Moon of Alabama Brecht quote
November 14, 2023
Ukraine’s Demographics Dictate To End The Fight

The knives are out in the fight over the Ukrainian throne.

Various Ukrainian media (in Russian) report of plans to fire this or that general. Andrei Yermak, Zelenski's chief of office and the real power behind him, is currently in the U.S., allegedly to get the okay for firing the commander-in-chief of the Ukrainian army General Zaluzny. Other Ukrainian media are calling for Zaluzny to become the new president. Tomorrow CIA director Burns is expected to be in Kiev to tell Zelenski that his time is up and that he, Zelenski, will have to go.

Simplicius writes:

It appears obvious that two competing factions are trying to outdo each other in the sphere of Western media. Zaluzhny fired his shot in the unsanctioned Economist piece, and it would seem that Zelensky backers are doing their own parallel counter-work.

Larry Johnson reminds of the larger powers who are behind this fight:

One critical point I failed to make in yesterday’s article regarding the competing narratives regarding Zelensky and General Zalushny — it looks like the Brits are backing Zalushny while the CIA is trying to save Zelensky and dump Zalushny. I base that conclusion on the fact that the Economist, a British publication with close ties to MI-6, gave Zalushny the celebrity treatment, while the Washington Post, the go-to rag for the CIA, blamed Zalushny for Nord Stream.

Fun to watch, unless you are on the frontline.

There, things are getting worse for the Ukrainian army day by day.

The Ukraine wasted so many troops for impossible endeavors, to hold Bakhmut and in its the senseless 'counter-attack' against impregnable Russian lines, that it now lacks the troops to hold its defense lines.

Six weeks ago the former British defense minister Ben Wallace urged the Ukrainian government to draft more young people to fill the lines:

The average age of the soldiers at the front is over 40. I understand President Zelensky’s desire to preserve the young for the future, but the fact is that Russia is mobilising the whole country by stealth. Putin knows a pause will hand him time to build a new army. So just as Britain did in 1939 and 1941, perhaps it is time to reassess the scale of Ukraine’s mobilisation.

In a recent interview with the Ukrainian Pravda the Economist writer Shashank Joshi took a similar line:

Q: Are there resources to escalate trainings of Ukrainian soldiers abroad?

A: I would say that one of the biggest challenges, really, right now is, first of all, being able to mobilise more young Ukrainians, which, as you know, is a challenge, and a political issue and a social issue.

The ignorance displayed in those British statements becomes evident when one takes a look at the Demographics of Ukraine:


bigger

When the Soviet Union dissolved in the late 1980s the economy of Ukraine went into a tailspin. People were suddenly very poor with no jobs available for them. They thus refrained from having children. Others fled when the war started and some of the young men were killed in the war.

While there are now some three hundred thousand Ukrainian men at the age of 40 there are less than a hundred thousand men at the age of 25.

As there are so few men and women of that reproductive age there are also only few new babies. Becoming independent was a social-demographic catastrophe for Ukraine that will haunt the country for the next hundred years.

The Ukrainian army can not draft younger soldiers because younger people are simply not there. The few thousand who are still hanging out in Kiev are actually university students who's knowledge and service will be needed over the next decades. To draft them would kill all positive perspectives the Ukraine still might have.

After the Ukrainian government, on order of the U.S., failed to make peace with Russia, the Russian president Vladimir Putin ordered his troops to 'de-militarize and de-nazify' the Ukraine. It then was obvious that the attrition of the Ukrainian army, not taking its land, was the main Russian plan.

The Ukrainian political and military command failed to correctly adopt to that. Instead of going into defense mode behind holdable lines it ordered its troops to attack Russian defense lines again and again. In consequence Russian losses were minimal while the Ukrainian losses exceeded all imaginations.

That this would end badly was quite predictable.

It is over. The Ukraine, and the powers behind it, have lost the war.

The Russian forces are now doing probing attacks along the whole frontline. Whenever a local Ukrainian local defense line will fail, which is just a question of time, they will break through and cover new grounds. Those drops leaking through will become a stream, then a river and a flood that will push the Ukrainian army into a full retreat.

The government of Ukraine, and its backers, can still prevent that.

But it requires to acknowledge the facts on the ground.

Calling for more younger Ukrainian people to be drafted to die is the opposite of doing that.

Comments

❗️🇷🇺🇺🇦 Battle for Avdeevka: Fighting on the Outskirts of Petrivske and an Attempt to Break Through the AFU near Gorlovka
Situation at the end of November 15, 2023
🔻Russian units continue to encircle the Avdeevka group of the AFU.
▪️Fighting is ongoing on the northern flank near Petrovskoye. Neither side has troops in the village itself, as there is no suitable position to hold. The AFU has retreated to the forest belt west of the village, using armored vehicles and FPV drones. The Russian Armed Forces are also being cautious in occupying areas under fire to protect their personnel.
▪️The enemy has lost several M2A2 Bradley infantry fighting vehicles near this village in the past week. The AFU is transferring reserves to hold positions along the railway at all costs. Russian units have taken control of several enemy strongholds on the approaches to the AKHZ ash dump.
▪️On the southern flank of the Avdeevsky fortified area, the Russian Armed Forces are expanding their control in the industrial zone near Yasinovataya. Currently, the Russian army controls about half of the territory. Preliminary data also indicate advances in the area of the Vinogradnik gardening partnership.
🔻Our colleagues from NGP razvedki reported that in the evening, the enemy launched a daring attack towards Gorlovka southwest of the Mayorsky concrete plant. After the AFU occupied Russian Armed Forces positions near one of the waste heaps, Russian fighters carried out a counterattack and regained control in the area.
▪️Currently, the AFU artillery is actively using cluster munitions, including in Gorlovka, where significant destruction has been observed. Unfortunately, there have been civilian casualties, with at least one person killed and another wounded.

https://t.me/geromanat/13790

Posted by: Down South | Nov 16 2023 4:48 utc | 501

❗️🇷🇺🇺🇦 Battle for Avdeevka: Fighting on the Outskirts of Petrivske and an Attempt to Break Through the AFU near Gorlovka
Situation at the end of November 15, 2023
🔻Russian units continue to encircle the Avdeevka group of the AFU.
▪️Fighting is ongoing on the northern flank near Petrovskoye. Neither side has troops in the village itself, as there is no suitable position to hold. The AFU has retreated to the forest belt west of the village, using armored vehicles and FPV drones. The Russian Armed Forces are also being cautious in occupying areas under fire to protect their personnel.
▪️The enemy has lost several M2A2 Bradley infantry fighting vehicles near this village in the past week. The AFU is transferring reserves to hold positions along the railway at all costs. Russian units have taken control of several enemy strongholds on the approaches to the AKHZ ash dump.
▪️On the southern flank of the Avdeevsky fortified area, the Russian Armed Forces are expanding their control in the industrial zone near Yasinovataya. Currently, the Russian army controls about half of the territory. Preliminary data also indicate advances in the area of the Vinogradnik gardening partnership.
🔻Our colleagues from NGP razvedki reported that in the evening, the enemy launched a daring attack towards Gorlovka southwest of the Mayorsky concrete plant. After the AFU occupied Russian Armed Forces positions near one of the waste heaps, Russian fighters carried out a counterattack and regained control in the area.
▪️Currently, the AFU artillery is actively using cluster munitions, including in Gorlovka, where significant destruction has been observed. Unfortunately, there have been civilian casualties, with at least one person killed and another wounded.

