With interest rates at historic lows in 2021, it baffles me that banks didn't account for the fact that rates could go up and diminish the value of their bonds/US securities.
Graham, thank you so much for this very helpful and well written and clear primer on what is going on with the banking crisis. I did have a question for you related to this. some of the news articles covering this have quoted experts who have been warning financial institutions not to increase the rates they pay to depositors. The experts called this quote dangerous unquote. Why would it be dangerous to increase deposit rates?
"The bailout is good in the sense that it reinforces the belief that customers have in the banking system. The system is built on faith, and if that faith is broken, it can spread like wildfire. "
An economic system that defies economic laws and is based on faith doesn't sound that great.
They raised rates too fast reminds me of the kids who threw a party and got caught. "But mom and dad came home too early!"
Thank you Graham, this was very informative!
With interest rates at historic lows in 2021, it baffles me that banks didn't account for the fact that rates could go up and diminish the value of their bonds/US securities.
Graham, thank you so much for this very helpful and well written and clear primer on what is going on with the banking crisis. I did have a question for you related to this. some of the news articles covering this have quoted experts who have been warning financial institutions not to increase the rates they pay to depositors. The experts called this quote dangerous unquote. Why would it be dangerous to increase deposit rates?
Thanks for information and professional analysis of the situation in the banking sector
Great insights game theory is one of the most interesting theory in economics and can be applied to almost anything.
https://open.substack.com/pub/danielduffy/p/credit-suisse?utm_source=share&utm_medium=android
"The bailout is good in the sense that it reinforces the belief that customers have in the banking system. The system is built on faith, and if that faith is broken, it can spread like wildfire. "
An economic system that defies economic laws and is based on faith doesn't sound that great.
They raised rates too fast reminds me of the kids who threw a party and got caught. "But mom and dad came home too early!"
In desperate times people do desperate things and deals are made!