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Silicon Valley Bank Crisis: The Liquidity Crunch We Predicted Has Now Begun

March 13, 2023

By Brandon Smith

There has been an avalanche of information and numerous theories circulating the past few days about the fate of a bank in California know as SVB (Silicon Valley Bank). SVB was the 16th largest bank in the US until it abruptly failed and went into insolvency on March 10th. The impetus for the collapse of the bank is tied to a $2 billion liquidity loss on bond sales which caused the institution’s stock value to plummet over 60%, triggering a bank run by customers fearful of losing some or most of their deposits.

There are many fine articles out there covering the details of the SVB situation, but what I want to talk about more is the root of it all. The bank’s shortfalls are not really the cause of the crisis, they are a symptom of a wider liquidity drought that I predicted here at Alt-Market months ago, including the timing of the event.

First, though, let’s discuss the core issue, which is fiscal tightening and the Federal Reserve. In my article ‘The Fed’s Catch-22 Taper Is A Weapon, Not A Policy Error’, published in December of 2021, I noted that the Fed was on a clear path towards tightening into economic weakness, very similar to what they did in the early 1980s during the stagflation era and also somewhat similar to what they did at the onset of the Great Depression. Former Fed Chairman Ben Bernanke even openly admitted that the Fed caused the depression to spiral out of control due to their tightening policies.

In that same article I discussed the “yield curve” being a red flag for an incoming crisis:

…The central bank is the largest investor in US bonds. If the Fed raises interest rates into weakness and tapers asset purchases, then we may see a repeat of 2018 when the yield curve started to flatten. This means that short term treasury bonds will end up with the same yield as long term bonds and investment in long term bonds will fall.”

As of this past week the yield curve has been inverted, signaling a potential liquidity crunch. Both Jerome Powell (Fed Charman) and Janet Yellen (Treasury Secretary) have indicated that tightening policies will continue and that reducing inflation to 2% is the goal. Given the many trillions of dollars the Fed has pumped into the financial system in the past decade as well as the overall weakness of general economy, it would not take much QT to crush credit markets and by extension stock markets.

As I also noted in 2021:

We are now at that stage again where price inflation tied to money printing is clashing with the stock market’s complete reliance on stimulus to stay afloat. There are some that continue to claim the Fed will never sacrifice the markets by tapering. I say the Fed does not actually care, it is only waiting for the right time to pull the plug on the US economy.”

But is that time now?  I expanded on this analysis in my article ‘Major Economic Contraction Coming In 2023 – Followed By Even More Inflation’, published in December of 2022. I noted that:

This is the situation we are currently in today as 2022 comes to a close. The Fed is in the midst of a rather aggressive rate hike program in a “fight” against the stagflationary crisis that they created through years of fiat stimulus measures. The problem is that the higher interest rates are not bringing prices down, nor are they really slowing stock market speculation. Easy money has been too entrenched for far too long, which means a hard landing is the most likely scenario.”

I continued:

In the early 2000s the Fed had been engaged in artificially low interest rates which inflated the housing and derivatives bubble. In 2004, they shifted into a tightening process. Rates in 2004 were at 1% and by 2006 they rose to over 5%. This is when cracks began to appear in the credit structure, with 4.5% – 5.5% being the magic cutoff point before debt became too expensive for the system to continue the charade. By 2007/2008 the nation witnessed an exponential implosion of credit…”

Finally, I made my prediction for March/April of 2023:

Since nothing was actually fixed by the Fed back then, I will continue to use the 5% funds rate as a marker for when we will see another major contraction…The 1% excise tax added on top of a 5% Fed funds rate creates a 6% millstone on any money borrowed to finance future buybacks. This cost is going to be far too high and buybacks will falter. Meaning, stock markets will also stop, and drop. It will likely take two or three months before the tax and the rate hikes create a visible effect on markets. This would put our time frame for contraction around March or April of 2023.”

We are now in the middle of March and it appears that the first signs of liquidity crisis are bubbling to the surface with the insolvency of SVB and the shuttering of another institution in New York called Signature Bank.

Everything is tied back to liquidity. With higher rates, banks are hard-pressed to borrow from the Fed and companies are hard-pressed to borrow from banks. This means companies that were hiding financial weakness and exposure to bad investments using easy credit no longer have that option. They won’t be able to artificially support operations that are not profitable, they will have to abandon stock buybacks that make their shares appear valuable and they will have to initiate mass layoffs in order to protect their bottom line.