https://t.me/geromanat/13790

Posted by: Down South | Nov 16 2023 4:48 utc | 502

Good grief, I go sleep and wake up and the psycho (shadowbanned) and the cynic (Cynic) are both on my case, good thing I’m on leave today, can’t miss me cricket. First to answer the cynic and set the stage for the psycho.
Since the 1990’s Ukraine has been an independent country separate from Russia. Since then the West has been etting Ukraine up to use against Russia. Read 600w’s comment at 101, the West purposely asset stripped and impoverished Ukraine, ideal conditions for a radical, malevolent group like the Nazi’s to come to the fore. These Nazi’s in the Western part of Ukraine were further aided in their agenda by the deliberate withholding of iodine (Hot Carl @127) to make them low IQ and so easier to guide into a certain direction, which is war with Russia. Russia being the source of all evil in their minds.
In the east of Ukraine exist the Russians and the Russian speakers, who together make up like 50% plus of the population in Ukraine. These guys want nothing to do with the Nazis in western Ukraine, but at the same time Russia did not want to risk heavy numbers of troops just to protect Russian and Russian speakers in another country, when those people could just move to Russia. That was the easiest solution to the problem, Russian’s belong in Russia, Palestinians belong in Palestine, Palestinians do not belong in Egypt, Jordan, Lebanon or elsewhere. Do not conflate the Palestinians with the Russians and Russian speakers in Ukraine.
And now to answer the psycho, oops sorry, I mean shadowbanned. Russia is the biggest country in the world, Russia does not need Ukraine. The Ukraine is just a nice to have back, a very nice to have back with the black earth region and industry and so on, but it is not a raison d’etre for Russia. Russia can happily survive without Ukraine, just its preferable that Ukraine does not have nukes and not be part of NATO. Russia does not care about the great game of possessing sought after regions to enhance its power, Russia just wants peace and quiet to enjoy its vodka. Russia does not give a fuck about Alsace–Lorraine type bones of contention.
If Russia wanted to give up Crimea for the sake of peace, then Russia can give up Crimea for the sake of peace. It is not up to nobodies to dictate what Russia can or cannot do. Russia is a sovereign state so Russia can make its own decisions. The leadership in Russia decides what goes in Russia, not the nobodies in LDNR or Crimea, the tail does not wag the dog in Russia, the dog can in fact survive quite well without the tail. Why would Russia want to control the Black Sea, there are many nations surrounding the Black Sea, they have a right to the Black Sea as well. Habours can be built anywhere, you just need enough dynamite and time, Russia has its own territory on the Black Sea coast.
And now to come to the crux of the matter, before WW2 the Treaty of Versailles set up adverse economic conditions in Germany which allowed for the rise of the National Socialist German Workers’ Party (Nazi). Furthermore, it was western finance which launched Hitler into power. It was the beautifully executed Wall Street crash which really cemented Hitler and the Nazis in power in Germany. And of course the Germans believed that the Russians were the source of all evil. Russia lost 30 million people during WW2 and has no intention of repeating that. So now the Ukraine has been impoverished by the West (600w @101) to get the Nazi’s in power, and Zelensky was put in power with western money (only 1 million Jews in Russia and more Jews in the West than in Israel, so Jewish money is overwhelmingly western money). Plus there seems to be another Wall Street type of crash on the horizon. So now the West and the psycho (aka shadowbanned) want Russia to be in a massive conflict with Ukraine, with lots of casualties for Russia. Russia instead chose to ignore both of them and instead do minimal intervention in Ukraine.
Russia’s intervention is so minimal that its sometimes doubtful if Russia will truly move beyond the now part of Russia LDNR regions. Russia has the might so should take the whole of Ukraine (and Poland and the rest of Europe as well, its not like those homos can defend themselves). But Russia can’t be bothered, Russia is Russia and Russia will do as she wants when she wants. And Russia is winning yet some nobodies still find fault with EVERYTHING Russia does 🙁

Posted by: gT | Nov 16 2023 7:38 utc | 503

Good grief, I go sleep and wake up and the psycho (shadowbanned) and the cynic (Cynic) are both on my case, good thing I’m on leave today, can’t miss me cricket. First to answer the cynic and set the stage for the psycho.
Since the 1990’s Ukraine has been an independent country separate from Russia. Since then the West has been etting Ukraine up to use against Russia. Read 600w’s comment at 101, the West purposely asset stripped and impoverished Ukraine, ideal conditions for a radical, malevolent group like the Nazi’s to come to the fore. These Nazi’s in the Western part of Ukraine were further aided in their agenda by the deliberate withholding of iodine (Hot Carl @127) to make them low IQ and so easier to guide into a certain direction, which is war with Russia. Russia being the source of all evil in their minds.
In the east of Ukraine exist the Russians and the Russian speakers, who together make up like 50% plus of the population in Ukraine. These guys want nothing to do with the Nazis in western Ukraine, but at the same time Russia did not want to risk heavy numbers of troops just to protect Russian and Russian speakers in another country, when those people could just move to Russia. That was the easiest solution to the problem, Russian’s belong in Russia, Palestinians belong in Palestine, Palestinians do not belong in Egypt, Jordan, Lebanon or elsewhere. Do not conflate the Palestinians with the Russians and Russian speakers in Ukraine.
And now to answer the psycho, oops sorry, I mean shadowbanned. Russia is the biggest country in the world, Russia does not need Ukraine. The Ukraine is just a nice to have back, a very nice to have back with the black earth region and industry and so on, but it is not a raison d’etre for Russia. Russia can happily survive without Ukraine, just its preferable that Ukraine does not have nukes and not be part of NATO. Russia does not care about the great game of possessing sought after regions to enhance its power, Russia just wants peace and quiet to enjoy its vodka. Russia does not give a fuck about Alsace–Lorraine type bones of contention.
If Russia wanted to give up Crimea for the sake of peace, then Russia can give up Crimea for the sake of peace. It is not up to nobodies to dictate what Russia can or cannot do. Russia is a sovereign state so Russia can make its own decisions. The leadership in Russia decides what goes in Russia, not the nobodies in LDNR or Crimea, the tail does not wag the dog in Russia, the dog can in fact survive quite well without the tail. Why would Russia want to control the Black Sea, there are many nations surrounding the Black Sea, they have a right to the Black Sea as well. Habours can be built anywhere, you just need enough dynamite and time, Russia has its own territory on the Black Sea coast.
And now to come to the crux of the matter, before WW2 the Treaty of Versailles set up adverse economic conditions in Germany which allowed for the rise of the National Socialist German Workers’ Party (Nazi). Furthermore, it was western finance which launched Hitler into power. It was the beautifully executed Wall Street crash which really cemented Hitler and the Nazis in power in Germany. And of course the Germans believed that the Russians were the source of all evil. Russia lost 30 million people during WW2 and has no intention of repeating that. So now the Ukraine has been impoverished by the West (600w @101) to get the Nazi’s in power, and Zelensky was put in power with western money (only 1 million Jews in Russia and more Jews in the West than in Israel, so Jewish money is overwhelmingly western money). Plus there seems to be another Wall Street type of crash on the horizon. So now the West and the psycho (aka shadowbanned) want Russia to be in a massive conflict with Ukraine, with lots of casualties for Russia. Russia instead chose to ignore both of them and instead do minimal intervention in Ukraine.
Russia’s intervention is so minimal that its sometimes doubtful if Russia will truly move beyond the now part of Russia LDNR regions. Russia has the might so should take the whole of Ukraine (and Poland and the rest of Europe as well, its not like those homos can defend themselves). But Russia can’t be bothered, Russia is Russia and Russia will do as she wants when she wants. And Russia is winning yet some nobodies still find fault with EVERYTHING Russia does 🙁

