Do Bank Failures Always Cause Recessions? | Economics Explained
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- čas přidán 25. 03. 2023
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Jean-Edouard Colliard is a financial regulation professor at HEC Paris. He previously worked as Economist at the European Central Bank where he gave policy advice to the ECB, including at the highest level.
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The video describes the recent banking crisis in Silicon Valley, where three banks including Silicon Valley Bank failed, causing bank runs and putting pressure on other banks like Credit Suisse. This is reminiscent of past US banking disasters such as the Great Depression and the 2008 recession. Many economists predict that more banks around the world will face similar pressures, and the video raises important questions about the causes and potential consequences of these failures.
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Hi, can you creat one about Credit Suiss, please? how the govermnet of a supposedly a country where people vote on everything like museum renovation out of the tax budget and were left shocked by goverment making UBS to fully buy out Credit Suisse with tax money as well as promising to print more money without asking anyone. Horrible situation.
it's funny that you low key called out johnny Harris about his bullshit SVB video lol
13:30. Poor Johnny Harris. T.T
I wish the world used more Cooperative Banking/more Pubic Banks/more Mutual Savings Banks and more Credit Unions tbh.
"Do we even need banks anymore? Venture Capital can start all the businesses"
Unsaid: "Hey yeah, let's have wealth creation be a top-down thing where the already-rich choose the winners and losers and have dominant equity in every new business that blows up so we have a permanent overclass and return to feudalism...loans from banks to individuals is way too democratic"
A recession as bad it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying, cash isn’t king at all in this time.
Let's face it... buying more stocks & index funds during stock market corrections and bear markets is scary. Which makes it really hard to do for most people like me. I have 260k i want to transfer into an s&s isa but its hard to bite the bullet and do it.
You need a Financial Advisor my friend so you don't get ripped off in the market. They provide personalized advice to individuals based on their risk appetite, placing them among the best of the best. There are bad ones, but some with good track records can be very good.
@@TomD226 Can you leave in details about your investment advisor here? I’m in dire need for one.
@@lowcostfresh2266 My advisor is Laurel Dell Sroufe, a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Increasing interest rates are going to continue to increase bank failures because it puts their commercial paper and treasuries underwater. They need to freeze interest rates to prevent a deep recession in the economy. At the same time the White house needs to help industry to increase gas and oil output to reduce fuel prices. The war on oil only serves to increase energy prices which trickles out to the rest of the economy as inflation. Lowering interest rates, tightening the money supply, reducing government spending and increasing the cheap supply of fuel will result in reduced inflation and a booming economy. Presto, no inflation and no recession. Of course there are a lot of other agendas out there that will never let all of that happen, so hello recession and sticky inflation.
A recession as bad it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying, cash isn’t king at all in this time.
I enjoy my day to day market decisions being guided by a portfolio-coach, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not outperform, been using a portfolio-coach for over 2years+ and I've netted over $1.2million.
That's grand! I believe the high-value gains are backed by years of study/experience in knowing what makes what tick. the portfolio-advisor that guides you is who though?
My advisor is Natalie Lynn Fisk who is easily searchable online and has extensive knowledge of the financial markets
Thank you for this amazing tip. I verified her and booked a call session with her. She seems Proficient.
cant lose all my money in a bank failure if I have no money
Amen
Life hacks
Dude living in 2024 while we all still in 2023.
👌
Same
The market is out of control, and banks are failing one by one. Could there be any potential in the stock market for a boomer like me? I am working on an approximate estimate of $3M for retirement.
You should hire a CFP to help you diversify your assets to include ETFs/index funds/mutual funds and stocks of companies with consistent cash flows, rather than betting on penny stocks.
I needed a good boost to help my portfolio stay afloat, hence I researched for license advisors and came across someone of due diligence, she helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far.
I started out with an FA named *Sharon Louise Count* Her honest approach gives me complete ownership and control over my position, and her rates are incredibly affordable given my ROI.
Well the recent events with SVB make it unlikely for the market to make significant gains soon, so it's wise to manage expectations and prepare for a potentially long recovery period. It's recommended to avoid making significant investment decisions until the economic environment stabilizes in areas of concern. It's best to exercise caution and avoid engaging with the current turbulence.
@Jose luiz classic gamblers fallacy, seek help
@@nunyabidness2148 That's a bot bruh.
I like the direction this channel is taking. The interviews add an extra layer of complexity and reliability of information to the videos. Keep doing great work
During a bear market, the headlines will focus on negative news, whether it's declining economic growth, geopolitical upheaval, cultural and legal turmoil, or some combination of all three. I listened to a podcast of someone that grew his reserve from $120k to almost $460k during this Red season, can you share tips on how to make such aggressive proceeds in short periods?.
I agree, having a brokerage advisor for inveesting is genius! Not long ago amidst the pandemic crash in March 2020, I was really having inveesting nightmare prior touching base with a advisor. In a nutshell, i've accrued over $550k with the help of my advisor from an initial $120k investment thus far
that's impressive!, I could really use the expertise of this advisors , my portfolio has been down bad....who’s the person guiding you.