SVB is not quite Bear Stearns, but it is likely a canary in the coal mine, telling us what is about to happen on a wider scale. Many of their depositors were founded in venture capital fueled by easy credit, not to mention all the ESG related companies dependent on woke loans. That money is gone – It’s dead. Those businesses are quietly but quickly crumbling which also conjured a black hole for deposits within SVB. It’s a terribly destructive cycle. Surely, there are numerous other banks in the US in the same exact position.

I believe this is just the beginning of a liquidity and credit crisis that will combine with overt inflation to produce perhaps the biggest economic crash America has ever seen. SVB’s failure may not be THE initiator, only one among many. I suspect that in this scenario larger US banks may avoid the kind of credit crash that we saw with Bear Stearns and Lehman Brothers in 2008. But, contagion could still strike multiple mid-sized banks and the effects could be similar in a short period of time.

With all the news flooding the wire on SVB it’s easy to forget that all of this boils down to a single vital issue: The Fed’s stimulus measures created an economy utterly addicted to easy and cheap liquidity. Now, they have taken that easy money away. In light of the SVB crash, will the central bank reverse course on tightening, or will they continue forward and risk contagion?

For now, Janet Yellen and the Fed have implemented a limited backstop and a guarantee on deposits at SVB and Signature. This will theoretically prevent a “haircut” on depositor accounts and lure retail investors with dreams of endless stimulus.  It is a half-measure, though – Central bankers have to at least look like they are trying. 

SVB’s assets sit at around $200 billion and Signature’s assets are around $100 billion, but what about interbank exposure and what about the wider implications?  How many banks are barely scraping by to meet their liquidity obligations, and how many companies have evaporating deposits?  The backstop will do nothing to prevent a major contagion.

There are many financial tricks that might slow the pace of a credit crash, but not by much.  And, here’s the kicker – Unlike in 2008, the Fed has created a situation in which there is no escape. If they do pivot and return to systemic bailouts, stagflation will skyrocket even more. If they don’t use QE, then banks crash, companies crash and even bonds become untenable, which puts the world reserve status of the Dollar under threat. What does that lead to? More stagflation. In either case, rapidly rising prices on most necessities will be the consequence.

How long will this process take? It all depends on how the Fed responds. They might be able to drag the crash out for a few months with various stop-gaps. If they go back to stimulus then the banks will be saved along with equities (for a while) but rising inflation will suffocate consumers in the span of a year and companies will still falter. My gut tells me that they will rely on contained interventions but will not reverse rate hikes as many analysts seem to expect.

The Fed will goose markets up at times using jawboning and false hopes of a return to aggressive QE or near-zero rates, but ultimately the trend of credit markets and stocks will be steady and downward.  Like a brush fire in a wind storm, once the flames are sparked there is no way to put things back the way they were.  If their goal was in fact a liquidity crunch, well, mission accomplished.  They have created that exact scenario.  Read my articles linked above to understand why they might do this deliberately.

In the meantime, it appears that my predictions on timing are correct so far. We will have to wait and see what happens in the coming weeks. I will keep readers apprised of events as new details unfold.  The situation is rapidly evolving.


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  • Rodster March 13, 2023 at 9:04 am

    Excellent read as always. I’m reminded of a famous Rahm Emmanuel quote, “never let a good crisis go to waste”. This appears to be a nice setup for CBDC’s which have been in development for years along with UBI, the globalists wet-dream for total control over the Plebs.

    • Tim March 13, 2023 at 3:43 pm

      I hope we have a few more years before they implement a CBDC. I don’t know how we’ll be able to survive if we choose not to participate in that kind of system. With a CBDC they can control what we buy and sell.

      • Rodster March 13, 2023 at 5:41 pm

        “I don’t know how we’ll be able to survive if we choose not to participate in that kind of system.”

        That’s probably where secession comes into play. I am 100% for liberty and freedom. I want to be left alone but the globalists/progressives/leftists want us all to share in their miserable world. Hopefully by that time the US will just collapse like the Soviet Union did in 1991 and States can go their separate ways. The US Federal Government has become a growing blob that is sucking the life out of everything both literally and figuratively.