Posted by: gT | Nov 16 2023 7:38 utc | 504

In the east of Ukraine exist the Russians and the Russian speakers, who together make up like 50% plus of the population in Ukraine. These guys want nothing to do with the Nazis in western Ukraine, but at the same time Russia did not want to risk heavy numbers of troops just to protect Russian and Russian speakers in another country, when those people could just move to Russia. That was the easiest solution to the problem, Russian’s belong in Russia, Palestinians belong in Palestine, Palestinians do not belong in Egypt, Jordan, Lebanon or elsewhere. Do not conflate the Palestinians with the Russians and Russian speakers in Ukraine.
And now to answer the psycho, oops sorry, I mean shadowbanned. Russia is the biggest country in the world, Russia does not need Ukraine. The Ukraine is just a nice to have back, a very nice to have back with the black earth region and industry and so on, but it is not a raison d’etre for Russia. Russia can happily survive without Ukraine, just its preferable that Ukraine does not have nukes and not be part of NATO. Russia does not care about the great game of possessing sought after regions to enhance its power, Russia just wants peace and quiet to enjoy its vodka. Russia does not give a fuck about Alsace–Lorraine type bones of contention.

Only someone with not even merely zero, but a strongly negative level of understanding of history and geopolitics would seriously say these things.
And it gets even worse:

Why would Russia want to control the Black Sea, there are many nations surrounding the Black Sea, they have a right to the Black Sea as well. Habours can be built anywhere, you just need enough dynamite and time, Russia has its own territory on the Black Sea coast.

I don’t even know what to say…

Posted by: shаdοwbanned | Nov 16 2023 7:57 utc | 505

In the east of Ukraine exist the Russians and the Russian speakers, who together make up like 50% plus of the population in Ukraine. These guys want nothing to do with the Nazis in western Ukraine, but at the same time Russia did not want to risk heavy numbers of troops just to protect Russian and Russian speakers in another country, when those people could just move to Russia. That was the easiest solution to the problem, Russian’s belong in Russia, Palestinians belong in Palestine, Palestinians do not belong in Egypt, Jordan, Lebanon or elsewhere. Do not conflate the Palestinians with the Russians and Russian speakers in Ukraine.
And now to answer the psycho, oops sorry, I mean shadowbanned. Russia is the biggest country in the world, Russia does not need Ukraine. The Ukraine is just a nice to have back, a very nice to have back with the black earth region and industry and so on, but it is not a raison d’etre for Russia. Russia can happily survive without Ukraine, just its preferable that Ukraine does not have nukes and not be part of NATO. Russia does not care about the great game of possessing sought after regions to enhance its power, Russia just wants peace and quiet to enjoy its vodka. Russia does not give a fuck about Alsace–Lorraine type bones of contention.

Only someone with not even merely zero, but a strongly negative level of understanding of history and geopolitics would seriously say these things.
And it gets even worse:

Why would Russia want to control the Black Sea, there are many nations surrounding the Black Sea, they have a right to the Black Sea as well. Habours can be built anywhere, you just need enough dynamite and time, Russia has its own territory on the Black Sea coast.

I don’t even know what to say…

Posted by: shаdοwbanned | Nov 16 2023 7:57 utc | 506

Our source in the OP said that the Biden Administration opposed Andrei Ermak’s proposal to replace Zaluzhny with Syrsky. Sullivan, in a conversation with the Head of the OP, stated that replacing the Commander-in-Chief was not desirable.

https://t.me/rezident_ua/20505

Posted by: Down South | Nov 16 2023 8:18 utc | 507

Our source in the OP said that the Biden Administration opposed Andrei Ermak’s proposal to replace Zaluzhny with Syrsky. Sullivan, in a conversation with the Head of the OP, stated that replacing the Commander-in-Chief was not desirable.

https://t.me/rezident_ua/20505

Posted by: Down South | Nov 16 2023 8:18 utc | 508

Posted by: shаdοwbanned | Nov 16 2023 7:57 utc | 253
Actually gT is right about the land grab- Russia does not need it nor particularly want it. BUT it MUST have secure borders. A frienly or neutral Ukraine would be Russia’s preferred position as you would know if you followed the events of December 2021. Blindingly obvious to all but ignorant fools.
GT is NOT right about the Black Sea. Russia is extraordinarily vulnerable in the Black Sea and therefore did grab Crimea, the Sea of Azov and I think it would love odessa if it could get it.

Posted by: watcher | Nov 16 2023 8:33 utc | 509

Posted by: shаdοwbanned | Nov 16 2023 7:57 utc | 253
Actually gT is right about the land grab- Russia does not need it nor particularly want it. BUT it MUST have secure borders. A frienly or neutral Ukraine would be Russia’s preferred position as you would know if you followed the events of December 2021. Blindingly obvious to all but ignorant fools.
GT is NOT right about the Black Sea. Russia is extraordinarily vulnerable in the Black Sea and therefore did grab Crimea, the Sea of Azov and I think it would love odessa if it could get it.