*KATRINA VANRENSUM* is the coach that guides, you probably might've come across her before I found her through a Newsweek report, she's quite known in her field, look-her up
Thank you for this tip. it was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé
Sounds legit, 2 accounts only 2 months old advising too google a name for financial advice.
You CANNOT remove the FDIC insurance limit in the US. We have an incredibly toxic business and investment culture. Sure it makes my country rich, but we have endless financial bubbles and unrealistic investment priorities because of the bailout culture we have. The only people who’ll benefit are the rich as they always do and average working taxpayers will be left holding the bill.
It makes the wealthy rich but your country is poor over half the country makes 35k a year or less
@@ryanharvey9800 median income in US is $69k. US is by no means a poor country. It’s very big though, so the small percentage of people living in “poverty” is still a large number of actual people.
Poverty in the US also affords a much higher standard of living compared to genuinely poor people in most parts of the world.
@@seppo1659 $69k is median household income in US, median is close to $30k. I would provide sources but YT doesn't like links.
@@furmek True that household is higher than individual. Your numbers still seem too low, are they in USD or international dollars PPP. Any way you cut the data, world population review puts US median income at #5 country in the world in March 2021.
Anyone saving a quarter million can afford losing money if SHTF. It's not pretty, but they will easily survive. I agree investment culture is toxic. Bailouts/ potentially unlimited insurance exasperate this. If you told me I had unlimited indefinitely insured money, I'd just make the worst investment ever. I'd play the lottery. Eventually I'd win, but in the meantime someone else is fronting the bill.
We're in an economic downturn. Wages are failing to keep up with inflation. That's the disaster.
It's not a recession in terms of GDP, but living standards for most of us are definitely receeding.
It's not learning to make lemonade, the trick is always be ready to eat lemons.
@@09f9 that 500k isn’t the result of tradesmen wages I can assure you that lol
Europe is completely screwed. They are wasting money on “green” energy that is neither economical nor environmentally friendly. They have no innovation nor economic growth. They are pulling the west down along with them.
Housing as an investment is the problem not labor
@@weird-guy Ultimately inflation is demand outstripping supply, which much more than "money printer goes brrrrrr" we also have unresolved COVID supply chain shocks... and unrestrained concentration of supply sources reducing overall market competition and resilience.
In parallel with escalation in the recent years, the recession is now the 'most likely output for the economy' and i cannot imagine being a victim of circumstances, my portfolio got a big hit, holding it further wont be any good, ive heard of people acquring hundreds of thousand even on red seasons, how can I certify this?
ïf you do make new buys, know your exit strategy before going in. Consider taking partial profits quickly to lock in some gains. I've been in constant touch with an FA since covid . You know these days it's really easy to buy into trending stock`s, but the task is determining when to buy or sell . My advisorr decides entry and exit commands on my portfoliio, I've accrued over $750 thousand usd in barely a year.
indeed and right now the markts are going berserk right now. this is the best time to watch them, get to know them better, and strike when the opportunity presents itself. i learned that from my mentor, “Christine Blake Mckale” she's seen dozens of markt cycles over the past few decades, and she has a feel for how they move, why they move, and what comes next.
mind if i ask you to recommend how to reach this particular FA you using their service? Seems you've figured it all out unlike the rest of us.
primarily you can find her basic information online, you are welcome to do further study.
thank you for this Pointer. It was easy to find her handler Christine Blake Mckale, She seems very proficient and flexible. I booked a call session with her.
The "Money Multiplier" is still taught and asked upon the AP Macroeconomics Exam every year. I taught AP Macro for years and am very familiar with this emphasis by the college board. In fact, the "money multiplier" is quite often part of the main FRQ (Free Response Question) aka essay portion of the exam as well as at least a few of the multiple choice questions. Not sure why the college board sticks with this but...............if teachers don't teach it the kids will not score well and then the teacher has to deal with upset Admin and parents. Believe me.
Maybe because I am an engineer, but it sounds like bs to me which try to create money from nothing and destined to fail.
It is beyond weird
Multiplier is not binary - it is an influencer, among others. Under various conditions, its effect is greater or less. Trying to predict is fraught.
Warning; A con man running his ponzi scheme.
The con; Promising everyone can save for a one star retirement and everyone can receive a two star retirement.
It is impossible math for everyone to be the 1%.
Only the 1% can be predatory lenders to the 99%. "It's their money".
But it is the workers' property!
My mortgage bond and car title says its my property.
Next time. Banking is only done with bonds tied to a physical object.
So much for renting with driving a bicycle.
So, I don't get this
If the money multiplier isn't real, why do the differences between m0, m1 and m2 exist? It may be more complicated now, but it would seem like it still has to be operating in the same way
I think my only real problem with the most recent SVB issue was the MASSIVE bonus the execs gave themselves as the bank went under. Basically, I, as an American citizen, now foot the bill for execs hollowing out their own customers account. That's my primary issue with "bailouts."
Bonus should be confiscated
According to info i heard.
First, the bonus have already been planned months before it happen. As per regulations to stop the kind of thing you mention.
