yego.me
💡 Stop wasting time. Read Youtube instead of watch. Download Chrome Extension

What happened with Sillicon Valley Bank and what it means for the economy


2m read
·Nov 8, 2024

I was asked to share my thoughts about the Silicon Valley Bank situation. I want to convey that, um, it's very, uh, indicative of what the whole economy is like.

So, there's its particular situation and the FED coming in and guaranteeing all depositors, but it's a common situation. It exists pervasively. What is it that I'm talking about? That there has been a lot of creation of debt to make investments.

Um, so for example, banks and insurance companies borrow money at a certain rate, and then they go out and they make investments. When those investments have lower returns, go down in value as stocks and bonds have gone down in value, or they don't have adequate yields relative to the cost of funding those assets, you have everybody losing money.

That is a pervasive situation that exists throughout the con—the economy, the world economy, the U.S. economy. In other words, the world is long—so long holding assets that they're betting go up, and they're leveraged long. This means that they have borrowed money to hold those positions.

And so, that set a circumstance, as we've been talking about, has put the Federal Reserve in this—and our country in a situation where, um, there's—um, that it's very difficult to create an interest rate that is high enough to provide a real return.

In other words, a return after inflation that is high enough to compensate you for holding that asset. To provide that interest rate that's high enough, at the same time as not damaging those who have borrowed that money, that balancing act is difficult.

And there's this big supply-demand means that there's a need to borrow a lot of money. If you look ahead and you say how much money needs to be borrowed by the Federal Reserve, by the government, uh, in order to deal with this situation—big deficits—that means they have to sell debt.

There's a supply-demand imbalance. In other words, those who want to buy that debt, what are they going to buy it for? They need to have a high enough real return. If they don't have a high enough real return, they can sell the debt, or their debt that they're holding, rather than buying that debt, and that creates a terrible imbalance.

So that imbalance is the nature of what's going on. You—and they're not marked to market. A lot of these, if you mark to market, a lot of entities are in financial difficulty.

More Articles

View All
How to turn $5000 into $50,000: With guest Ricky Gutierrez
What’s up you guys, it’s Graham here. So I’m joined today by Ricky Gutierrez, and we were hanging out today. I got a message on my Snapchat, a really good question, which I actually worked out perfectly since Ricky was here: How would you turn five thousa…
This 18th Century Gold Rush Changed How the World Pans for Gold | National Geographic
Gold is the most powerful metal on earth, and Russia is one of the world’s leading suppliers of it. It all began in 1745 when a peasant named Tiara Fade Markov, while looking for crystal, found something else: a tiny gold speck inside a piece of quartz. H…
One, Two, Three Bites, You’re Out | Wicked Tuna: Outer Banks
Michael: “Let that one go, all right? Got a double on, baby! What do you want me to do with this one?” TJ: “Let him go! Just cranking up. Keep it tight on them! Get tight on him!” F: “Watch out! What we’re here for, baby! Got a double on here. I think h…
Don’t Rely on Credibility Stamps
There are a lot of institutions in our society today that are relying upon credibility stamps. They used to be how you gain credibility in society. So, if you were a journalist writing for the New York Times or Washington Post, then you had the masthead o…
Missing Dial Trailer | National Geographic
You don’t know heartbreak until you’re running through the jungle, yelling for your son’s name. “Roben! Oh, that’s my son, chip off the old block!” He emailed us right before he headed into the jungle. “It should be difficult to get lost forever.” What t…
Dividing polynomials by x (no remainders) | Algebra 2 | Khan Academy
Let’s say someone walks up to you on the street and they give you this expression: x squared plus 7x plus 10 divided by x plus 2. And they say, “See if you could simplify this thing.” So, pause this video and see if you can do that. One way to think a…