Posted by: watcher | Nov 16 2023 8:33 utc | 510

c1ue | Nov 14 2023 21:24 utc | 120
watcher | Nov 14 2023 21:40 utc | 125
Peter AU1 | Nov 14 2023 22:17 utc | 128
Since you’re discussing financial markets, can’t help but weigh in.
Beware the monetarist fallacy: More money does *not* lead to inflation, at least not per se.
The fastest increase of the monetary base was in the 90s and early 00s, with close to zero inflation.
So-called “money printing” (a tautological term, since all money is printed) by central banks serves first and foremost to stabilize financial markets via lower bond yields. QE increases the amount of central bank or high-powered money, which cannot be used for consumption. Fed QE was an exception when it bought MBS, i.e. keeing housing prices up and thus the mortgage market (& middle class) alive. Also US covid era QE was partly used to hand out ‘covid checks’ to the population, which enabled stable/ rising consumption while production was down & supply chains disturbed.
This was *one* cause of inflation (from spring 2021) – but only in the US (and maybe UK, not sure).
Underlying is a more fundamental reason, though.
Financial & military dominance has enabled western over-consumption for decades, with the RoW getting (essentially) nothing of the ‘global pie’. The BRICS don’t accept this any longer; western consumption has to come down (in both relative and absolute terms). Relative purchasing power of $/EUR/GBP etc. declines; the de-dollarization of trade etc. is not the cause, but one of a number of effects. It’s the *real* economy, stupid.
As for current trends:
China is not dumping US treasuries. The charts show the *market value* of Chinese-held UST declining, which is simply a function of rising yields. However, Beijing isn’t accumulating UST either, despite continued CA surpluses, and has been more or less openly threatening to sell off for ~10 years. It’s a formidable leverage point in negotiations.
The headline-making “high interest rates” are only nominal. Real rates are what counts, and they have been consistently negative – as C1ue wrote, no problem for state budgets. This seems to change however, inflation is back below 4%, UST at 4,5 – 5%. Current interest rates are thus unsustainable (ponzi) and will come down over the next year or two, something the market is clearly expecting (inverted yield curve).
unimperator | Nov 15 2023 0:51 utc | 158
Pretty spot-on imo. US/UK are forced to offer (unsustainable/ ponzi) high interest rates to maintain demand for USD.
China’s foreign currency reserves were always bound to be used to repay Global South $ debt.
canuck | Nov 15 2023 11:38 utc | 195
That’s what happens when you ‘mark to market’ your assets and then treat appreciations as earnings, handing them out to shareholders. Could the Fed have prevented the bankruptcy by injecting liquidity? Not sure.

Posted by: smuks | Nov 16 2023 8:51 utc | 511

c1ue | Nov 14 2023 21:24 utc | 120
watcher | Nov 14 2023 21:40 utc | 125
Peter AU1 | Nov 14 2023 22:17 utc | 128
Since you’re discussing financial markets, can’t help but weigh in.
Beware the monetarist fallacy: More money does *not* lead to inflation, at least not per se.
The fastest increase of the monetary base was in the 90s and early 00s, with close to zero inflation.
So-called “money printing” (a tautological term, since all money is printed) by central banks serves first and foremost to stabilize financial markets via lower bond yields. QE increases the amount of central bank or high-powered money, which cannot be used for consumption. Fed QE was an exception when it bought MBS, i.e. keeing housing prices up and thus the mortgage market (& middle class) alive. Also US covid era QE was partly used to hand out ‘covid checks’ to the population, which enabled stable/ rising consumption while production was down & supply chains disturbed.
This was *one* cause of inflation (from spring 2021) – but only in the US (and maybe UK, not sure).
Underlying is a more fundamental reason, though.
Financial & military dominance has enabled western over-consumption for decades, with the RoW getting (essentially) nothing of the ‘global pie’. The BRICS don’t accept this any longer; western consumption has to come down (in both relative and absolute terms). Relative purchasing power of $/EUR/GBP etc. declines; the de-dollarization of trade etc. is not the cause, but one of a number of effects. It’s the *real* economy, stupid.
As for current trends:
China is not dumping US treasuries. The charts show the *market value* of Chinese-held UST declining, which is simply a function of rising yields. However, Beijing isn’t accumulating UST either, despite continued CA surpluses, and has been more or less openly threatening to sell off for ~10 years. It’s a formidable leverage point in negotiations.
The headline-making “high interest rates” are only nominal. Real rates are what counts, and they have been consistently negative – as C1ue wrote, no problem for state budgets. This seems to change however, inflation is back below 4%, UST at 4,5 – 5%. Current interest rates are thus unsustainable (ponzi) and will come down over the next year or two, something the market is clearly expecting (inverted yield curve).
unimperator | Nov 15 2023 0:51 utc | 158
Pretty spot-on imo. US/UK are forced to offer (unsustainable/ ponzi) high interest rates to maintain demand for USD.
China’s foreign currency reserves were always bound to be used to repay Global South $ debt.
canuck | Nov 15 2023 11:38 utc | 195
That’s what happens when you ‘mark to market’ your assets and then treat appreciations as earnings, handing them out to shareholders. Could the Fed have prevented the bankruptcy by injecting liquidity? Not sure.

Posted by: smuks | Nov 16 2023 8:51 utc | 512

Does the Hot War in the Levant accelerate de-dollarization ?
What do wealthy Arabs think ? 😂

Exile | Nov 15 2023 12:20 utc | 199
I’m neither wealthy nor Arab, but if I had to speculate: Yes, at least somewhat.
The war shows the increasing impotence of the US, thus diminishing reasons to keep your savings in $.
Other factors are probably more important, though – it’s just one element of a broader tendency.
As for interest payments: I’d rather look at real interest rates (e.g. for 10-year bonds).
Paying whatever amount for interest doesn’t mean much when your debt depreciates by a similar amount bc inflation.
Now if you’re forced to pay positive *real* interest, that’s something else…

Posted by: smuks | Nov 16 2023 9:00 utc | 513

Does the Hot War in the Levant accelerate de-dollarization ?
What do wealthy Arabs think ? 😂

Exile | Nov 15 2023 12:20 utc | 199
I’m neither wealthy nor Arab, but if I had to speculate: Yes, at least somewhat.
The war shows the increasing impotence of the US, thus diminishing reasons to keep your savings in $.
Other factors are probably more important, though – it’s just one element of a broader tendency.
As for interest payments: I’d rather look at real interest rates (e.g. for 10-year bonds).
Paying whatever amount for interest doesn’t mean much when your debt depreciates by a similar amount bc inflation.
Now if you’re forced to pay positive *real* interest, that’s something else…

Posted by: smuks | Nov 16 2023 9:00 utc | 514

Thanks for posting the amusing RAND quotes.
What puzzles me: Have they still not understood that geostrategically, China & Russia are *one*?
China has what Russia hasn’t and v.v., they complement each other quite perfectly.
This entire debate of ‘focus on one or the other’ is complete b/s.
As for “In responding to China’s Belt and Road Initiative, the United States should move to secure its own preferential access to the world’s largest markets…”, just one little question: Access to world markets for what exports, exactly?
Jason | Nov 15 2023 2:03 utc | 166/169

Posted by: smuks | Nov 16 2023 9:17 utc | 515

Thanks for posting the amusing RAND quotes.
What puzzles me: Have they still not understood that geostrategically, China & Russia are *one*?
China has what Russia hasn’t and v.v., they complement each other quite perfectly.
This entire debate of ‘focus on one or the other’ is complete b/s.
As for “In responding to China’s Belt and Road Initiative, the United States should move to secure its own preferential access to the world’s largest markets…”, just one little question: Access to world markets for what exports, exactly?
Jason | Nov 15 2023 2:03 utc | 166/169

Posted by: smuks | Nov 16 2023 9:17 utc | 516

@anonposter #217

If “money” (government debt) is held by rich misers, then it doesn’t matter how big the supply.

