Baltic
Dry Index. 1424 +97 Brent Crude 83.00
Spot Gold 1880 US 2 Year Yield 4.60 -0.30
Coronavirus
Cases 01/04/20 World 1,000,000
Deaths 53,103
Coronavirus Cases 13/03/23 World 681,560,453
Deaths 6,811,949
"When you raise interest rates quickly, after 15 years of overstimulating the economy with near-zero rates, to not imagine that there's not leverage in every pocket of society that will be stressed is a naive imagining."
U.S. government
steps in and says people with funds deposited at SVB will be able to access
their money
Banking regulators devised a plan Sunday to
backstop depositors with money at Silicon Valley Bank,
a critical step in stemming a feared systemic panic brought on by the collapse
of the tech-focused institution.
Depositors at both failed SVB and Signature Bank in
New York, which
was shuttered Sunday over similar systemic contagion fears,
will have full access to their deposits as part of multiple moves that
officials approved over the weekend. Signature had been a popular funding
source for cryptocurrency companies.
Those with money at the bank will have full access starting Monday.
The Treasury
Department designated both SVB and Signature as systemic risks, giving it
authority to unwind both institutions in a way that it said “fully protects all
depositors.” The FDIC’s deposit insurance fund will be used to cover
depositors, many of whom were uninsured due to the $250,000 cap on guaranteed
deposits.
Along with that move,
the Federal Reserve also said it is creating a new Bank Term Funding Program
aimed at safeguarding institutions affected by the market instability of the
SVB failure.
A joint statement
from the various regulators involved said there would be no bailouts and no
taxpayer costs associated with any of the new plans. Shareholders and some
unsecured creditors will not be protected and will lose all of their
investments.
“Today we are taking
decisive actions to protect the U.S. economy by strengthening public confidence
in our banking system,” said a joint statement from Federal Reserve Chair
Jerome Powell, Treasury Secretary Janet Yellen and FDIC Chair Martin Gruenberg.
The Fed facility will
offer loans of up to one year to banks, saving associations, credit unions and
other institutions. Those taking advantage of the facility will be asked to
pledge high-quality collateral such as Treasurys, agency debt and
mortgage-backed securities.
“This action will
bolster the capacity of the banking system to safeguard deposits and ensure the
ongoing provision of money and credit to the economy,” the Fed said in a
statement. “The Federal Reserve is prepared to address any liquidity pressures
that may arise.”
The Treasury Department is providing up to $25
billion from its Exchange Stabilization Fund as a backstop for any potential
losses from the funding program. A senior Fed official said the Treasury
program likely won’t be needed and will exist only as a safeguard.
The same official expressed
confidence the various moves would shore up confidence in the financial system,
providing funding guarantees and liquidity considered essential during
financial crises.
Along with the facility, the Fed
said it will ease conditions at its discount window, which will use the same
conditions as the BTFP. However, the new facility offers more favorable terms,
with a longer duration of loans of one year vs. 90 days. Also, securities will
be valued at par value rather than the market value assessed at the discount
window.
The haircut, or reduction in
principal, issue is critical as there are estimated to be some $600 billion in
unrealized losses that institutions possess in held-to-maturity Treasurys and
mortgage-backed securities.
“This should be enough to stop any
contagion from spreading and taking down more banks, which can happen in the
blink of an eye in the digital age,” Paul Ashworth, chief North America
economist at Capital Economics, said in a client note. “But contagion has
always been more about irrational fear, so we would stress that there is no
guarantee this will work.”
Markets reacted
positively to the developments, with futures tied to the Dow
Jones Industrial Average leaping more than 300 points in early trading.
Cryptocurrency prices also rallied strongly, with bitcoin up more than 7%.
----President Joe Biden praised Sunday’s
initiatives but indicated there would be consequences from the crisis.
“I am firmly
committed to holding those responsible for this mess fully accountable and to
continuing our efforts to strengthen oversight and regulation of larger banks
so that we are not in this position again,” Biden said.
The SVB failure was
the nation’s largest collapse of a financial institution since Washington
Mutual went under in 2008.
The dramatic moves
come just days after SVB, a key financing hub for tech companies, reported that
it was struggling, triggering a run on the bank’s deposits.
