The Next World Financial Meltdown is Ready to Explode Again

johnwk2 · 2023-03-19T14:20:22.323Z

Ceasar:

Nemesis:

That is fascinating (not being sarcastic) How does that work? Do you have pricing that gives the cost in dollars and then silver and gold? I assume you accept dollars. Do you get a lot of people wanting to pay in gold and silver?

Dollar value. No, I don’t get many who want to pay like that, but I have accepted that kind of deal. I just put the dollar amount in the contract no mention of the alternate payment, then give a receipt in dollar amount. I can’t do it for the entire price if it’s a big job, but I will for small ones or part payment. The bookkeeper just gets the dollar amounts to keep the books straight.

Ceasar · 2023-03-20T02:48:56.893Z

johnwk2:

Ceasar:

Nemesis:

That is fascinating (not being sarcastic) How does that work? Do you have pricing that gives the cost in dollars and then silver and gold? I assume you accept dollars. Do you get a lot of people wanting to pay in gold and silver?

Dollar value. No, I don’t get many who want to pay like that, but I have accepted that kind of deal. I just put the dollar amount in the contract no mention of the alternate payment, then give a receipt in dollar amount. I can’t do it for the entire price if it’s a big job, but I will for small ones or part payment. The bookkeeper just gets the dollar amounts to keep the books straight.

I wouldn’t be interested in those…I just don’t know enough about them…

Steel-W0LF · 2023-03-20T02:54:48.795Z

Ceasar:

johnwk2:

Ceasar:

Nemesis:

That is fascinating (not being sarcastic) How does that work? Do you have pricing that gives the cost in dollars and then silver and gold? I assume you accept dollars. Do you get a lot of people wanting to pay in gold and silver?

Dollar value. No, I don’t get many who want to pay like that, but I have accepted that kind of deal. I just put the dollar amount in the contract no mention of the alternate payment, then give a receipt in dollar amount. I can’t do it for the entire price if it’s a big job, but I will for small ones or part payment. The bookkeeper just gets the dollar amounts to keep the books straight.

I wouldn’t be interested in those…I just don’t know enough about them…

Just remember 11 dimes per ounce of silver and you’ll be within the margins of error. Or in other words…… $1.10 face value of coins = 1oz pure pretty dang close.

Ceasar · 2023-03-20T09:23:29.532Z

Rurudyne · 2023-03-20T14:32:09.949Z

Spot silver price is $22 today.

So $0.20 “junk silver” (old coins with no other claimed value) would be about $4 a gallon.

Have to be $0.15 a gallon in these parts to not be paying too much.

Nemesis · 2023-03-20T16:28:49.377Z

Would it actually benefit a business owner to sell gas in this way. I assume that he would be selling those pre 63 coins for their silver content. Obviously someone buying them will want to buy them at lowers possible cost and there is time involved in selling them and perhaps fees?

johnwk2 · 2023-03-20T19:00:31.650Z

The point was to illustrate there is a vast difference between Federal Reserve Notes and United States Dollars.

JWK

“Of all the contrivances for cheating the laboring class of mankind, none have been more effectual than that which deludes them with paper money. This is the most effectual of inventions to fertilize the rich man’s field by the sweat of the poor man’s brow.” __ Senator Daniel Webster, DEBATING THE BANK BILL, May 25th, 1832

johnwk2 · 2023-03-20T19:17:00.199Z

Rurudyne:

Spot silver price is $22 today.

So $0.20 “junk silver” (old coins with no other claimed value) would be about $4 a gallon.

Have to be $0.15 a gallon in these parts to not be paying too much.

In the 1990’s I was trading in 6 Federal Reserve Notes [one dollar denomination] for one United States Dollar. That was one of the best investments I made over the years.

.

Rurudyne · 2023-03-20T19:18:28.063Z

No fees for buying or selling silver that that I’m aware of.

That said, and granted there would be few people besides kids raiding their parent’s old coins for spending money (believe me, it happens. The twerps don’t care, they just want their stupid cola), on paper he would be taking a loss for every such transaction since he would only be selling gas at “twenty cents”.

Nemesis · 2023-03-20T19:22:11.213Z

Cheers for that information. Interesting topic.

floydefisher · 2023-03-21T01:08:17.552Z

Nobody is against proper regulation. If they were, they would be in favor of things like embezzlement.

