Quote from: Gyfts on Today at 03:44:49 PM

Quote from: crypticj on March 13, 2023, 10:33:13 PM

Some people and media also say that the system broke and that means that federal reserves won't rise interest rates at the next meeting. And I think it's completely wrong. I think they will just rise rates for another 0.25% as a response to the SVB situation. The inflation is still pretty high and FED will keep fighting it, they can't afford to stop right now.

So I think we will still see a lot more bankruptcies, there will be more layoffs and the stock market will keep suffering from that. This also means that bitcoin will probably find a new bottom.

It's not that simple to raise interest rates again when there's a liquidity crisis.

Understand the options the federal reserve have right now are either let the banks collapse and hope they get scooped up by the larger financial players (which is what would happen considering these banks are sitting on assets will eventually mature to somewhat of a return) OR they introduce liquidity into the system by pausing the interest rates hikes and bailouts which will prolong the inflation crisis.

The reason this crisis is occurring is because of interest rates hikes in the first place. Would the federal reserve rethink their course of action seeing the mess they've caused? I'm not in support of such matters but certainly the White House would support bailouts considering the world economy is in a fragile state. Elections are close.

I am not the biggest expert on this topic, but if I understand the issue at hand correctly, it is not only a liquidity crisis because of securities that have not matured. The banks' equity capital took some serious hits because they have unrealized losses on their balance sheets of $620 billion at yearend 2022.

But you are right as the report says that once the banks are going to sell those securities below their face values, they do indeed have liquidity issues as their cash flows are way below what was initially planned or expected.

That's interesting and I wonder why so many big and experienced banks get into trouble so easily when actually they should know better in the first place. But the risk is worth it, they can play the lottery day in day out because they get saved anyway.