Second, it's not bailout. SVB does not exist anymore. It has already collapse
Third, the money being use were not taxpayer money.
I love the way that you start off with basic questions, also love the clear and specific way that you answer these tough questions that "experts" can't always foresee lol - definitely enjoy your videos, keep up the great work!
Oh
U
Shut up
Stop sucking
Western banks always fail
Creating chaos everywhere else
Nonsense
From west Africa
🦅
Starting with questions is one of the best ways to promote critical thinking skills. I always try to do this with people, to prompt them to think and not just blindly take what I have to say. Not only that but I wanna hear what answers they come up with.
I think I’d be important to note when talking about the fed being the lender of last resort. When a bank take an emergency loan from them it carries reputational damage and will make banks hesitant to borrow from the third due to the fears it will put it into consumers
2008? ya big banks have really suffered from taking money printed from the fed
!!! ... We are always on the verge of a Catastrophic Crisis after they ended the "Gold Standard" and invented the Central Bank Cartel ... to print money ... to manipulate the economy ... to create inflation ... to devalue your money ... to increase the cost of living ... but the most formidable are the "Safety Nets" ... that protect the powerful Billionaires from the consequences of playing their high stakes games ... !!!
Reputation means nothing when they are the only bank's left
@@rambo64bit82 people have recourse in credit unions, which are owned by the members.
Sounds to me, then, like this loan process ought to be anonymized, i.e. no one but the Fed and the bank taking the loan should know who the bank taking the loan is.
SVB lent money to VC, who demanded their startups to have an account there and SVB preferred these VC. The bank also lent to people in startups based on their companies future valuation. I think this qualifies as a ponzi style scheme. The other two banks are being investigated in criminal activity (money laundering). The FT reported on wide spread money laundering in the banking sector and I would expect the shady practices of SVB of lending $$$ to wealthy based on their stock v holdings as collateral, that the system is far more fubar. because the rich own our gov, their bottoms are now covered.
You can’t vote against the interests of Goldman Sachs
I wonder where Silicon Valley would land on the leaderboard.
I half expected this video to end there after they explained the economic might of it.
Yes and No. Yes in the case of GFC in 2008. No in the case of Australia, which loves Chinese monies but hates China politically, by exporting massively to China.
I already watched multiple videos on this topic, didnt think you could add much, but you did. All that extra background information was really useful, great video 👍
You're probably the only youtuber that's made me feel like I understand anything at all about economics
criminals/banks will never change their behaviors if theyre never punished for their criminal behaviors
It never start with "let's do crime" but they gave money to people who shouldn't be given the money.
Please go into more detail on the "maturity transformation" and how banks really work, that was very interesting. I got taught money multiplier at uni.
Bank Failures do not always Cause Recessions but Almost every Recessions is caused by Bank Failures
@@dudebros6122 No it doesn't. I'll dumb it down for you below.
Say for example there were 1000 banks failures event over 100 years , but only 10 recessions in a 100 years and 9 out of that 10 recessions started with bank failures.
Hence, "Bank failures don't always cause recessions, but bank failures cause almost every recession".
"Bank Failures do not always Cause Recessions but Almost every Recessions is caused by Bank Failures"
@@dudebros6122 you are wrong. He is using a similar statement to "all squares are rectangles, but not all rectangles are squares." He is saying that all recessions are caused by bank runs, but there won't necessarily be a recession just because there was a bank runs.
Not really 2001(9/11), 2020(covid), 1921(spanish flu) were all caused by non bank reasons
Was waiting for this video! Thanks for doing it!
"what we're experiencing today is poor economic conditions leading to bank failures; not bank failures leading to poor economic conditions". That sounds worse not better.
Me, listening: Ah yes, here comes how banks work. I'm such a smart boy.
EE: And that's wrong.
Me: Ungabunga surprised Charizard face.
I feel like this got glossed over. We might need a more detailed video explaining how banks make money.
I really enjoy watching your videos! Also thanks for giving some context and summarizing the topic as you did here in the first 4 minutes. :)
This is the most informative video I’ve seen on this channel, at least at this point in my economic journey. Love the included interview too.
There is one critical factor that nearly all of the analyses on SVB overlook. Regulations require banks like SVB to hold reserves. These reserves can be held in treasuries the bank intends to hold to maturity.
It’s not so much that SVB was unable to make loans but that they were permitted to hold reserves in risk bearing assets without being subjected to scrutiny over how that risk was managed.
They held because they couldn't make loans in the time frame they wanted. (They got a massive quick influx of deposits in 2020).
They were subject to scrutiny, the Fed branch responsible for there region of the country had told them numerous times they needed to change how they were managing risk. Now whether the Fed should have done more is a question a lot of people are asking.
From what I know they lobby the government for lower scrutiny.
I never thought I'd find it sad that banks may now be an outdated model!
The new model is CBCD.
@@januarysson5633 We need to reject it immediately
@@Starfish-rr5ed Agreed.
But we are already using digital currency
Finally true words about how modern banks really work, at least for official and legal money - thank you!! 🙏🇩🇪
Stepping up your game with these interviews - great to see!
