The reality is someone have pay for those beautiful infrastructure, not going to be the incumbents due to political arrangment, then it’s the vulnerable newcomers shouldering all of it. Just think about those terrifying condo prices.
I think it’s not just foreigers with unfavorable origins, in their speaking of ideology/regime/path confidence, anyone not subscribing and contributing to the greater good, foreigners or not, are not welcomed and supposed to stay and share the pie.
The regime has trumpeted the superiority of their political and governing system since the second month of covid-19, in
stark
contrast to the decadent and degenerate
west, daily
news started with data of how many more thousands died in the US.
That’s a good 2 whole years on
a
roll, no matter how illogical it seemed, it worked.
The CCP way is making you do thing out of your own volition so that they can always be the nice guy, they never banned US companies, they just made them extremely uncomfortable to operate so they quit themselves.
The whole point of banking is that you borrow money from your depositors at low interest rates, but at a variable term length (The depositor can always withdraw), and you lend money to borrowers at high interest rates, but at a fixed term length (The bank can't just call in your mortgage tomorrow.)
Borrow short, lend long. The latter necessitates 'locking money up'.
A well-managed bank will properly manage the risk of the short loans getting called.
A poorly-managed bank will go all-in on getting short loans from people who are likely all going to call them in at the same time (startups), while putting their entire lending portfolio into lending long in an environment where long-term loans are dropping in value.
I know you are generalizing but there are times the yield curve is the other way and it is better to lend short and borrow long. But a well managed bank takes care to duration(not maturity) match their assets and liabilities while also taking into account liquidity needs and buffers. Also, the above applies to use of their own capital as well.
Demand deposits can be immediately be recalled, so where exactly do you suggest they park it? In the central bank -- no bueno they've denied banking license for narrow banking. Margin lending that allows recall at any moment? I can think of some options but frankly I'd rather have my money in a bank that over-extends themselves on treasuries than most the alternatives. At least I'd most likely get 90+% of my money back eventually.
Only retroactively in a bank run are you really able to see just what duration and what amounts were the limit.
It's not that they shouldn't have bought treasuries, it's that they shouldn't have bought such long dated treasuries, and if they did, they should have hedged against interest rates, and if they didn't, they should have realized the loss when it was smaller. But they did none of those things and it was fatal to them.
The Fed kept making it clear that it was raising rates, and it seems like SVB just slipped quietly into that good night without lifting a finger to save itself. Which is bizarre and confusing and there must be more to the story (and details are coming out, like the risk manager role remaining open for nine months), but it does seem like crazy risks were taken. But not in pursuit of additional gains, like we are used to seeing, but it's looking more like negligence or a misunderstanding of their position.
You can `s/treasuries/mortgage-backed securities/g` into my comment and it doesn't change much, but my understanding is that they had a lot of treasuries (not to the exclusion of having MBSs).
> To fund the redemptions, on Wednesday Silicon Valley Bank sold a $21bn bond portfolio consisting mostly of US Treasuries.
All your link shows is that Guardian, Reuters, and others have equally as bad reporting as commenters here, just parroting each other constantly...
SVB's actual announcement says "Additionally, earlier today, SVB completed the sale of substantially of its available for sale securities portfolio. SVB sold approximately $21 billion of securities, which will result in an after tax loss of approximately $1.8 billion in the first quarter of 2023."
I haven't seen any evidence that there were substantial Treasuries sold, I just see MBS on their balance sheet.
So put it where? Narrow banking is illegal by virtue of denying the banking license. You're basically left with what, something like recallable loans/margin? What are the other options?
Put it in bonds of whatever duration the bank chooses, but require sufficient equity that the shareholders will bear the loss and not the depositors?
Interest rates didn't increase in a single step. If the SVB had been forced to recognize their losses on a continuous MTM basis, then they'd have been forced to raise capital (or liquidate if they couldn't) by late 2022, when they were undercapitalized but not insolvent. The shareholders might still have been zeroed, but the depositors would have been fine.