        • Thomas Wilson March 14, 2023 at 1:13 am

          Well said I’m with you 100%

          • Steve March 15, 2023 at 4:44 pm

            Yep. I don’t even bother following all the 2024 election guff. There’s no point because no solution is every going to come from DC. The best hope is some kind of break up and that the Red states go it alone.

      • Steve March 15, 2023 at 4:43 pm

        There will be a lot of opposition and many parts of the world won’t buy into it. Fight the good fight, folks!

    • Michael March 15, 2023 at 12:24 pm


  • Rodster March 13, 2023 at 9:38 am

    Question, if this meltdown goes parabolic, will this push States to decide they want nothing to do with Washington anymore and request to secede?

    • Fyodor March 14, 2023 at 12:53 pm


  • spring March 13, 2023 at 9:40 am

    Interesting how all these higher-ups keep talking about how there isn’t going to be a bankrun and that theres no need to worry as if they are trying to put that idea inside people’s heads. If sudden withdrawals have any major effect on the solvency of banks (or can be portrayed like they did) the solution could be a system where people can’t withdrawal money because it isn’t physical (digit dollar/wallet). Did i miss anything?

  • Roundball Shaman March 13, 2023 at 2:54 pm

    “We are now at that stage again where price inflation tied to money printing is clashing with the stock market’s complete reliance on stimulus to stay afloat.”
    Most people never bother to look deeply at the Financial System itself or try to understand even the basics of what really goes on there.
    But it’s at ‘crisis’ times like these that more of the clueless public begins to notice just what a flimsy house of cards the ‘financial’ system of United States Incorporated (and the World at large) truly is.
    It’s all a big game of ‘Pretend’. Or maybe, that old standby ‘Monopoly’. Or even better, magic and sorcery and charades.
    ‘They’ pretend that a small piece of paper (or pixels buried in a database somewhere) have real value. And all the rest of WE the People get to pretend that this thin paper (or pixel pixies) has actual value! No, really! Let’s pretend! Let’s not worry about the fact that is it just ink printed on a slip of paper or not even on that!
    It’s all about conjuring fake ‘money’ out of thin air and having the Public have ‘fully faith and confidence!’ in such a System. Huh!? What? Confidence in vaporous fictions conjured out of thin air? And I’m supposed to do give you something tangible and of actual value (or my time and labor) for this puff of vapor smoke called ‘currency’? Sure! No problem!
    And it’s not even really money. It’s some weird concoction called a Federal Reserve Note. You know, that small group of private bankers who operate far above elected government who (as others have said)… are NOT Federal and they have NO Reserves. Or maybe they do… but guess what? We aren’t allowed to look at Their Books! OK… why would we even want to do that? Let’s just… pretend!
    So let’s pretend even more. Let’s pretend These folks in the shadows really have our Nation’s best interests at heart and they are not just in this fiasco system to enrich themselves! And that this ENTIRE System is rational and actually makes sense.
    Whoa! That does take a whole lot of pretending to believe THAT…

    • Steve March 15, 2023 at 4:46 pm

      Correct, RBS. And here in Switzerland we’re being told to pretend that Credit Suisse is a healthy, viable bank.

  • Ava Cassise March 13, 2023 at 3:17 pm

    But but the Fed has tools… go brrrrr….. easy job for the fed that is addicted to QE , they created on purpose this SVB crisis as an excuse to pivot because they cant raise above 5% with over 30 trillions in debts

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      Brandon Smith March 13, 2023 at 4:55 pm

      I don’t think they need an excuse to pivot, otherwise they never would have raised rates in the first place. The goal of higher rates was to deliberately create the liquidity crisis we are now seeing. The Fed is a suicide bomber. They don’t have any loyalty to the US economy, they have loyalty to the globalists, and the next program the globalists want is CBDCs and a global currency system. They have to bring down the US economy to make that happen.

      • BoomBustProfits March 13, 2023 at 9:59 pm

        Jeff Gundlach recently stated: ““Dick Bove did an interview on CNBC Asia today. He pointed out that the “net worth” of the US Federal Reserve is -1.1 Trillion dollars due to essentially the same funding/investing mismatch that took down SVB. So the only way for the Fed to backstop the system is to print money.”

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          Brandon Smith March 13, 2023 at 11:16 pm

          I don’t know that the Fed can ever have a true negative balance. I suppose if you count unfunded liabilities then it would be technically true. Though, Gundlach may be assuming that the Fed actually WANTS to initiate a true backstop. I think they will piece-meal it with half measures until the credit system crashes like 2008.