Best thing about Economics is, it's a magic 🎩 trick.
Money doesn't actually exist, Money is just a promise of Production or Labour.
Does anything really exist
Well money DOES exist and yes, it is both the promise of labor and the exchange of past labor. Money allows people to exchange the product of labor without making a direct swap.
So yes, money definitely exists, as long as you understand what money IS.
@thevoxdeus m = P*l but M flows back to p and l as an invisible thing..
Economics is bananas 🍌 but it makes sense
Hey EE! I love your videos and had a request - can you cover the economy of France? I recently moved here and it is interesting to see the massive protests against raising the retirement age. While Macron and the Economist (conventional economic experts) are happy to argue that the reform makes economic sense, the people protesting also have excellent argument about why it should not be raised (which are not usually covered in the news)
czcams.com/video/4GmwZVknnCg/video.html
There you go, mate
Not really. France, like many developed countries, have few children and thus the burden of the old will be passed to fewer and fewer youth. It’s not an automated economy yet.
@@Vandelberger you're clearly not French :P France is a developed country, with a high productivity per worker. The profits from this rise in productivity stay at the level of CAC 40 companies, while for workers the retirement age is increased. Most countries this won't be a big issue - but French people recognize that they can get a better deal and they are willing to fight for it.
@@AriS-gg7gw nothing in your reply addresses his point about France being an aging country.
And incidentally, situations like that are why individual pension systems make so much sense over collective ones; the worker gets to retire with a pension that corresponds to his own productivity and that of his country during his productive years, instead of depending on his generation's children. It's just too bad that switching to one from a collective one requires government to expose the Ponzi scheme of collective systems, and few if any have the guts to do so.
@@disalazarg Individual pension systems just mean that your retirement money is managed by a private fund manager, instead of a govt body. They are still exposed to the economic impact of an aging population. The biggest difference with the French system is the size and coverage of retirement benefits (a lot more people can get it). Also, everyone who retires in France has to pay at least 43 years of contributions to the fund to get their benefits, so they are not really relying on their kids.
Last point, you should maybe educate yourself on this - there is no clear problem with the French system at the moment. The government is anticipating a problem and increasing the age of retirement by just 2 years - the system itself is actually fine. French people still have a much better retirement system than most other countries actually.
Terrific video. Really clarified a few points that I did not know or did not understand well enough. Thank you very much.
love all the new content, but this tape is the bread and butter than brought me to your channel. great stuff
Id love to hear your thoughts about what happened to credit suisse afterwards. Greetings vom switzerland ❤
In the future can you provide a summary at the end. I think it would be helpful.
13:36 thank goodness you have clarified that. I was beginning to think that I had lost my mind when I saw that original video.
finally most awaited video
Are you gonna do a video on Deutsche bank?
Thank you for the summary! I agree that there is not any crisis at the moment in the banks as a hole or in economics. It's just a economic downturn from overheated economy to normal economy which kills the worst apples. Those banks were indeed doing bad or they had exposure to scammers, FTX or free money surfer companies that were actually never profitable. Banks how did good decisions about investments and only gave out loans that will be paid back and bank runs are stopped, everything will be fine so far.
Lol
Now we gonna see who’s being swimming naked 😂
@@weird-guy indeed
I've watched multiple explanations and coverage of SVB's collapse; this perspective is honestly priceless (and necessary)
Times like this, best to have nothing. The more you have, greater the worries.
Giving banks short term loans to cover loses caused by the rising interest rate will not end well.
Fed: sorry I caused you losses by raising the rate. Here is some money for you to borrow. You'll have to return it later.
Bank: 😮😢
I hear the sound of falling dominoes in the distance.
It's short term loans for short term liquidity. It's not like these banks are bankrupt but illiquid
I mean some of those bank literally got bank runs FROM lack of condidence and not even because something really happened.
Lack of confidence= people see people withdrawing to place elsewhere in large numbers then the others panic and do the same
@@tomlxyz from the perspective of a depositor, there is no difference; you don't have my money when I need it.
Stop having a question in the title if you're not going to answer it!
@David Lightman Specifically "unlikely"
Thank you for this explanation
WOW this video is extremely informative.
8:28 Craziest thing in this whole vid is questioning whether banks will foot the bill for this or pass it on to consumers. Of course they’re gonna pass it on to us, that makes the lines go up
The minute we made the Federal Reserve the de-facto monopoly on credit creation is the minute we created systemic risk. Those bank failures before 1913 and post Civil War - while bad - were localized events. In other words, what happened in NY was a NY problem - not a FL problem.
What's your alternative then?
@@wafercrackerjack880 psst gold silver commodities and some digital tokens
@@wafercrackerjack880 It's called real money - GOLD. JPM once said "Gold is real money, everything else is credit". If JPM believed it - then obviously he knew they hoodwinked the American people with the Fed. They built a social credit system - because their Knickerbocker bank collapsed in 1907 and he wanted a guarantee he could inflate without consequence. Simple as that.
Thank you for explaing things.