In fact, the SVB designated those bonds as held-to-maturity, which allowed them to avoid reporting the loss, leaving them adequately capitalized for regulatory purposes despite being MTM insolvent. That accounting treatment doesn't change the actual economics though, so they still blew up.
>Put it in bonds of whatever duration the bank chooses, but require sufficient equity that the shareholders will bear the loss and not the depositors?
But that's literally what they did. They put it in 10 year treasuries that they had to sell for 87 cents on the dollar because every "thought leader" in Silicon Valley had the same idea at the same time and triggered a bank run on their own bank.
Everybody who has deposits will get 100 percent of their money back and everybody who holds equity in SVB will be (mostly) wiped out.
The depositors are getting 100% of their money now because the FDIC has guaranteed all deposits, including deposits in excess of the usual $250k limit. Any shortfall will be socialized among all participating banks. The SVB's shareholders didn't get bailed out, but their depositors absolutely just did.
If the SVB had been forced to recognize its loss sooner, then this government bailout wouldn't have been necessary. Perhaps they'd have succeeded in raising more capital, and survived as an operating business; or perhaps their shareholders would still have been zeroed and their creditors would have seen a partial recovery. The depositors would have been fine either way though, no government bailout required.
The depositors are getting 100% of their money because the fed is lending against their assets at par. [1] The FDIC can be confident that they'll be able to make everybody whole because their assets exceed their liabilities. The Fed is going to hold the assets to maturity and get paid back by the Federal Government. "Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law." is legalese, nothing more.
> The depositors are getting 100% of their money because the fed is lending against their assets at par.
And FMV is less than par, so that's an undercollateralized loan. That's another component of the subsidy to SVB depositors, and also a subsidy to shareholders of other banks that overexposed themselves to long-term debt (though too late for the SVB shareholders). There's no rational economic basis for this change in policy, and it goes against all modern central banking theory.
I hope you don't think holding the bond to maturity somehow means the loss isn't real? All bonds get held to maturity by someone (unless they default, but that's not the problem here). The FMV of a bond is ultimately determined by the value of those cash flows to that person; so if the FMV went down, then that should be a clue that value was fundamentally lost, regardless of who holds it.
The SVB's problem was that their HTM accounting treatment didn't model economic reality. The government is leaning into that fiction somewhat here, out of some combination of favoritism and concern for systemic risk. That doesn't make the fiction true though, and it doesn't mean the loss disappears; it just means the loss gets socialized.
Correct. And they failed at it. Swap bonds for magic beans and see if it’s defensible. We know the bonds were worth less, but it doesn’t obviate failing to manage the half of the business that isn’t people handing you money
Correct. I think you are being blinded by the word "bonds" when evaluating the proportions you assign to mismanagement vs. being blindsided. I feel inviting swapping in a word that is anything except bonds may be a way to continue this interesting conversation
Amazon sellers are actually researching the market and designing new products, which
can't be said about domestic Chinese brands and sellers that are mired in cutthroat price dogfights.
The profits maybe not be that big, but big enough to drive a skeleton team, make a small fortune. One item with $500 a day in revenue can let you make more money than a typical coder.
The comparison was to a software engineer, which earns more than $15,000 in China. And also with a 50% margin, which is extremely generous. Most margins are closer to 10% - 20% in manufacturing.
From the party's view, although e-commerce helped in driving down consumer prices despite sky-high inequality and property speculation (much to the party's plan and advantage), he should remain manageble and of use.
The principle is simple for any entity (and a wild west capitalism stint too), when the party need you, you give them your best, and when they don't, according to their grand plan, you must sacrifice without a word.
Nothing is more important than the safety of the party and the ruling class.
> The principle is simple for any entity (and a wild west capitalism stint too), when the party need you, you give them your best, and when they don't, according to their grand plan, you must sacrifice without a word.
You seem to be pretty happy on ignoring all Ma's very dodgy dealings.