          • BBP March 14, 2023 at 3:36 pm

            Agreed—At this point they want to retain whatever confidence is left while still bailing out the Fiat Banking Cartel & those connected to it, and keep their fingers crossed & hope things work out…
            Of course, they will do what they always do and say the opposite of what is actually happening-Fed & media puppets will demand they are not bailing anyone out as they do just that – and I also think (as many others do) they will raise the inflation target from their stated 2%…
            They all (Powell, Neel Kashkari, etc) look so stupid – it is inevitable that confidence will eventually be totally lost, and it will happen fast when it does…
            What is scary – like many discuss—if the Treasury/FED call a Bank Holiday, lock down all banking over a weekend & do a massive devaluation of the USD (plenty of precedent here) and at the same time force us all into CBDCs… USD may be relatively strong now due to global flight to safety but worst things to own in the actual reset scenario is money (cash) in a savings acct… Bonds will basically all be devalued into nothing/become worthless…

      • Ava Cassise March 13, 2023 at 10:32 pm

        I was watching CNBC yesterday when a guest talked about the possibility that the banking system in the US may choose the USDC token (jp morgan and blackrock investing in it) to be the official digital version of the dollar by the end of year. So yeah i agree with CBDC adoption is imminent.

        • Sgt Oddball March 20, 2023 at 8:30 am

          In that event, tobacco, or homebrew/hooch, or bars of soap, or somesuch will become the *unofficial* version of the dollar in fairly short order… 😉

      • Steve March 15, 2023 at 4:48 pm

        Brandon, what do you think of the alternative view by the likes of Tom Luongo (Gold, guns and goats) that the Fed is actually on the side of the big East coast banks and is fighting AGAINST the Davos maniacs? The Fed is the front for these banks and I’m sure Dimon et al have no intention of letting the central banks and BIS run the show.

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          Brandon Smith March 15, 2023 at 4:58 pm

          It’s completely fabricated theory. Maybe an attempt to cope with the fact that the agenda is almost universally accepted by the elites in every country. The Fed answers to the BIS and always has. You can’t become a central banker unless you are a part of the Davos crowd.

          • Steve March 16, 2023 at 11:47 am

            Thanks for confirming my opinion. I suspected that the “Powell is a white hat” idea is of no more credence than the Q crap that “patriots are in control”

          • Avatar photo
            Brandon Smith March 16, 2023 at 3:25 pm

            Yeah, the theory is almost exactly like the Q nonsense.

  • Brent March 13, 2023 at 4:33 pm

    CBDC here we come! The best hope at this point is state legislatures. They have to pass laws against it and open back up the “gold” currency. The US dollar has been so damaged by all the printing that it just doesn’t seem possible to me to save at this point. It seems as though an asset that you can hold or stand on is your best safety net at this point. Do you agree?

    • Rodster March 14, 2023 at 1:28 pm

      What really needs to happen is for the breakup of the United States. It has gotten too big and corrupt. California should be its own country. Just separate blue vs red states.

      • BBP March 14, 2023 at 11:40 pm


      • Steve March 15, 2023 at 4:50 pm

        100%. It will happen – probably with bloodshed

    • Steve March 15, 2023 at 4:49 pm

      Noem, whom I don’t particularly trust, has at least been speaking out against them. Hopefully, just like with the clot shots, there will be significant islands of resistance. Most people don’t realise that anyone can create money, and it is NOT the total preserve of governments. We could see some interesting developments in this area if the swine try and push ahead with CBDCs.

  • Linda March 13, 2023 at 8:56 pm

    I have heard that in the aftermath of this crash their will be a USD for International trade and USD for use inside the USA.

    I live in Australia, what do you think currencies will look like when the dust has settled on this current financial crisis?

  • Black Cat March 14, 2023 at 5:36 am

    It’s their lie, they can tell it how they want, they know there’s plenty of fools to believe it.

  • Ned March 14, 2023 at 7:25 am

    Did having physical cash in our economy cause the problems at SVB?
    Will having digital currency prevent another SVB?

    • David Homer March 15, 2023 at 7:58 am

      A lot of the deposits withdrawn from SBV was done over the internet so it looks like a digital currency would not have made a difference

    • Steve March 15, 2023 at 4:51 pm

      Digital cash will still be the same fiat garbage. Except with total surveillance of your life.