Good to get my dose of Oz! Bravo on a great interview and video!
I suggest we have a tiered system of deposit insurance starting at $50,000. Then you can raise the level of deposit insurance such as $100k, 250k, 500k, and 1m, each paid for with higher fees. If your bank fails and your balance is less than the level of insurance, you are fully covered. If your account exceeds the limit, you are covered up to the insurance level you were paying for and uninsured for every dollar above. In my opinion, this solves the problem. No more bailouts, no more moral hazard.
Banks who cannot insure most of their customers with liquid money should just be forced to pay into a fund.
A bankers union fonds for insuring deposits.
And in case of being forced to sell bonds at a loss now for quick money (just means you lent money to the state, and they will pay it back with interest over the next 10 years)
Then they are allowed to exchange the bonds for money from the fund to fix the problem.
There already are other third parties that can be paid for insurance. At least in the brokerage business, one of the earliest zero commission brokerages 17 years back had such an agreement to cover up to 25m of account balances by a policy with Lloyd's. Of course that both assumes the insurance company stays in business AND the company in question renews the policy. Maybe there is a flaw to the banking system if banks aren't able to do that. Though cross-sweeps where your money above the FDIC insured limit is held at separate banks is definitely a thing with some of these companies nowadays.
@@davidglad I'm suggesting FDIC create tiered levels of deposit insurance.
Our system of banking almost seems like it’s designed to fail. Every 15/20 years with the exception of 1929 - 1986 the economy had a turbulent shock, now given that in that period you had mass manufacturing to fight the biggest war in history as well as public works like building the interstates as well as contributing factors such as the gold standard and families practicing saving over debt then you can see a pattern.
It seems more like a good one every 7 to 10 years but one massive one every 100 years so we’re right on schedule for the 2nd Great Depression lol
Pump and dump.
Wash, rinse, repeat.
@@ryanharvey9800 the main reason why the great depression was so bad was because the central back reduced money supply and that made some companies fail that weren't even bankrupt but couldn't get access for temporary money so they had to close anyway
@@ryanharvey9800 2008 was the big one
@@theroarx2050 this one’s gonna make 08 look like the good times the money printer has been on since 09 32 trillion was printed through quantitative easing after the “Great Recession”then another 4 or 5 was printed during covid we essentially have an entire stock market propped up by Monopoly money right now because 95% of what was printed was spent pumping the stock market you can see that by look at the SPY or DJI on a quarterly or monthly time frame we’re sitting at the top of the largest bubble in this country’s history
bro, your content is getting better. gj
Of course I think it's still a problem of moral hazard/ adverse selection for big depositors as unlike the small depositors they have the means to monitor and correct the bank's behavior and they were content to not using it. What I mean is that providing FDIC coverage for big depositors would entice them to look for the banks with more risky conduct and therefore creating a problem of adverse selection by letting the big depositors choose the risky banks with no consequences while they have a market power on the deposits demand side.
I say let them fail these big companies and rich investors deserve everything they get I have sympathy for them they put everyone in a shitty position and have really always gotten off scott free.
*YEAH - LETS HEAR IT FOR WEALTH INEQUALITY* protecting us from bank failures - and from the hassle of being wealthy...
It's not "protecting" you from being wealthy, but the opposite: since there's much more money on high-risk investments like startups and less intermediaries, it's much easier to start your own company and you have to sacrifice much less equity to raise capital.
Modern problems require modern solutions.
The timeline in the first 3 minutes of the video showing an economic crisis roughly every 20 years is fascinating; surely it's clicked with someone that the problem may be systematic
Aren’t we still feeling 2008 effects because of government and Fed interventions? It seems a bit like the Covid pandemic. The government reactions to events might or might not avoid some tragic effects, but they inevitably have countless side effects that ripple through the system for years.
Not a great comparison. Government didn't know what to do during the COVID pandemic. And a few bad years is much better than countless dead and no economic recovery ever!
The 2008 crisis wasn't that big in comparison. It's one thing to loose your money, it's another to loose your life.
@@lamcho00 Fair, but it was not my intention to equivocate loss of life with loss of resources (which often leads to loss of life and certainly to the inability to save lives). Furthermore, I think we can all understand the measure taken to ensure our hospitals were not overrun.
Did we need to send out checks to workers in excess of what they earned while working? It’s at least arguable that the government over did things on the financial side and were more motivated by partisanship and their own hold on power than on saving lives or preventing economic collapse. I’m pretty sure at least each side claims the other side was in the wrong.
Lastly, the politicization of the healthcare aspects mirrors the financial issues with physical and mental harm still being felt due to some regrettable government decisions no matter what the intentions. I mean seriously, was there no plan for dealing with a pandemic? They certainly abandoned it if there was. I’m aware some cities and counties had to abandon their own plans due to federal intervention. Seems even a fairly extreme libertarian would expect a government to have a fricking plan.
@@nunyabidness3075 don't know about other governments but UK had a study/report about future possible pandemic giving them recommendations how to prepare for such a event. It was ignored and party that was in power for last 12 years actually made it worse by systemically underfunding nhs which was struggling just with winter flu prior to COVID.
