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Dave Mariani's avatar

I'm not saying that the system is perfect - far from it. But the whole banking system operates on the principle that the bank can invest their deposits (i.e. make loans) to earn interest and make a profit. If too many people (near 100% in SVB's case) withdraw their deposits at once, the bank will not have the liquidity to give them their money back until they liquidate their investments - hence the "run on the bank". What's the alternative? No banks? That means no mortgages, car loans, etc. - money in mattress time. The purpose of the Fed is to backstop a "run on banks" to keep the system functioning which is precisely what they did. And no, crypto is not an answer. Crypto is an example of no "lender of last resort" which is why it's so volatile. Imagine if the value of the dollar fluctuated by 10% or more per day - not good.

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Jillian Corkin's avatar

i can’t help but feel a sense of anticipation that all of your writing over the past few years has been training ground for intimately covering what’s unfolding right now in the economy, banking and tech (no pressure).

I’ve been on an info binge for the past week, and your writing stands out with a few others, that you’ve mostly linked!

Here’s my favorite (i saw you reference patrick so maybe you saw) https://www.bitsaboutmoney.com/archive/banking-in-very-uncertain-times/

… tldr; the banking crisis root cause is flawed data modeling. the entities represented in the system (for the purpose of both administration and legislation) do not accurately reflect reality.

… which, after my last 13 years of work in tech, does not shock me, but does leave me feeling deeply unsettled.

If you continued to analyze/cover this space, i’d pay to subscribe.

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