The collapse of Silicon Valley Bank and the current wider financial crisis are a result of the devastating economic fallout from years of lockdown policies that crippled Western economies and filled them with low-interest debt, according to Professor of Economics Christian Parenti, who has written a piece explaining the connection in the Grayzone. Here’s an excerpt.
On Friday March 10th 2023, Silicon Valley Bank (SVB) died of Covid. Alright, it’s a little more complicated than that, but Covid lockdowns followed by massive government stimulus were a critical – and massively under-acknowledged – factor in propelling the bank’s demise.
At the heart of the crisis is the gigantic pile of low-interest debt that was issued during the height of the pandemic. While private-sector pandemic-era debt like corporate bonds also soared, U.S. Government debt like Treasury bonds piled up.
In a nutshell, during the pandemic the Government issued enormous amounts of extremely low interest government debt — about $4.2 trillion of it. But now interest rates, including on Government debt, are higher than they have been in 15 years and investors are dumping their old low-interest debt. As they dump, the resale price of the old debt goes down. The more it declines, the more investors want to dump. And thus, a panic is born.
To understand the problem fully, the question of U.S. Government debt has to be put into its larger context, which is: the pandemic response as a whole.
When news of the Covid virus first broke in December 2019, the two-year Treasury bond was being offered at 1.64% interest; the 10 year was at about 1.80%, and the resale value of such bonds on secondary markets was strong. Then, in March 2020, as Covid cases and deaths spiked, the U.S. began to shutter its economy with panicked lockdowns that were supposed to ‘flatten the curve’ or slow the spread of the virus and thus protect the hospitals. But Covid was politicised and the lockdowns were extended.
As the lockdowns dragged on, the U.S. economy began to collapse, shrinking at a record-shattering annualised rate of 31.4% during the second quarter of fiscal year 2020.
To avoid total economic devastation, the federal Government began massive debt-financed spending. In March 2020, Trump signed into law the $2.2 trillion economic stimulus bill the CARES Act, or Coronavirus Aid, Relief, and Economic Security. Then, in March 2021, Biden signed the American Rescue Plan Act which contained $1.9 trillion more in Covid relief. Finally, in April 2021, another trillion or so of Covid relief arrived in the Consolidated Appropriations Act.
Thanks to these laws, every industry and most people received public money. There was increased and extended unemployment payments, as well as the so-called ‘stimmy checks’ or stimulus payments to everyone earning under $75,000 a year (about half the population). The Paycheck Protection Program spent almost a trillion dollars. The Provider Relief Fund doled out $178 billion to the healthcare system.
All this debt spending kept millions of people in their homes, and helped feed, employ and care for millions more. The measures allowed hundreds of thousands of businesses to stay afloat even as many thousands of others went under. The impact of the spending on Americans’ well-being was generally positive. For a moment, the U.S. child poverty rate was cut in half, falling to 5.2%.
But the economically destructive lockdowns were not necessary and did not work.
Worth reading in full.
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SVB collapse to be blamed on climate thingy, not LDs which saved 14 trillion or indifferent management. They gave some $65 million to Burn Loot and Murder I do recall.
Probably a few hundred millions to climate thingy, LGBTQZ++, xi Biden etc.
All the worthy causes.
Bank of Retards. Good riddance, may many more expire.
Banksters + gov’t. Maybe a repeat of the 2008 ‘bailouts’, you know the once-only bailout…which we can blame on Putin of course. Or white privilege.
Interest rates were only low in 2019 because of the extraordinary support given to the financial markets through suppression of interest rates after 2008. Even without overt QE, interest rates were suppressed because people believed that governments would do whatever was necessary to keep interest rates low, no matter what.
What happened in 2020 was another extraordinary influx of cash, which has led to inflation.
The only way to tame this inflation (now that it has started) would be to use interest rates, and people (investors) have noted that governments can’t simultaneously suppress interest rates (to stop the economy collapsing) and raise interest rates (to fight inflation).
At some point soon governments will have to work out what they want to do about this conundrum. There’s no easy way out, but I imagine they’ll chose a compromise which results in the most pain to the most people (probably keep interest rates somewhat suppressed but still high compared with 2008-2022, which will result in high debt servicing costs, damage to the economy, asset prices reducing and rampant inflation (but not hyperinflation) without compensatory wage increases).
“I imagine they’ll chose a compromise which results in the most pain to the most people (probably keep interest rates somewhat suppressed but still high compared with 2008-2022, which will result in high debt servicing costs, damage to the economy, asset prices reducing and rampant inflation (but not hyperinflation) without compensatory wage increases).”
This was of course all part of the reset agenda.
The costs of servicing debt will defeat many working people and assets of many types, not just property, will come on to the market and values will progressively fall thus enabling the banks and large financial institutions to hoover them up at bargain prices.