@@nunyabidness3075 I agree, loss of resources certainly leads to loss of life. Though I wouldn't say it's comparable with the loss of life during the COVID pandemic.
About the welfare checks. I don't live in the US, so maybe some I miss some crucial piece of information regarding that, but here is how I see things. Because in the US there is no employee protection, businesses just laid off woks, because consumption was low at the time. Those were usually low payed workers with no savings at all. (In contrast in Europe, if a company lays off an employee without a valid reason, it has to pay the laid off worker 3 to 10 times his salary.) That's why the government had to give out those welfare checks. If it didn't then you'd have people at home not being able to afford bills. Those people wouldn't just stay at home and take it, most likely they would go out and protest. That would have been especially bad during the pandemic. Also the party in power would lose a lot of voters if they allow something like this to happen. As I see it this was simply unavoidable given the conditions at the time.
About the healthcare system. As an outsider it's just hard to believe how the American people can put up with the corporate lobbying and blatant corruption going on in the healthcare sector. To keep some corporation profits coming in they ban imports on cheap meds from abroad.
About the pandemic plan. I'm pretty sure there is one. But what stroked me as an outsider is how the government at the time treated the pandemic as a flu epidemic and did nothing to prevent life loss. Even though at the time WHO announced a global pandemic, China had a lock-down, Japan and most of Europe introduced lock-downs. There were reports of the estimated death rate which at the time was 2% (similar to the spanish flu). And the government ignored all that information until some US hospitals were over capacity. Only then did they introduce a lock-down. As soon as the hospital situation was under control, the government urged people to "go back to work". So even if there was some plan, it was just ignored.
A personal advise would be to not vote for rich politicians.
@@lamcho00 except that there was no upside to the lockdowns. They didn't save any lives and, most importantly, we knew that before the pandemic. But bureaucrats needed to be seen as doing something to justify their budgets.
Bank failures because of poor economic conditions is what all the examples of historical bank failures sounded like to me. So bank failures being an early sign of upcoming recessions seems a perfectly valid conclusion.
Why would a bank take a loan from the fed at a 4.5% interest rate to loan that money out for a mortgage at 7% when they can loan out customer deposits that are only yielding 1.75% interest? I think the 'no money multiplier' thing only applies when central banks have a near 0% interest rate.
@TO INFINITY and BEYOND I'm not sure what banking system you're discussing but it doesn't work that way in the USA. www.federalregister.gov/documents/2022/12/01/2022-26065/reserve-requirements-of-depository-institutions
Why would banks pay interest on savings accounts if they couldn't lend part of that money out?
@@IAMNOTGOODWITHCOMPUT the million dollar question. I don't need your money, your money is a liability to me that threatens my existence and I can't do anything with it, so I will aggressively seek out your money and even pay you interest. This makes zero sense to me.
@@Derek-Trotter Coca Cola sells me a lot of stuff, but never in the history of ever has a company given me $101 of their dollars to get $100 of my dollars.
@TO INFINITY and BEYOND it's not about whether the reserve ratio is 0, it's about whether the reserve ratio is 1, and it's obviously not 1 so banks do not need to keep every deposit in a liquid reserve.
You just gained a new subscriber, sir. Notification bell and all.
The Credit Suisse / UBS merger is ridiculous. They now have a bank that’s twice the size of Swiss GDP. They kicked the can down the road. Deutsche Bank is shaking now.
No Johnny Harris was harmed during the making of this video
you may be right, but the tone you used was one of defending banks, I mean obviously you would like to defend your fellow economists, unfortunately life isn't a strawberry, people fck up and usually not by "human error" or "because the economical conditions were making banks prone to failure", but most likely because these fellow economist only seek one thing, money.
Great video EE! Filled with misinformation and warped statistics but fantastic for clicks, views and making money for the people behind EE!!
Thanks for clearing up the BS about "fractional reserve banking" something always seemed off with that idea.
and here lies the problem - if you can create money out of thin air by only having 10% of the deposit, then where does that money come from? Well it comes in a form of debt. And once you reach a critical point where your debt is so large compared to the deposits, the trust in the system becomes very low. And this is what you are seeing - loss of trust. I for one can't believe that the majority of the people here think that debt does not matter.
Did you stop watching after that point in the video?
I would like a video on a digitised economy like India to see the difference in the effects of bank run on a economy that still is majorly cash based vs a economy that is moving away from it
are you saying India is more digital than US? I would call India much more "cash based" than the US considering the percentage of cash transactions.
Somewhere like Singapore would be a far better example than India. You can literally go weeks here without ever touching cash, almost everything can be paid digitally.
@@MichaelGGarry netherlands belgium uk u can do everything without cash. there is not a single cash only bussines.
@@sosvaneey993 in uk it is very common for merchants to be cash only for various reasons
Here in Brazil people are using less and less cash since the Central Bank created PIX, an electronic payment system that transfers money immediately.