      • Sgt Oddball March 20, 2023 at 8:48 am

        See my reply to Ava Cassise, a little ways up-thread: – ‘Prison Currencies’ and the black market ftw!… – Alternative currencies based on everyday necessity consumable commodities’ll compel the weasels to engage in a neverending game of whack-a-mole as they move to blacklist CBDC transactions into those commodity necessities, until they eventually have to blacklist transactions into, ultimately, *anything* and *everything*… – At that point: – *Game Over* for the Davostani Borg, at least on the social-control-grid front.

        …- The ‘CBDCs as same-old fiat garbage’ is a *whole other* kettle of fish, which’ll make hyperinflationary Zimbabwe look like the epitome of staid, sober solvency and thrift, in *VERY* short order and also bring a fairly prompt end to the whole misbegoten experiment. – Tip: – Keep an eye on Nigeria…

  • Stuff March 14, 2023 at 10:07 am

    If everyone stood up to the vaccine mandate they won’t get their mark of the beast because people will end up standing up to that too. Christians have been going on and on about the mark of the beast for centuries. Plus some Christians believe accepting the mark is an unforgivable sin. How do you see this fight playing out Brandon. Do you think at best only in blue states they will get their CBDCs implemented temporarily?

    • Steve March 15, 2023 at 4:53 pm

      I think the same people who stood up to the death shots will stand up to CBDCs. And it won’t be Christians. I know so many Christians who banged on and on about the coming Mark of the Beast. Then when it appeared in the form of the jabs and vax passports, they went for it without a murmur. I’ll never forget that as long as I live, and now know that most Christians are no different from the majority of sheep.

  • Luke March 14, 2023 at 10:42 am

    —Great article Brandon… raise or not to raise that is the question. I think you might be right about them not reversing course. Looking back at when the aggressive rate hikes started most contend it was to deal with inflation. Maybe that had something to do with but I get the feeling it was to make certain the USD remained best suitable for continued reserve status.
    —With other countries/entities like BRICS and SCO leading the charge to de dollarize it seems to make sense. Admittedly I am not anywhere near as familiar with the fundamentals as you and others happen to be.
    —If they continue to raise rates, the US Treasuries held by most banks continue downward which should increase problems for the banks balance sheets. That will no doubt be problematic to put it mildly. If they slash rates inflation is going to roar now that it is entrenched in the zeitgeist.
    —Truly a damned if you do damned if you don’t situation. Seems there’s no good solutions available. In short we (US) have shot our proverbial wad.
    —Question for you sir, the markets seem fine today but I must ask WHO (investor or fund) would continue to hold or purchase stocks in the financial sector? If I had anything related to banks or bank affiliated companies (bank software, etc) I would have ejected. Maybe some are waiting for a bounce back then an exodus. With contagion lurking and this seemingly unsolvable problem along with FJBs castigation of stock holders would anyone remain in this sector? Am I overlooking something?

    • David Homer March 15, 2023 at 8:01 am

      If you have billions invested, you can’t leave that investment unless you find a buyer. Finding a buyer when everyone wants out of that sector can be impossible.

  • Byron March 15, 2023 at 10:44 am

    Thanks, Brandon. A true thanks to you for years of analysis. I appreciate you keeping us informed. I am looking forward to more articles like this as the situation unfolds soon.

  • JohnP March 15, 2023 at 11:03 am

    Absolutely excellent article. The quality of Brandon’s writing shows. Every point he makes is boilerplate solid and supported by excellent analysis.
    Let’s support alt-news! Shackled by mainstream narratives, the truth is left to just a few trustworthy people like Brandon to tell.

  • Spud March 15, 2023 at 12:14 pm

    Could the liquidity crisis be caused by something else? How about a large withdrawal of funds from organizations that are in drug laundering, human trafficking, etc businesses out there. Someone needs to launder that money and could it be that SVB be part of that?

  • Serge March 15, 2023 at 2:59 pm

    Brillant post.
    We are currently witnessing an acceleration of the collapse of the global financial system, particularly in the West – and this is by design.
    You wrote in previous articles that “the Fed is a kamikaze and will not capitulate”.
    This “scenario” seems to be coming true.
    “The situation is rapidly evolving.” I fully agree.