I, for one, favor a ban on variable mortgages on houses less than 1 million dollars. I also favor a ban on using loans to buy stock.

What I don’t favor is overregulation in the form of stuff like Dodd-Frank which is frankly unnecessary. It failed to solve the subprime crisis at all, and instead created new problems that are biting us in the rear in this current crisis.

Gaius · 2023-03-21T10:38:12.103Z

Just there is Gresham’s law, (Bad money drives out good money.)

There is, what we might call “Bob’s Law” (Sometimes bad banks drive out good banks.)

As such, even anti-regulation person such as myself agree that if a banks are to have a “level playing field” then certain regulations are necessary. ( Bank = any institution that has access to secondary banking markets, certain facilities from the Fed, FDIC etc.)

EX:

In 2020 the Fed reduced reserve requirements, which recently was 10%, to ZERO (yes you read that right) The big banks keep about 2% in reserve.
Silicon Valley Bank (SVB) charge high-risk borrowers the “going rate” plus 2%. Right now the market standard is approx 3%. Many years ago the market standard was 3.5% 3.5%. Putting in some kind of minimum might be reasonable.
50% of SVBs assets were in government bonds but
– Nearly all of them were recently issued long term bonds, and
– SVB had zero insurance (swaps) on those bonds
– Jay Powell announced 12 consecutive times that rates will go up (meaning people should dump their long term bonds) and SVB did nothing. They bet the house on a Fed pivot
Presumably regulations could be enacted to prevent any of those practices
There has been a lot of discussion about SVBs gov’t bonds, but the fact is SVB had a whopping 35% of its assets in illiquid commercial loans to high-risk tech start-ups.
Presumably a regulation could be enacted to prevent that too.

Gaius · 2023-03-21T11:09:06.346Z

Imagine if a firm was told:
“Invest all of my money and don’t worry if you lose it all, because any losses are fully insured so I’ll get it back.”

That would encourage risky behavior, wouldn’t it?

zantax · 2023-03-21T11:13:16.898Z

Gaius:

Imagine if a firm was told:
“Invest all of my money and don’t worry if you lose it all, because any losses are fully insured so I’ll get it back.”

That would encourage risky behavior, wouldn’t it?

I don’t think any banks want to emulate SVB, the fed is bailing out the depositors, not the banks owners and executives. There is no moral hazard here.

Gaius · 2023-03-21T11:25:37.516Z

It is true that backstopping SVB does not present an additional “moral hazard.”

That said, providing FCIC insurance, providing the FED facilities such as the emergency loan window, free interest on overnight deposits etc…(thing 1)
encourages banks to take riskier behavior, (thing 2)

Because thing 1 causes thing 2
the same gov’t and quasi-governmental agencies encouraging that encourage additional risk-taking above and beyond what the free market would do on its own,

It makes sense that they take steps to ensure the risks are not excessive and
a level playing field (such as a mandatory 10% reserve.) is required, so that risky behavior by one bank does not give it “to much of” an advantage over others.

Old-school conservative, free market banking should not be squeezed out of existence because of government actions like overnight rates, FDIC insurance etc.

floydefisher · 2023-03-21T14:48:59.195Z

So you don’t think the wizards of finance at these large corporations should be checking these banks out, and avoiding institutions with red flags like this one had?

It’s one thing to protect people like me, a guy with barely a high school education from this kind of stuff, but why should we be protecting major corporations who should know better?

Go listen to Sean Hannity’s interview with Kevin O’leary (Shark Tank angel investor, and big business guy himself). He admitted he knew SVB was run by morons, and still did business there. Why should he be protected?

zantax · 2023-03-21T19:21:41.013Z

floydefisher:

So you don’t think the wizards of finance at these large corporations should be checking these banks out, and avoiding institutions with red flags like this one had?

It’s one thing to protect people like me, a guy with barely a high school education from this kind of stuff, but why should we be protecting major corporations who should know better?

Go listen to Sean Hannity’s interview with Kevin O’leary (Shark Tank angel investor, and big business guy himself). He admitted he knew SVB was run by morons, and still did business there. Why should he be protected?