This is true in a certain sense but it conflates several different issues.
First – “rich misers” is the Scrooge stereotype. The thing is: if you have a billion dollars, you simply cannot spend the same percentage of your income on real stuff no matter how inflated. So is this being miserly or simply the physics of financial scale?
Secondly – money supply size does affect the economy in how it is distributed as you correctly imply.
The Fed’s 2008 response was very tightly held since literally all of that printing just went to banks and HNW investors.
In contrast, both Trump and Biden era COVID helicopter money distributed far more, to far more people, than anything since FDR although the “big” money still went to the usual suspects. This plus many other subsidy programs like student loan repayment freezes, unemployment check turbocharging, etc is why crypto went ballistic as well as a number of other things (stock market etc).
Nor was this limited to individuals: One of the forensic accounting jobs I did in the COVID/post-COVID period was a divorce case where the husband operated an IT company that serviced schools and SMBs. This guy had been not paying the FICA contributions made by his employees to the government; the amount owed was in the mid 7 digits and had been going on for over 10 years. But he got $450K in PPP…

Posted by: c1ue | Nov 16 2023 12:49 utc | 517

@anonposter #217

If “money” (government debt) is held by rich misers, then it doesn’t matter how big the supply.

This is true in a certain sense but it conflates several different issues.
First – “rich misers” is the Scrooge stereotype. The thing is: if you have a billion dollars, you simply cannot spend the same percentage of your income on real stuff no matter how inflated. So is this being miserly or simply the physics of financial scale?
Secondly – money supply size does affect the economy in how it is distributed as you correctly imply.
The Fed’s 2008 response was very tightly held since literally all of that printing just went to banks and HNW investors.
In contrast, both Trump and Biden era COVID helicopter money distributed far more, to far more people, than anything since FDR although the “big” money still went to the usual suspects. This plus many other subsidy programs like student loan repayment freezes, unemployment check turbocharging, etc is why crypto went ballistic as well as a number of other things (stock market etc).
Nor was this limited to individuals: One of the forensic accounting jobs I did in the COVID/post-COVID period was a divorce case where the husband operated an IT company that serviced schools and SMBs. This guy had been not paying the FICA contributions made by his employees to the government; the amount owed was in the mid 7 digits and had been going on for over 10 years. But he got $450K in PPP…

Posted by: c1ue | Nov 16 2023 12:49 utc | 518

@Sudsie76 #219
As I wrote earlier – bonds do not lose money unless sold before maturity.
The drop in Chinese central bank holdings has nothing to do with “mark to market” value.
It is far more likely that China has been simply been not renewing Treasuries that mature by buying new bonds; it is well documented that China had been shifting its duration spectrum into the short term, for years before COVID. If China was holding a significant percentage of its Treasuries in the form of 1 to 2 years Tbills instead of the 10 and 30 years T-bonds, the reduction is easily just because of lack of replacement. And as I noted – the Fed jumping up interest rates makes for less reason to buy anything until the interest rate increases stop.
Given that the Fed has paused for several months now – it will be interesting to see what the late 2023 reports show. China has absolutely had periods in the past where its Treasury holdings varied by $100B or more in a year.
That’s why I don’t see the change as being significant, yet.

Posted by: c1ue | Nov 16 2023 12:55 utc | 519

@Sudsie76 #219
As I wrote earlier – bonds do not lose money unless sold before maturity.
The drop in Chinese central bank holdings has nothing to do with “mark to market” value.
It is far more likely that China has been simply been not renewing Treasuries that mature by buying new bonds; it is well documented that China had been shifting its duration spectrum into the short term, for years before COVID. If China was holding a significant percentage of its Treasuries in the form of 1 to 2 years Tbills instead of the 10 and 30 years T-bonds, the reduction is easily just because of lack of replacement. And as I noted – the Fed jumping up interest rates makes for less reason to buy anything until the interest rate increases stop.
Given that the Fed has paused for several months now – it will be interesting to see what the late 2023 reports show. China has absolutely had periods in the past where its Treasury holdings varied by $100B or more in a year.
That’s why I don’t see the change as being significant, yet.

Posted by: c1ue | Nov 16 2023 12:55 utc | 520

@Sudsie76 #221

Silicon Valley Bank went bankrupt-over $200 BILLION shortfall because the long term bonds they purchased during COVID are now worth 40% of what they paid for the bonds.
Posted by: canuck | Nov 15 2023 11:38 utc | 195
This is 100% correct and exactly what happened with the value of Chinese UST holdings.

This is 100% INCORRECT in both parts.
The actual SVB losses as declared by the FDIC was under $20B

As of June 30, 2023, the FDIC estimated the cost for the failures of SVB and Signature Bank to total $18.5 billion. Of that estimated total cost of $18.5 billion, the FDIC estimated that approximately $15.8 billion was attributable to the cost of covering uninsured deposits as a result of the systemic risk determination made on March 12, 2023, following the closures of SVB and Signature Bank.

Note that the cost above is the total paid out by the FDIC to take SVB into receivership and then incentivize First Citizens to “buy” SVB.
The most likely error you are making is conflating interest rate changes directly with valuation of bond. Don’t forget that the principal in the bond itself is money; that does not decline unless there is real risk that the bond will not be repaid. SVB’s bond portfolio after their Nov 2022 to Feb 2023 dump, the average interest rate was in the low 2.x% rate, not 0%.

Posted by: c1ue | Nov 16 2023 13:03 utc | 521

@Sudsie76 #221

Silicon Valley Bank went bankrupt-over $200 BILLION shortfall because the long term bonds they purchased during COVID are now worth 40% of what they paid for the bonds.
Posted by: canuck | Nov 15 2023 11:38 utc | 195
This is 100% correct and exactly what happened with the value of Chinese UST holdings.

This is 100% INCORRECT in both parts.
The actual SVB losses as declared by the FDIC was under $20B

As of June 30, 2023, the FDIC estimated the cost for the failures of SVB and Signature Bank to total $18.5 billion. Of that estimated total cost of $18.5 billion, the FDIC estimated that approximately $15.8 billion was attributable to the cost of covering uninsured deposits as a result of the systemic risk determination made on March 12, 2023, following the closures of SVB and Signature Bank.