For many the shrinking economy will mean unemployment.
The aim of course is an economy of renters. Inflation will make matters comfortable for those with the resources to service their debts but increasing penury for those with no assets only debts. And for those who lose their homes they will be offered a little hutch in one of the fifteen minute ghettos.
This situation will be ameliorated via UBI, which of course will necessitate CBDC and the requisite digital passports.
The push for a return to feudalism grows apace.
“You will own nothing but be happy.”
Absochuffinglutely. And who’s this Joseph Gentile dude? He seems kind of interesting, in a sketchy as hell sort of way..
”People often ask why the globalist elite would collapse the world economy. Wouldn’t that mean they destroy their own wealth in the process? The answer is no. The elite have been consolidating their wealth in order to protect it for centuries. The process of consolidation has accelerated dramatically in recent years, with the global financial crisis in 2008 and the Covid pandemic allowing the elite to get richer while the rest of us were made poorer.
When the world financial system finally crashes the elite will be positioned to buy whats left for pennies on the dollar. Where does this leave the rest of the world financially? The answer is in bondage to a Techno-Communist World Governmental System led by the World Economic Forum in Davos and the hidden hands that control the public face of that cabal.
If you pay attention now you can see that everything around you is being engineered towards this one goal.”
https://newspunch.com/wef-insider-admits-silicon-valley-bank-crash-is-a-great-reset-scam/
Thanks Mogs.
Indeed.
But it’s not generally recalled that pre 2008 interest rates had been at artificially low levels for perhaps a decade – a policy crime which in itself was responsible for the ‘crash’ of 2008-9.
I don’t think there is anything governments can do now to sort out this mess – they’ll almost certainly do their best to inflate the debt away while all the time pretending to the dumb masses that they’re ‘tough on inflation’ and will ‘take whatever steps are necessary’.
The central banks have failed – for the same reasons that just about every other Western institution has failed: heavily politicised and run by know-nothing, self interested careerists.
Whatever way you look at it, we as a society are in deep, deep shit.
The bailout is more interesting and corrupt. Democratic lawmakers making sure their donors aren’t hurt at all. Nothing else.
Why do we take as given the fundamentals of the banking system in the first place. As if somehow some strategem will always save us. The next crash is going to be not just quantitavely different but also in quality. If you want to import some oil or food who is going to make the payments. Will you do it by carrier pidgeon? Understand the nature of a higher order collapse. Being in the heart of the empire won’t help at all. And if you’re thinking of going rugged individualist fine but we are talking about a breakdown of a system which keeps alive many times more people than could exist without it and it is going down. I think the main thing is to not care if it is you who has to meet your demise. Don’t act out of fear of death or poverty. Acting without such concerns is very subversive for the programmers.
”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.”
https://uncut.substack.com/p/buckle-up-for-the-financial-new-normal
As a long term customer of the HSBC (formerly known as the Hong Kong & Shanghai Banking Corporation), it looks a bit suspicious to me. Perhaps it looked like a cheap takeover/investment opportunity.
SVB is heavily involved with the CBDC rollout in the UK, which is most likely the reason why it could not be allowed to fail here.
You cannot avoid the calculus of an empire in the final throes not just behaving irrationally but wanting to parade its dementia in the form of its leaders. If you read the FT over the last five years there were many articles saying Marx was right. The point being that the bankers themselves are awaiting the challenge because they want an end to the madness as well. It really is like that. So this is no time to be faint hearted it the door is wide open. The trouble is, how many of us can conceive of a positive vision of the future.
A strange thing happened in March 2020. At the height of a new deadly virus, predicted to kill 500,000 people in the Uk alone, the stock market skyrocketed.
From trough to peak, in November 2021, the Nasdaq went up a whopping 152%.
To put it in perspective, if you’d risked £600 using spreadbetting in March 2020 you would have made £100,000 if you’d sold in November 2021.
The explanation given is that it was simply stimulus but remember that in March 2020 the predictions were for millions of skilled workers to drop down dead from this virus (and also remember there were no vaccines at this point) and stimulus would have made very little impact on the devastation to the economy that this virus would reap.
There is another explanation, however, and that is those institutional investment companies, or the ‘smart money’, don’t listen to ‘experts’ like Prof Neil Ferguson, they go out and do their own research and I believe they quickly concluded that Covid was laughable nonsense. They wouldn’t have shouted about it but quietly put their money where their research told them to put it and that was to buy, buy, buy.
While everyone else was hiding under the bed with their N95 masks on these people were laughing all the way to the bank.
Obviously the bankers avoided the mass hysteria.
huxleypiggles is a Colonel in Brigade 77.
Beware.