Depends if you only want the biggest four or five banks left standing. If they had not backstopped those depositors everyone would have moved to the SIB’s (systemically important banks) and that would pretty much be the end of regional and local banks.

That’s why they did it, a bank run was underway that would have toppled many more regional banks.

Gaius · 2023-03-22T08:59:22.060Z

zantax:

floydefisher:

So you don’t think the wizards of finance at these large corporations should be checking these banks out, and avoiding institutions with red flags like this one had? . . .

Depends if you only want the biggest four or five banks left standing. If they had not backstopped those depositors

To be a bank means to be a participant in the Fed/FDIC system.

Participating in the Fed/FDIC system means even without special programs or legislation, a partial backstop (FDIC insurance, access to Fed facitilities etc.) is provided.

The Fed/FDIC do not “wish” to provide such backstopping to banks that take crazy risks, and “wish” that solid banks compete on a level playing field with risk-taking banks.

Thus the Fed/FDIC already have extensive regulatory authority over how much risk banks can take.
.
.
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Point being

It is not crazy for “the wizards of finance at these large corporations” to assume that their deposits were safe. It was wrong, but not crazy.
Even without additional legislation the Fed/FDIC already have sufficient authority, and could have made those deposits safe. They failed to exercise the powers they already have. They do not need an expansion of power. They need to get off their rose-colored asses and use the authority they already have.
– Example: In Mar 2020 the Fed reduced reserved requirements from 10% to 0%. FDIC maintained its 2% reserve requirement. A big part of this crisis would have been averted if the Fed had maintained its old requirement.

zantax · 2023-03-22T12:15:13.053Z

Gaius:

zantax:

floydefisher:

So you don’t think the wizards of finance at these large corporations should be checking these banks out, and avoiding institutions with red flags like this one had? . . .

Depends if you only want the biggest four or five banks left standing. If they had not backstopped those depositors

To be a bank means to be a participant in the Fed/FDIC system.

Participating in the Fed/FDIC system means even without special programs or legislation, a partial backstop (FDIC insurance, access to Fed facitilities etc.) is provided.

The Fed/FDIC do not “wish” to provide such backstopping to banks that take crazy risks, and “wish” that solid banks compete on a level playing field with risk-taking banks.

Thus the Fed/FDIC already have extensive regulatory authority over how much risk banks can take.
.
.
.

Point being

It is not crazy for “the wizards of finance at these large corporations” to assume that their deposits were safe. It was wrong, but not crazy.

Even without additional legislation the Fed/FDIC already have sufficient authority, and could have made those deposits safe. They failed to exercise the powers they already have. They do not need an expansion of power. They need to get off their rose-colored asses and use the authority they already have.
– Example: In Mar 2020 the Fed reduced reserved requirements from 10% to 0%. FDIC maintained its 2% reserve requirement. A big part of this crisis would have been averted if the Fed had maintained its old requirement.

No sorry, ten percent reserves wouldn’t have saved them either. At that point everyone wanted their money out of the bank, that could only be met with 100% reserve.

Gaius · 2023-03-22T12:24:05.815Z

zantax:

No sorry, ten percent reserves wouldn’t have saved them either. At that point everyone wanted their money out of the bank, that could only be met with 100% reserve.

What did not happen: 100% of all businesses and 100% of all wealthy persons are withdrawing 100% of their accounts.

What has happened: Banks with teensy weensy reserves publicly shrieked that their teensy weensy reserves might not be sufficient and that triggered a bank run of about $600b which because reserves are so teensy weensy, actually threatens a domino effect.

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Silicon Valley Bank Collapse Suggests 0% Reserve Requirement Won’t Halt Bank Runs

In May 2002, the reserve requirement was 10%, according to Economic Policy Review. . . .

In November 2022, the Fed reiterated its reserve requirements were still 0% with a twist. That is when the Fed noted “technical details related to reserve requirements for depository institutions” would go into effect in January 2023.

Banks have exceeded that reserve requirement. For example, at the end of December,

Bank of America had 2% of its $1.93 trillion in deposits in cash;

JP Morgan held 2% of its $2.3 trillion in deposits in cash and

Silicon Valley Bank had 5% of its $175 billion in deposits in cash.