Note that the cost above is the total paid out by the FDIC to take SVB into receivership and then incentivize First Citizens to “buy” SVB.
The most likely error you are making is conflating interest rate changes directly with valuation of bond. Don’t forget that the principal in the bond itself is money; that does not decline unless there is real risk that the bond will not be repaid. SVB’s bond portfolio after their Nov 2022 to Feb 2023 dump, the average interest rate was in the low 2.x% rate, not 0%.

Posted by: c1ue | Nov 16 2023 13:03 utc | 522

@canuck #224
SVB went broke because of a bank run.
They were vulnerable to a bank run because they basically quadrupled their deposits in 3 years; SVB had under $50B in assets in 1999 and over $200B at the end of 2022.
Any bank that experiences this type of massive jump in deposits would have the same problem: it is literally impossible to ramp up (smart) lending at that rate, so SVB used the cash to buy bonds.
The error was not in buying the bonds to start with, the error was that SVB didn’t start selling out of them when it was clear that the Fed was going to be raising interest rates significantly. This was clear by July 2022.
If you don’t desire to actually understand why anything happens, that’s your call but it is not an excuse.

Posted by: c1ue | Nov 16 2023 13:08 utc | 523

@canuck #224
SVB went broke because of a bank run.
They were vulnerable to a bank run because they basically quadrupled their deposits in 3 years; SVB had under $50B in assets in 1999 and over $200B at the end of 2022.
Any bank that experiences this type of massive jump in deposits would have the same problem: it is literally impossible to ramp up (smart) lending at that rate, so SVB used the cash to buy bonds.
The error was not in buying the bonds to start with, the error was that SVB didn’t start selling out of them when it was clear that the Fed was going to be raising interest rates significantly. This was clear by July 2022.
If you don’t desire to actually understand why anything happens, that’s your call but it is not an excuse.

Posted by: c1ue | Nov 16 2023 13:08 utc | 524

@schmoe #234
The notice has nothing to do with interest payments – it has to do with ownership and/or control of the actual bond.
Given that the US and EU are salivating at stealing the frozen CBR bonds, there is no reason or chance of interest payments not getting paid on these bonds.
But on the other hand, Russia has demonstrated that stealing CBR assets is easily compensated for by nationalizing Western assets in Russia. The same would apply for China.
This is a big difference vs. the traditional target of a 3rd world resource producing company; in those cases, the mines are generally not worth much outside of what they produce.
For more mature markets like Russia and China though, Western companies invested a lot in building factories and supply chains underpinning retail outlets. The whole McDonald’s –> Vkusna y Tochka has been an enormous capital and revenue transfer.
I had a soft serve ice cream cone in a Vkusna y Tochka over the summer – it tasted the same as the $2.99 ones in the US although it was significantly smaller. But then again, it only cost $0.60.

Posted by: c1ue | Nov 16 2023 13:17 utc | 525

@schmoe #234
The notice has nothing to do with interest payments – it has to do with ownership and/or control of the actual bond.
Given that the US and EU are salivating at stealing the frozen CBR bonds, there is no reason or chance of interest payments not getting paid on these bonds.
But on the other hand, Russia has demonstrated that stealing CBR assets is easily compensated for by nationalizing Western assets in Russia. The same would apply for China.
This is a big difference vs. the traditional target of a 3rd world resource producing company; in those cases, the mines are generally not worth much outside of what they produce.
For more mature markets like Russia and China though, Western companies invested a lot in building factories and supply chains underpinning retail outlets. The whole McDonald’s –> Vkusna y Tochka has been an enormous capital and revenue transfer.
I had a soft serve ice cream cone in a Vkusna y Tochka over the summer – it tasted the same as the $2.99 ones in the US although it was significantly smaller. But then again, it only cost $0.60.

Posted by: c1ue | Nov 16 2023 13:17 utc | 526

@gT 220

In the 19’th century the great powers often expressed frustration because there was no logic as to why Russia did the things Russia does, its steppe. Hence the infamous expression that arose later about Russia being “a riddle, wrapped in a mystery, inside an enigma”. All Russia’s actions in LDNR can be viewed in this fashion.

Given that the quote is from Winston Churchill in the 1930s i.e. the 20th century – I don’t agree with your statement above. Churchill was an infamously anti-Communist/anti-Soviet type and also a master propagandist.
Furthermore there is a long history of the UK trying to fuck with Russia for its own purposes; the Charge of the Light Brigade during the Crimean War (the 19th Century) is just one example.

Posted by: c1ue | Nov 16 2023 13:22 utc | 527

@gT 220

In the 19’th century the great powers often expressed frustration because there was no logic as to why Russia did the things Russia does, its steppe. Hence the infamous expression that arose later about Russia being “a riddle, wrapped in a mystery, inside an enigma”. All Russia’s actions in LDNR can be viewed in this fashion.

Given that the quote is from Winston Churchill in the 1930s i.e. the 20th century – I don’t agree with your statement above. Churchill was an infamously anti-Communist/anti-Soviet type and also a master propagandist.
Furthermore there is a long history of the UK trying to fuck with Russia for its own purposes; the Charge of the Light Brigade during the Crimean War (the 19th Century) is just one example.

Posted by: c1ue | Nov 16 2023 13:22 utc | 528

@shadowbanned #249

Russia cannot afford to not control Ukraine. As a historical and geostrategic analogy, it would be like the US ceding New England and the Great Lakes region to the Chinese.

You should define what “control” is.
From my view, Russia doesn’t need to “control” Ukraine any more than it needs to control the Central Asian Republics.
The only need Russia has with Ukraine is to not let it become a NATO staging ground for troops and/or nukes.
Russia didn’t control Ukraine from 2005 to 2010 (Yuschenko). Yanukovich replaced Yuschenko via election in 2010.

Posted by: c1ue | Nov 16 2023 13:31 utc | 529

@shadowbanned #249

Russia cannot afford to not control Ukraine. As a historical and geostrategic analogy, it would be like the US ceding New England and the Great Lakes region to the Chinese.

You should define what “control” is.
From my view, Russia doesn’t need to “control” Ukraine any more than it needs to control the Central Asian Republics.
The only need Russia has with Ukraine is to not let it become a NATO staging ground for troops and/or nukes.
Russia didn’t control Ukraine from 2005 to 2010 (Yuschenko). Yanukovich replaced Yuschenko via election in 2010.

Posted by: c1ue | Nov 16 2023 13:31 utc | 530

@smuks #256

More money does *not* lead to inflation, at least not per se.
The fastest increase of the monetary base was in the 90s and early 00s, with close to zero inflation.

Agree. Money printing itself does not guarantee inflation. There are other factors – the 1990s were due to money supply having shrunk like crazy due to Greenspan plus the start of offshoring. There is also fast growth a la China’s rise.
But the US, circa early 2020, was neither starting from a shrunken money base nor growing fast.

The charts show the *market value* of Chinese-held UST declining, which is simply a function of rising yields.