Good one
Great video as always. I would have liked a little more focus on how bankruns in general work (great to show with double accounting tables) but I guess thats not the point of the video really. I was also very happy about what you said about the money multiplier theory. It is very hard to fight this idea especially since it is often taught in basic economics classed which robs people of the ability to understand our modern banking system.
Stop letting banks take such high risks! Or force a memo stating that they will fail, and not be bailed out if they choose to be so risky!
The risk is the government command control.
You cant not bail them out because too many people would be affected. The banks are smart and know the position they are in...
@CAS Smart as in they can take all the profits (and bonunes) none of the risk, as and when risk blows them out they will get bailed out.
@CAS smart in knowing the government won't let them fail. Improve your reading comprehension
You can't do that when US has centralized banking. A lone bank can't issue currency and set interest rates or controls taxes.
Is recession imminent? I am absolutely nobody but I think it is inevitable at this point, it is more a matter of WHEN is coming rather than IF.
Well said Nobody Krampus. Get ready, retire debt or offset some money to give yourself a cunning kick !
The money multiplier theory has always been hard to wrap my head around. I perfectly understand the mechanics of the theory. But it’s always been hard to visualize it working. Now we all understand why.
Very interesting. Like to hear more about investment banking and its regulation across the world.
Sorry, this may not be the BEST example for moral hazard and too big to fail, but the depositors knew their money was not insured. Frankly the depositors should have taken the estimated 10% cut to their savings. Depositors knew there was risk.
You want to tell a big corporation they should take a wash on 10% of a billion dollars? I'll stand over here, thanks.
@@thekaxmax Yes I would, but I agree with the subtext of your statement; corporations have too much power and influence over the Government.
Additionally, to my original point, the CEOs and CFOs of these "Big Corporation" knew or should have known their money was not insured, and should have diversified or sought additional deposit insurance.
Because they aren't accountable to the voters
They shouldn't be. It would make things worse.
@@gabbar51ngh maybe, but they shouldn't exist anyway.
interesting topic!
As a prepping channel im encouraging everyone to prepare like a storm is coming because it looks like a big storm is coming soon. Hopefully not nearly close to the great depression but i could see another 08 happening soon.
I think people forget who gets hurt most in recessions: poor people. Billionaires will go "broke", as in they have millions. We're the ones losing jobs.
i mean, if we are to talk prosentages, the rich loose much much much more. their quality of life goes down much much further. but im sure you going from oreoes, to of brand oreoes hurts much more then them having to stop drinking expensive wine
Well technically it's the middle class who hurt the most. The middle class lose their job, fail to pay the mortgage, get repossessed and find themselves thrown firmly back into the working class. The working class might go from being poor to being even poorer, but it's not a massive shock to their lifestyle.
Yeah, I’m suspicious of the whole middle class as victims themes as I think it gets overblown, but it’s true in the US that the poor have floor and it’s hard to measure their sinking very far. Theoretically, any big change gives the poor a chance to change their situation without much loss of government benefits. It’s the middle class that has career disruptions that might be hard to recover from. I think those near the start and ends of their careers are especially vulnerable.
When hiring restarts, the companies start hiring recent graduates again. The kid with the two to four year old degree who has been waiting tables is at a disadvantage. Similarly, the over 40 are at risk of never getting back into their industry if they get laid off.
You’re never going to get much sympathy for anyone who still has enough money to live a multi home, travel at will, eat out every meal lifestyle. That’s gone from about $4MM to $6MM net worth since covid though. A LOT of comfortably retired people are now stressing and returning to work isn’t really going to happen. If you were earning $250k plus, it’s not likely you can go back to that after you’ve been retired for a few years.
It's not just the jobs but the depressing of wages compared to rate of inflation and loss of access to being able to purchase assets like homes.
@@eirikarnesen9691 The rich may lose more but they don't hurt as much. Going from billions to millions may mean that they can't buy afford a new mansion in the Alps, instead they'll have to stay at home in the Hamptons in their already paid off mansion. When only 5% of your income goes to cover living costs you can cut back a lot more then a person using 95% of their income just to stay afloat, where cutting back your Oreos to one pack of off-brand a month may only save you $10.
Bank failures don't cause recessions. They're caused by some of the same things that cause recessions: bad investment plus tightening credit.
@economicsexplained great info and video as always! one small note: can you add where each of the chapters you mentioned start and end? i really dont see where you answer each question or it may not be necessary to add the chapters at all to begin with. otherwise carry on the good work :))
We invite you to study the Canadian banking system. It puts into question a lot of what is said in here.
Are there any specific things about the Canadian system that puts into question the US system?
Is it possible to set up something of a meta-bank? Basically, a "bank" that doesn't keep any assets, but that helps manage multiple deposits at multiple actual banks. That way all of the individual deposits are kept under the insurance limit, and the risk is also spread out among multiple institutions.
And that is a govt function, and should be a function of a state reserve bank. The USA Fed Reserve is /not/ that, though, cos it's not owned by the govt.
That last bit is like finding out the antagonist of a horror movie isn't actually dead.