More
Silicon
Valley Bank depositors protected by U.S. government (cnbc.com)
What the failures
of Signature, SVB and Silvergate mean for the crypto sector
Two of the banks that were friendliest to the
crypto sector and the biggest bank for tech startups all failed in less than a
week. While cryptocurrency prices rallied Sunday night after the federal
government stepped in to provide a backstop for depositors in two of the banks,
the events sparked instability in the stablecoin market.
Silvergate Capital, a
central lender to the crypto industry, said
on Wednesday that it would be winding down operations and
liquidating its bank. Silicon Valley Bank, a major lender to startups,
collapsed on Friday after depositors withdrew more than $42 billion following
the bank’s Wednesday statement that it needed to raise $2.25
billion to shore up its balance sheet. Signature, which also
had a strong crypto focus but was much larger than Silvergate, was seized
on Sunday evening by banking regulators.
Signature and Silvergate were the two main banks for crypto
companies, and nearly half of all U.S. venture-backed startups kept cash with
Silicon Valley Bank, including crypto-friendly venture capital funds and some
digital asset firms.
The federal government stepped in on Sunday to
guarantee all deposits for SVB and Signature depositors, adding confidence and
sparking a small rally in the crypto markets. Both bitcoin and ether are
nearly 10% higher in the last 24 hours.
According to Nic Carter of Castle
Island Ventures, the government’s willingness to backstop both banks signifies
that it’s back in the mode of providing liquidity, rather than tightening, and
loose monetary policy has historically proven to be a boon for cryptocurrencies
and other speculative asset classes.
But the instability once again
showed the vulnerability of stablecoins, a subset of the crypto ecosystem
investors can typically rely on to maintain a set price. Stablecoins are
supposed to be pegged to the value of a real-world asset, such as a fiat
currency like the U.S. dollar or a commodity like gold. But unusual financial
conditions can cause them to drop below their pegged value.
Not-so-stablecoins
A lot of crypto’s
problems in the last year originated in the stablecoin sector, beginning with TerraUSD’s
collapse last May. Meanwhile, regulators have been homing in on
stablecoins in the last few weeks. Binance’s dollar-pegged stablecoin, BUSD,
saw massive outflows after New York regulators and the Securities and Exchange
Commission applied pressure on its issuer, Paxos.
Over the weekend, confidence in this sector
again took a hit as USDC – the second-most liquid U.S. dollar-pegged stablecoin
– lost its peg, dropping below 87 cents at one point on Saturday after its
issuer, Circle, admitted to having $3.3 billion banked with SVB.
More
Signature,
SVB, Silvergate failures: Effects on crypto sector (cnbc.com)
Bank
rescue buys stability at a high price
March
13, 2023 1:58 AM GMT
NEW YORK, March 12 (Reuters
Breakingviews) - The biggest U.S. banks are so tied up in regulatory red tape
that they couldn’t cause a crisis if they tried. The 16th largest, though?
That’s a different story, based on Sunday’s dramatic rescue of the financial
system. Swift action by U.S. agencies has stopped what could have been a
crisis, but at a cost.
---- The two-part
package helps to resolve SVB and Signature, but also reassures nervous
depositors that still-living peers are safe. First, the FDIC will reimburse all
of the two banks’ depositors, not just those whose balances are within the
$250,000 guaranteed limit. In the event that the bank’s assets, after a sale,
are below the value of the deposits, that cost will be spread among all
FDIC-insured banks. It’s unorthodox, but necessary. SVB’s failure, which left
companies like crypto firm Circle unable to access their cash, had sent a loud
signal that large deposits aren’t safe in smaller banks. Without an implicit
guarantee for everyone, Monday could have brought new bank runs.
Second,
the Fed will start lending to banks against
certain investments they hold, but based on the securities’ face value, not
their market prices. In other words, banks that need to raise cash won’t have
to sell Treasuries or federally-backed debt at a loss as SVB did, so long as
they’re in reasonable standing. Again, it’s a break from the norm. The Fed
normally applies a “haircut” to assets that banks want to borrow against
through its discount window facility. And while the new Bank Term Funding
Program, at a cost of around 5%, is much higher than the nearly-nothing banks
pay for most of their deposits, it is hardly punitive.
As always,
anti-crisis measures are there to be seen, not to be used. If depositors think
they’ll be bailed out unconditionally they have no need to cause a run. And if
the bank doesn’t face a run, it ought to have no need to sell assets in a
hurry. In that sense, the regulators can say that they have done what was
necessary.