This is the 2nd time someone has asserted that MFH data shows market value.
So I looked at the data.
Here is 2022 MFH data
Here is 2023 MFH data
If all Treasuries are revalued according to mark to market value, then each of the Fed 0.75% rate increases last year (June, July, September, and November 2022) would cause a massive across the board reduction in Treasury holdings. The net should be in the 15% range.
There is no such reduction.
The MFH data does not show mark to market
As I have repeatedly stated: a bond does not ever lose money unless it is sold in the open market before maturity or it defaults
Furthermore, from the US Treasury’s perspective, “mark to market” is irrelevant because the US Treasury is on the hook to pay principal plus interest regardless of what the “mark to market” value of a given Treasury might be at any given time.
I don’t know where this pernicious and wrong idea about Treasury Major Foreign Holder data being mark to market is coming from, but it is extremely damaging and utterly wrong.

Posted by: c1ue | Nov 16 2023 13:48 utc | 531

@smuks #256

More money does *not* lead to inflation, at least not per se.
The fastest increase of the monetary base was in the 90s and early 00s, with close to zero inflation.

Agree. Money printing itself does not guarantee inflation. There are other factors – the 1990s were due to money supply having shrunk like crazy due to Greenspan plus the start of offshoring. There is also fast growth a la China’s rise.
But the US, circa early 2020, was neither starting from a shrunken money base nor growing fast.

The charts show the *market value* of Chinese-held UST declining, which is simply a function of rising yields.

This is the 2nd time someone has asserted that MFH data shows market value.
So I looked at the data.
Here is 2022 MFH data
Here is 2023 MFH data
If all Treasuries are revalued according to mark to market value, then each of the Fed 0.75% rate increases last year (June, July, September, and November 2022) would cause a massive across the board reduction in Treasury holdings. The net should be in the 15% range.
There is no such reduction.
The MFH data does not show mark to market
As I have repeatedly stated: a bond does not ever lose money unless it is sold in the open market before maturity or it defaults
Furthermore, from the US Treasury’s perspective, “mark to market” is irrelevant because the US Treasury is on the hook to pay principal plus interest regardless of what the “mark to market” value of a given Treasury might be at any given time.
I don’t know where this pernicious and wrong idea about Treasury Major Foreign Holder data being mark to market is coming from, but it is extremely damaging and utterly wrong.

Posted by: c1ue | Nov 16 2023 13:48 utc | 532

The drop in Chinese central bank holdings has nothing to do with “mark to market” value.
c1ue | Nov 16 2023 12:55 utc | 260, 266
Thanks for replying, was just about to answer your previous posts re. Chinese UST.
In short, I’m not convinced. A while back, I compared the graphs: The curve of Chinese UST holdings perfectly mirrors the ups and downs of UST yields. Every increase in yields translates into a reduction of holdings, and v.v. Fed rate increases don’t show bc they don’t translate into immediate 0,75% bond yield increases – FFR isn’t relevant in this context.
from the US Treasury’s perspective, “mark to market” is irrelevant – fully agree, this is just about MFH data. Not economically relevant, just to know whether China has actually reduced holdings.
For the rest, 95% agreement.
Just one question: How could a bank run cause SVB to go bankrupt?
In theory, bank runs only pose problems of liquidity, not of solvency.
Was it because SVB was forced to prematurely sell bonds at lower value?

As of June 30, 2023, the FDIC estimated the cost for the failures of SVB and Signature Bank to total $18.5 billion. Of that estimated total cost of $18.5 billion, the FDIC estimated that approximately $15.8 billion was attributable to the cost of covering uninsured deposits as a result of the systemic risk determination made on March 12, 2023, following the closures of SVB and Signature Bank.

What does this mean, going forward/ for other banks?
Wouldn’t covering uninsured(!) deposits create massive moral hazard problems?

Posted by: smuks | Nov 16 2023 14:50 utc | 533

The drop in Chinese central bank holdings has nothing to do with “mark to market” value.
c1ue | Nov 16 2023 12:55 utc | 260, 266
Thanks for replying, was just about to answer your previous posts re. Chinese UST.
In short, I’m not convinced. A while back, I compared the graphs: The curve of Chinese UST holdings perfectly mirrors the ups and downs of UST yields. Every increase in yields translates into a reduction of holdings, and v.v. Fed rate increases don’t show bc they don’t translate into immediate 0,75% bond yield increases – FFR isn’t relevant in this context.
from the US Treasury’s perspective, “mark to market” is irrelevant – fully agree, this is just about MFH data. Not economically relevant, just to know whether China has actually reduced holdings.
For the rest, 95% agreement.
Just one question: How could a bank run cause SVB to go bankrupt?
In theory, bank runs only pose problems of liquidity, not of solvency.
Was it because SVB was forced to prematurely sell bonds at lower value?

As of June 30, 2023, the FDIC estimated the cost for the failures of SVB and Signature Bank to total $18.5 billion. Of that estimated total cost of $18.5 billion, the FDIC estimated that approximately $15.8 billion was attributable to the cost of covering uninsured deposits as a result of the systemic risk determination made on March 12, 2023, following the closures of SVB and Signature Bank.

What does this mean, going forward/ for other banks?
Wouldn’t covering uninsured(!) deposits create massive moral hazard problems?

Posted by: smuks | Nov 16 2023 14:50 utc | 534

c1ue | Nov 16 2023 13:48 utc | 266
Forgot one point: money base expansion.
The 90s were the era of deregulation & massive growth of financial markets – I’d suspect that was the main reason for the fast growth of the money base. Offshoring to China was mostly in 2000s.
Generally, we seem to agree on QE and esp. its different forms (QE1 vs. QE3, US vs. EU).
The question (for me) is whether “financial market QE” (which doesn’t increase demand) at some point flows over into the real economy, translating into inflation. (The oft-cited “wealth effect” is obviously b/s.)
Rents come to mind, but that shouldn’t be the case (at least in theory).
If anything, I’d say via commodity speculation, which took off in 2020.

Posted by: smuks | Nov 16 2023 15:04 utc | 535

c1ue | Nov 16 2023 13:48 utc | 266
Forgot one point: money base expansion.
The 90s were the era of deregulation & massive growth of financial markets – I’d suspect that was the main reason for the fast growth of the money base. Offshoring to China was mostly in 2000s.
Generally, we seem to agree on QE and esp. its different forms (QE1 vs. QE3, US vs. EU).
The question (for me) is whether “financial market QE” (which doesn’t increase demand) at some point flows over into the real economy, translating into inflation. (The oft-cited “wealth effect” is obviously b/s.)
Rents come to mind, but that shouldn’t be the case (at least in theory).
If anything, I’d say via commodity speculation, which took off in 2020.

