Financial Crisis

#SVBcollapse #financialcrisis The collapse of SVB and another 2 banks in the US could be the trigger or black swan event that bring about a financial crisis probably worst than the 2008 mortgage crisis. The collapse of SVB was brought about by a run on the bank. BUT the underlying primary cause was that SVB made the classic mistake of taking very short term deposits, and investing them in long term treasuries. That's about the most FUNDAMENTAL principle to avoid. Their long term treasuries were purchased at a time of ultra low interest rates. With the FED raising interest rates at an alarming rate, the losses on their investments began to increase. SVB liquidated some of their treasuries at a substantial loss and this triggered the panic and run.

The circumstances that caused the mortgage crisis was basically greed. However this potential crisis has the underlying cause by US treasuries, NOT greed. Since the FED printed unprecedented amount of money, this has finally come to roost on them.