Quick Update on SVB, Signature Bank Failures

Is This 2008 All Over Again?

The economy is one big game of musical chairs. This week the music stopped.

Let’s back up a little. As they say, the generals are always fighting the last war. The Federal Reserve kept interest rates low in the early 2000s in response to the Dot-com bubble and 9/11. Easy money makes people do stupid things. Banks started lending money to anyone and everyone, many of which were adjustable-rate mortgages (ARM). A massive Jenga tower of derivative securities based on these mortgages emerged. But we didn't find out about it until the Fed raised rates and took the easy money away. And the rest is history.

If you thought that was easy money, wait until you hear what the Fed did after 2008. First, they lowered the Fed Funds rate to effectively zero. That means negative interest rates after inflation. That means YOU literally had to PAY the bank to keep your money. Then they injected trillions of free dollars into the economy by increasing its balance sheet to almost $5 trillion.

Just when the F…