very sticky and we will be dealing with it for years to come. So much for the wisdom of the Federal Reserve. They really screwed the pooch on this one.
**[Financial crisis of 2007–2008](https://en.m.wikipedia.org/wiki/Financial_crisis_of_2007–2008)** >The financial crisis of 2008, or Global Financial Crisis (GFC), was a severe worldwide economic crisis that occurred in the early 21st century. It was the most serious financial crisis since the Great Depression (1929). Predatory lending targeting low-income homebuyers, excessive risk-taking by global financial institutions, and the bursting of the United States housing bubble culminated in a "perfect storm". Mortgage-backed securities (MBS) tied to American real estate, as well as a vast web of derivatives linked to those MBS, collapsed in value. ^([ )[^(F.A.Q)](https://www.reddit.com/r/WikiSummarizer/wiki/index#wiki_f.a.q)^( | )[^(Opt Out)](https://reddit.com/message/compose?to=WikiSummarizerBot&message=OptOut&subject=OptOut)^( | )[^(Opt Out Of Subreddit)](https://np.reddit.com/r/Bitcoin/about/banned)^( | )[^(GitHub)](https://github.com/Sujal-7/WikiSummarizerBot)^( ] Downvote to remove | v1.5)
Spot on. Many blockchains are in diapers. As it happened with internet, there will be crashes, loss of confidence, panic and such. The current stock/MBS/inflation crisis will make this linger and go deeper, but it's not alarming. It's only logical if you pay attention to the last decades. It's a matter of holding to what you believe in, as blockchain is the future, but only a few of them will survive. These times are a stress test, and we can already see which ones struggle and which don't.