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SVB’s Collapse Highlights Limits of Easy Money Policies, Warns Telegraph Report

Telegraph reports that central banks around the world need to act quickly to prevent the bankruptcy of Silicon Valley Bank (SVB) from spreading. The report argues that while it is essential to protect depositors, giving banks financial aid would be a mistake.

Bondholders and shareholders of banks must bear the losses themselves. SVB’s London branch has been placed under the control of the UK government, and depositors cannot withdraw money. The bank’s clients may not be able to pay their employees next weekend. Some tech companies and startups may have to close their doors due to the freezing of assets.

The article suggests that central banks should learn from the lessons of the 2008 and 2009 financial crises, and protect depositors while bondholders and shareholders should take care of themselves.

The article highlights that the collapse of SVB is a warning sign for the financial sector. It illustrates that there is no going back to “easy money” policies such as ultra-low interest rates, zero interest rates, and unlimited currency issuance.

Otherwise, we will repeat the mistakes of the 2008 and 2009 financial crises. The current financial situation is a wake-up call, and we need to be prepared for the crisis to come. The article emphasizes that if someone thinks we can survive more than ten years of zero interest rates, unlimited money printing, and double-digit inflation, they should look at SVB.

According to the report, SVB’s bankruptcy is an old-fashioned bank run, and once it starts, it is challenging to stop. Depositors panicked and rushed to withdraw money, mostly tech venture companies.

The US Federal Deposit Insurance Corporation took control of SVB. Anyone with cash in the bank can withdraw up to $250,000. The London branch of SVB is also expected to be bankrupt. Depositors will be protected for up to £85,000 ($100,000), and the rest will be supplemented by liquidating the bank’s assets.

SVB’s bankruptcy is a warning sign for the financial sector that easy money policies have their limits. The article suggests that central banks around the world should learn from the lessons of the 2008 and 2009 financial crises and protect depositors while bondholders and shareholders should bear the losses.

According to a recent report from AZCoin News, the CEO of Pershing Square, Bill Ackman, has expressed concerns regarding the potential failure of SVB Financial Group and criticized the government’s inaction to protect all depositors. In a tweet, Ackman warned that if the government doesn’t take action within the next 48 hours, it could cause irreversible damage to the banking industry. He emphasized that allowing an uninsured deposit to fail without protecting all depositors would be a significant error, and the world would wake up to the fact that uninsured deposits are unsecured and illiquid claims on a failed bank.

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