'Republicans & Democrats may posit their own political reasons why SVB collapsed like a dying star — a “woke” obsession with ESG, corporate greed, venture capitalists orchestrating a bank run — but the real reason is much scarier,' TianaTheFirst writes.
Republicans and Democrats may posit their own political reasons why Silicon Valley Bank collapsed like a dying star — a “woke” obsession with ESG, corporate greed, venture capitalists orchestrating a bank run — but the real reason is much scarier, if only because the entire finance industry has bought into the delusion.
Yet despite the predictable result of blowing out the money supply while artificially constraining economic output, the entire professional finance class cleaved to the delusion that whatever inflation that just so happened to occur amid a record-breaking expansion of the money supply was “transitory.” This includes SVB, which based its entire long-term investment strategy on the obvious fiction that the Fed would keep interest rates near zero despite inflation surpassing 6%.
Other, actually solvent banks would hedge against the exceedingly obvious risk by the end of 2021 that the Fed would raise interest rates, but SVB did not. Instead, the chasm between the yields of SVB bonds and those sold during the Fed’s tightening cycle created a net loss on SVB’s balance sheet, and in a fatal blow to the bank, its clients finally noticed.
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