We are genuinely about to hit a depression that will be worse than the great depression. It's being compounded by similar factors, including global instability, climate driven food crisis, and irresponsible government spending. It should have happened in 2008, but was floated off by short term financial policies that are now coming to bear. Corporations have siphoned value out of their assets and distributed it to their shareholders at an unprecedented level, and now the level of corporate reinvestment that is needed is simply unobtainable.
Things are going to get bad, then they are going to get worse. Then maybe, maybe they'll get a bit better.
I'm waiting for round one of the property value collapse and hoping to get enough acreage to grow enough food and fuel crops to sustain my lifestyle, along with giving some to the community. I have moved back to all diesel vehicles again, and am in an area that gets enough rain to reliably grow crops without irrigation. Hopefully I'm in a position to insulate my family from the worst of this, and help full the hit to some others as well.
Shots fire lol
Yea his little graphic in that video really perpetuates misinformation.
Very easy for financial institutions to gamble with somebody else’s money. The thing is they don’t see it as your money it’s their money!! As soon as you put money into an account you have lost ownership and their lies the problem. They are free to lend it out to qualified or sub prime borrowers. Greed is king keep the debt churn moving around. The money they make goes to shareholders , the losses get funded by your savings under bail in rules. The smaller the bank the more vulnerable your savings are. Risk is higher but so are the interest rates offered. They pay lousy interest anyway so why use them ?
I'd love to see a video on what savers like me should be doing right now as interest rates are high.
Lend long to lock in the rates, but do it gradually, as they may continue up.
@@harleyb.birdwhisperer I was looking at Treasury bills and bonds. Any pitfalls I should try to avoid?
@@nabbunsechkie The main drawback of treasury bills is that it locks in your money. You can still access it early (before it matures), but you will lose most of the interest earned and sometimes some of the initial investment. One way of offsetting this is using a bond ladder. That's just a fancy way of saying to buy treasury bills of different maturity dates. For example, splitting your investment between 3-month, 6-month, and 12-month bills. That way every few months you get access to your cash. Then, if you don't need the cash just buy another bond, and if you do, don't buy a bond. You could also do something like buy a 3-month treasury bill once a month for rolling returns as well. Same idea.
@@theroarx2050 thanks to both of you!
I would grow your personal cash position as large as you can possibly make it. Amazing the flexibility you have when you have meaningful excess liquidity. If you want to get in on an investment opportunity, you have the means to do that. If you wanna make some non-financial investments in your knowledge or your health, you have the means to do that.
If you find an online deposit account that pays you a nice rate, and they also happen to have a Robo-advisor you can use to grow your market exposure in a slow, sensible way...even better. But cash is king. Grow your position as large as you can make it. If you have pathways to earn more money through your line of work, pounce on them.
So a former advisor to the ECB is making the case that we don't need private banks, and ever so subtly hinting that CBDCs and direct central bank accounts are the solution. Colour me shocked!
😂
Thank you thank you thank you for debunking the money multiplier garbage
Interesting!
"1929, the big depression, the real one this time."
Yeah...
On that last point of banks being unnecessary: only rich people investing seems like a downgrade, not an upgrade.
I was just thinking the same. It is almost reminiscent of a medieval system where the local lord might finance the expansion of the pub down the street.
not necessarily...if capital investment is more accessible to more people than it's ever been. Anyone with any excess liquidity whatsoever can grow their market exposure through smart, sensible investing. And for all the talk about growing inequality, there's objectively more people who have crossed the pre-Covid thresholds of "high income" than ever before. What we once considered "high income" will become the new "upper middle".
As always, a matter of perspective.
@@sriig No it won't 🤣
Good video
A very well explained documentary
Thank you
I wonder what was going on between 1929 and 1986 that kept us from having bank failures in the US... 😅
boring banks, no mix of savings and investment banking allowed. Enormous real productivity growth in the physical sense (more and better stuff to buy rather than more Apps to use).
me.
An incentive to save and a booming economy primarily fuelled by the need to make materials to fight the biggest war in human history.
The glass steagall act
@@Hollows1997 and people took pride in doing things for themselves.
Crazy times. Not just a recession but also AI is coming to take our jobs.
Sounds like it's about time to appropriate ownership of the means of production
@@milkdrinker7 the government is not the person who needs to hold that. They can't even manage themselves
@@milkdrinker7 okay, commie
Trying to use AI to help me code fast enough to outrun obsolescence for a few more years.
“You will own nothing but you will be happy.”
I heard one economist say that raising the ocr was a crude blunt tool and very old tool for managing inflation. It takes a long time to take effect due to fixed mortgages. His suggestion was to add a superannuation tax to peoples weekly pay. The money would go to peoples super accounts therefore taking it out of circulation but allowing it to be released at a later time when inflation was lower. So long as the type of super fund was controlled for this tax I think it’s a great alternative approach.
I have absolutely no idea how many "views" you get on the podcast but I love listening to it so it matters to me. Just an ask or a tip. Maybe explain what is being looked at so podcast listeners can follow. An example recently but not here (can't find the ep) you had a list of countries and clearly listeners couldn't see it so the next five minute meant nothing 😂