Still,
all of this comes at a price. Authorities have shown that they failed to tackle
the problem of banks being too big to fail. Legislation after the 2008 crisis
was designed so that big firms could in theory go under without taking the
whole system with them. The biggest banks are forced to write so-called living
wills; examiners pore over their every trade; even their WhatsApp messages
aren’t safe from prying eyes. Smaller banks – including
SVB and Signature, whose combined assets were just one-tenth the size of
JPMorgan (JPM.N) – received a much lighter
regulatory burden, for reasons that are both pragmatic and political. With
hindsight, that may have been a mistake.
Bank
rescue buys stability at a high price | Reuters
"The
international monetary order is more precarious by far today than it was in
1929. Then, gold was international money, incorruptible, unmanageable, and
unchangeable. Today, the U.S. dollar serves as the international medium of
exchange, managed by Washington politicians and Federal Reserve officials,
manipulated from day to day, and serving political goals and ambitions. This
difference alone sounds the alarm to all perceptive observers."
Hans F. Sennholz
Global Inflation/Stagflation/Recession Watch.
Given
our Magic Money Tree central banksters and our spendthrift politicians,
inflation now needs an entire section of its own.
Why
commodities shine in a time of stagflation
They
offer high returns, low correlation with other assets and protection from
inflation
Mar
9th 2023
Watching jerome powell testify
before Congress on March 7th brought on an irrepressible sense of déjà vu. “The
process of getting inflation back down to 2% has a long way to go and is likely
to be bumpy,” warned the Federal Reserve’s chairman. Recent economic data
suggest that “the ultimate level of interest rates is likely to be higher than
previously anticipated.” It is a message that Mr Powell and his colleagues have
been repeating, in various forms, since the Fed started raising rates a year
ago. As so many times before, markets that had lulled themselves into a sense
of complacency took fright and sold off.
Investors are serially reluctant to take Mr Powell at his
word because its implications are unpleasant for them. An ideal portfolio would
contain a mix of asset classes that each prospers in different economic
scenarios. But all the traditional classes—cash, bonds and stocks—do badly when
inflation is high and rates are rising. Inflation erodes the value of both cash
and the coupons paid by fixed-rate bonds. Rising rates push bond prices down to
align their yields with those prevailing in the market, and knock share prices
by making future earnings less valuable today.
More.
Subscription required.
Why commodities shine in a time of stagflation | The Economist
Covid-19 Corner
This section will continue until it becomes unneeded.
We'll never know the
full truth about COVID-19 origins. Political infighting won't help.
Sat, March 11, 2023 at 7:02 PM GMT
With recent revelations about the Department of Energy now saying that COVID-19 most likely came from
a lab leak, and Republicans in
control of the House of Representatives and their own version of the
COVID-19 select committee, the raging debate about COVID origins has come back to the
forefront.
This is a debate that stirs
emotions like few other aspects of the pandemic. The truth is, we never
will know the full truth about the origins of a virus that has killed millions, decimated a global economy, and set children’s education and development back – and that’s exactly the problem.
From the very beginnings of this
once-in-a-century pandemic, China's rulers have demonstrated a
stunning lack of transparency regarding what they knew about the virus – from
its likely origins to its symptoms to how it was being spread.
This lack of transparency has
caused irreparable planetary harm, and yet the World Health
Organization still hasn’t shown itself willing to hold China to account,
or to put in place measures to ensure that we have the necessary sharing of
critical information when inevitable crises occur in the future.
In other words, we remain just as
vulnerable now as we were in December 2019.
More
We'll
never know the full truth about COVID-19 origins. Political infighting won't
help. (yahoo.com)
NY Times Coronavirus Vaccine Tracker
https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html
Regulatory Focus COVID-19 vaccine tracker. https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker
Some other useful Covid links.
Johns Hopkins Coronavirus
resource centre
https://coronavirus.jhu.edu/map.html
Centers for Disease Control
Coronavirus
https://www.cdc.gov/coronavirus/2019-ncov/index.html
The
Spectator Covid-19
data tracker (UK)
https://data.spectator.co.uk/city/national
Technology
Update.
With events happening fast in the
development of solar power and graphene, among other things, I’ve added this
section. Updates as they get reported.
Today, more warnings on Li-ion battery
fires.
'Someone's going to die' - man's warning
after battery fire
Thursday
9 March 2023 at 4:07pm
A man says it’s
lucky his and his neighbours' homes weren’t burnt down after a fire which he
believes was started by his mobility scooter’s battery.