  • Serge March 16, 2023 at 2:53 am

    The current macroeconomic situation is strangely reminiscent of a prediction made almost a century ago by the Austrian economist Ludwig Von Mises.
    “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises in “Human Action” (1949), Chapter XX: Interest, Credit Expansion..

  • Sgt Oddball March 20, 2023 at 8:57 am

    “SVB is not quite Bear Stearns…”

    …- No indeed, but fast-forward a week or so now and Credit Suisse looks a lot like fitting the bill…

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      Brandon Smith March 20, 2023 at 9:03 am

      Credit Suisse has MASSIVE asset exposure and the backstop offered by the SNB is incredibly small in comparison, so it looks like the central bankers are letting this crisis escalate. The question is, which American bank will be next, because I would not be surprised to see a major US institution suddenly announce contagion in the next week to two weeks.

      • Sgt Oddball March 24, 2023 at 4:42 pm

        Thanks for the reply, Brandon. – Whew, lad! – Been a busy week has it not!? – And sure enough, next up is Deutsche Bank (read somewhere that Lagarde’s hike last week has also *definitely* sent Santander tits-up).

        To your question: – I ain’t got the foggiest!… – I’d say it’s all crystal ball guesswork at this point who’s in the lead of *that* particular race (By ‘bank’, and ‘major’ I take it you mean one of the ‘Big 4/5’?). I was reading around this, this week, trying to get a sense of it after reading your reply, and it seems they’re all pretty well exposed to the Eurotrash *up to the eyeballs* and, *Mother of God!*, the whole entire thing is just *THE MOST* mind-blowingly convoluted and incestuous rat’s maze of a daisy-chain clusterfuck, so…

        – I dunno: – Maybe try drawing a venn diagram of who has(/*recently* had, in the case of CS) the greatest exposure to the Euromajors (esp.: Credit Suisse/UBS, DB – maybe also Santander?), versus any substantial ties/exposure to FTX/Crypto (ie: Signature, etc) and the regional banks, viz: ESG/tech unicorn involvements (ie: SVB, etc.)(perhaps via some Blackrock-style ‘consultancy’ cutout/partnership?), just for good measure.

        – At a guess, I’d go with BoA (DB shareholder), but that is *just me, wild mad guessing*. – Maybe even JPM?… – They’re up to their necks in a lot of that ESG consultancy nonsense, no? (- Like how they were ‘consulting’ for Enron, back in the day, ho-ho…) Plus they have, at least, *all* of the major Eurotrash as counterparties, one way or another. – Oh, and they just bought a bunch of rocks, thinking they were nickel – That’s *gotta* tell you something.

        – Alternatively, howabout *all of them*? (- Given the sheer quantity of systemic pile-o’-wank involved, they’re prolly all technical zombies at this point, anyways, *And* what with this being the final great Black-Hole-slurp of Globalista financial consolidation, after all. – Plus how they keep saying CBDCs will strictly involve accounts being held solely at central banks only. (- Can’t see the likes of D-Sol and Jimmy Diamonds being too happy with that setup, tho’)).

        – Conversely, they keep the big institutionals and maybe a few boutique banks around to cater exclusively for the fat cat club’s gambling bets, and just pull the plug on the *entire* small/medium/regionals side of the biz?… – Tune in next week to find out, folks! – same bat-time, same bat-channel, I guess… XD

        This is just me pure spitballing, anyways… – Pardon the foregoing stream of consciousness – It’s been an exciting week!… – And as always, keep up the outstanding work, good sir.

        • Sgt Oddball March 24, 2023 at 5:08 pm

          – Oh, one further thought: – Watch out for clearing houses going belly-up, as well… – I remember reading an analysis on ZH after the 2019 Repo blow-out, pointing out how post-bailout/QE era, all the big institutional banks had essentially ‘sub-contracted’ all their formerly in-house (prop desk, I guess?…) derivitaves betting trades to the hedge funds, where they would pass on the free QE moolah to the hedgies in loans, which the hedge funds would then use to leverage to the moon the bets they were making, essentially, on the banks’ behalf… – When a couple or three of the hedgies got margin called during ‘Repogeddon’, the clearing houses involved as intermediaries no longer had the collateral on the hedge fund side to actually settle transactions, or something… – Anyways, here’s the original ZH piece – If that link’s too stale, I believe you can find it elsewhere by searching the title, “944 Trillion Reasons Why…”:…

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