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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Well speaking of clones and doppelgangers, this is where our Nigel comes into his own. What a badass.
https://x.com/GaryBrumz/status/1808523412064649562
Terrific Mogs
Brill
I love how Johnson’s had a total transformation after losing 30kg and a trip to the barbers.
Is it just me or does Keir Starmer share the same furrowed brow of a monkey worriedly looking at a wiring diagram of a Ford Capri? His anxiety about possibly being caught saying something inappropriate is amplified by his nasal and pedestrian delivery – the man isn’t going to know his ass from a hole in the ground in a fortnight.
Correct so he will hand over to Khant at some point
That is the intention Freddy as I have posted more than once.
Fishy and Kneel sound the same because they are both little WEFfers.
Reinhard Tristan Eugen Miliband
Because they get their orders from Davos, it’s common knowledge.
To be fair, the Green Goblin does turn up well in a small pair of shorts.
“but all those… doubles… are there precisely because if Putin goes, Russia will once again be redefined [so his death would perhaps have to be covered up to prevent chaos]”
Surely that can be a double edged sword considering that if they chose a double, bumped off the real Putin, then put in their puppet until they have gained power.