Chris Barnes,
from West Camel near Yeovil, says the vehicle had only been on charge for 10
minutes before a blaze began. The damage has forced his family to move into
temporary housing.
The fire
started around 3pm on 26 January. Despite the quick work of the fire service it
still caused considerable damage to the outside and inside of Chris's house.
The heat was so intense that damage to the windows and fittings of his
neighbour's home was also caused.
Chris has lived
with a disability since he was 17 and relies on a mobility scooter to get
around. He believes the fire started in the battery of the one he says he'd
only recently put on charge.
He said:
"We rushed round, opened the shed door, plumes of smoke come out, and it
was just like a little tiny glow at the bottom of where the scooter was sat. I
rushed to get the hose pipe, went back round and literally, it was a massive
raging inferno by then. It was rapid how fast it went."
Chris contacted ITV News West Country after seeing a spate of fires had been linked to lithium-ion
batteries used in electric bikes and scooters.
There’s no evidence to suggest the mobility scooter was faulty and until
a report on what caused the fire is completed it’s impossible to know for sure
what happened. Chris said he just wants to warn people to be aware of the
potential risks posed by lithium-ion batteries found in many electrical
products.
He said: "God forbid it happens to an older person that literally
cannot move. God forbid they can't get out of the house. Someone's going to die
and that's what scares me the most and that's why I'm speaking out."
Devon and Somerset Fire and Rescue service’s advice is for mobility
scooters to be charged:
·
In
a specially designated, well-ventilated area which has had a fire risk
assessment
·
Using
the specific charging equipment for the vehicle and following the
manufacturer’s instructions
·
During
the day
·
In
an area away from possible sources of ignition
'Someone's going
to die' - man's warning after battery fire | ITV News West Country
Lithium battery dangers revealed in footage of fire
7th March
RARE footage has been captured by homeowners in
West Yorkshire showing the horrific dangers of lithium
batteries.
The video
shows the owner rushing downstairs in the middle of the night after being woken
by a popping noise, created by the batteries of an electric motorbike being
charged inside the house.
The sound
indicated the batteries were failing due to thermal runaway – this is when too
much heat is generated within a battery. Seconds later fire dramatically erupts
and sets off the smoke alarm.
Watch manager John Cavalier, who is
with the fire investigation unit at the service, said: “While fires involving
lithium batteries are common, having a video showing the violence of the fire’s
development is not. It’s clear to see in the video that the fire is absolutely
horrifying – none of us would want this to happen in our homes.”
The fire happened at about 1am
on February 24 and five people were taken to hospital - all of them had
smoke inhalation with one person suffering burns to their mouth and windpipe.
None of the injuries were life threatening. The property’s kitchen was severely
damaged from the smoke and heat, which also affected other parts of house as
doors were left open as people escaped from the blaze.
WM Cavalier said: “Because lithium
batteries can be found in a range of items, we frequently attend fires
involving them.
"They can be found in cars,
bikes, scooters, laptops, phones, and e-cigarettes, among many other items. Any
other type of fire we deal with has usually developed slowly, and people are
able to get out quickly.
"However, battery fires are so
ferocious and spread so quickly that there isn’t as much time to escape.
“To help keep everyone in your family
safe, don’t leave lithium batteries to charge unattended, don’t put them in the
way of exits or in hallways and unplug chargers when the batteries are at full
capacity.
More
Lithium battery
dangers revealed in footage of fire | Halesowen News
The true costs of very low interest rates
---- Interest rates are the most
important prices in the economy, according to Nobel laureate F.A. Hayek,
because they reflect the collective time preference of individuals to consume
either now or later. Accordingly, interest rates co-ordinate allocation of capital
across the economy by signalling to businesses whether they should invest.
Distortions in interest rates can cause “clusters of errors” in which large
swathes of businesses unwittingly miscalculate at the same time.
Hayek observed that interest rate stimulus interfered with
economic calculations, causing managers to invest in projects that would not
otherwise have appeared profitable. Losses can subsequently materialise as
customer demand fails to meet forecasts that were, in retrospect, optimistic.
Long-term projects are highly sensitive to interest rates and are therefore
more susceptible to such distortions. Pension obligations and long-term,
capital-intensive projects are at high risk of miscalculation based on
artificially low rates.
More
https://www.ft.com/content/2838c142-a560-11df-a5b7-00144feabdc0
No comments:
Post a Comment