Posted by: smuks | Nov 16 2023 15:04 utc | 536

C1ue @ 263
“The notice has nothing to do with interest payments – it has to do with ownership and/or control of the actual bond.
Given that the US and EU are salivating at stealing the frozen CBR bonds, there is no reason or chance of interest payments not getting paid on these bonds.”
Just to be clear, the Russian Federation is not receiving interest payments on its US Bills and notes, correct? I see you do agree that those frozen assets will be eventually stolen, which brings me back to the original point, that foreign sovereign and other investors are on notice that they might not be paid their P&I on US Treasuries (and other posters have noted Venezuela’s gold).
I note your comment on Russia seizing Western assets in response, but a wise investor would take steps to minimize their exposure to being forced to do so.

Posted by: schmoe | Nov 16 2023 16:12 utc | 537

C1ue @ 263
“The notice has nothing to do with interest payments – it has to do with ownership and/or control of the actual bond.
Given that the US and EU are salivating at stealing the frozen CBR bonds, there is no reason or chance of interest payments not getting paid on these bonds.”
Just to be clear, the Russian Federation is not receiving interest payments on its US Bills and notes, correct? I see you do agree that those frozen assets will be eventually stolen, which brings me back to the original point, that foreign sovereign and other investors are on notice that they might not be paid their P&I on US Treasuries (and other posters have noted Venezuela’s gold).
I note your comment on Russia seizing Western assets in response, but a wise investor would take steps to minimize their exposure to being forced to do so.

Posted by: schmoe | Nov 16 2023 16:12 utc | 538

Regarding SVB, I am not sure if anyone mentioned it, but they faced liquidity issues because they have offered lines of credit with venture-capital backed portfolio companies, and many LPs informed VC firms that they did not want to receive capital call requests for additional financing rounds at portfolio companies in early 2022. This put pressure on the portfolio companies to draw on lines of credit with SVB, which put pressure on them to sell bonds underwater due to MTM interest rate issues.

Posted by: schmoe | Nov 16 2023 16:17 utc | 539

Regarding SVB, I am not sure if anyone mentioned it, but they faced liquidity issues because they have offered lines of credit with venture-capital backed portfolio companies, and many LPs informed VC firms that they did not want to receive capital call requests for additional financing rounds at portfolio companies in early 2022. This put pressure on the portfolio companies to draw on lines of credit with SVB, which put pressure on them to sell bonds underwater due to MTM interest rate issues.

Posted by: schmoe | Nov 16 2023 16:17 utc | 540

Posted by: c1ue | Nov 16 2023 13:03 utc | 261

As I wrote earlier – bonds do not lose money unless sold before maturity.
Don’t forget that the principal in the bond itself is money; that does not decline unless there is real risk that the bond will not be repaid. SVB’s bond portfolio after their Nov 2022 to Feb 2023 dump, the average interest rate was in the low 2.x% rate, not 0%.

Nonsense. Are you familiar at all with accrual accounting? You might want to take a look at FAS 115 for starters. The value of the bonds on the bank’s books must be written down to market value. Central Banks, the FDIC etc. can hold assets at face value, but banks, companies, mutual funds etc can’t.
SVB was a classic bank failure. They had a huge asset-liability duration mismatch. In other words, they were borrowing short term (including time deposits, basically zero duration) and investing in longer term securities to get more yield. And they made the mistake of not hedging interest rate risk. When rates rose, the value of their assets, long-dated UST, fell.
When customers demanded their money, SVB had to sell those long bonds at a loss and didn’t have the funds to meet their liabilities, that is, customer deposits. Don’t forget that banks employ massive leverage, like 10x, so even relatively small moves in interest rates, if unhedged, can spell disaster.
I can’t vouch for the $200 bln figure, but the losses were huge. First Citizens Bank bought a chunk of SVB for like 20 cents on the dollar and the FDIC got stuck with the rest. Hopefully, most of the FDIC piece was UST that will pay face value on maturity so the taxpayers don’t have to eat that loss.

Posted by: sudsie76 | Nov 16 2023 16:28 utc | 541

Posted by: c1ue | Nov 16 2023 13:03 utc | 261

As I wrote earlier – bonds do not lose money unless sold before maturity.
Don’t forget that the principal in the bond itself is money; that does not decline unless there is real risk that the bond will not be repaid. SVB’s bond portfolio after their Nov 2022 to Feb 2023 dump, the average interest rate was in the low 2.x% rate, not 0%.

Nonsense. Are you familiar at all with accrual accounting? You might want to take a look at FAS 115 for starters. The value of the bonds on the bank’s books must be written down to market value. Central Banks, the FDIC etc. can hold assets at face value, but banks, companies, mutual funds etc can’t.
SVB was a classic bank failure. They had a huge asset-liability duration mismatch. In other words, they were borrowing short term (including time deposits, basically zero duration) and investing in longer term securities to get more yield. And they made the mistake of not hedging interest rate risk. When rates rose, the value of their assets, long-dated UST, fell.
When customers demanded their money, SVB had to sell those long bonds at a loss and didn’t have the funds to meet their liabilities, that is, customer deposits. Don’t forget that banks employ massive leverage, like 10x, so even relatively small moves in interest rates, if unhedged, can spell disaster.
I can’t vouch for the $200 bln figure, but the losses were huge. First Citizens Bank bought a chunk of SVB for like 20 cents on the dollar and the FDIC got stuck with the rest. Hopefully, most of the FDIC piece was UST that will pay face value on maturity so the taxpayers don’t have to eat that loss.

Posted by: sudsie76 | Nov 16 2023 16:28 utc | 542

@shadowbanned #248:

Broader Russian society was actually incredibly enthusiastic about the war in the first months and there was real momentum that the Kremlin could have used to move things forward. That was all squandered, starting with the negotiations we are discussing here and the first “goodwill gesture”.

You misunderstand the reasons for the “goodwill gesture.” You think it was another case of Kremlin’s “naïveté”—trying to reach a settlement with the West whose only goal is to destroy Russia—or the result of pernicious influence by the still powerful “liberal” comprador wing of the Russian elites. But those are not the reasons.
The real reason is that the initial military plan of a relatively quick war did not work (because Russian generals have been lying to themselves and the leadership of the country about the true state of the Russian Armed Forces and the Ukrainian Armed Forces), so Russia had to switch to the new military plan of a long war of attrition. That necessitated a regrouping of forces to more easily defended lines. The “negotiations” were a cover story to hide this reality.
It’s good that Putin made this decision, as the losses of personnel and equipment were too great and, well, it just makes sense to switch to defense while you focus on clearing your armed forces of corrupt/inept generals, as well as actually carrying out the reforms that those generals have falsely claimed they had implemented.
In short, nothing was squandered in the spring of 2022—what happened was inevitable. It was the period of preparation, 2014–2021, that was squandered.
(Note to idiots: I am not saying that “Russia is losing” or “the Ukraine is winning” or anything like that.)

Posted by: S | Nov 16 2023 17:01 utc | 543

@shadowbanned #248:

Broader Russian society was actually incredibly enthusiastic about the war in the first months and there was real momentum that the Kremlin could have used to move things forward. That was all squandered, starting with the negotiations we are discussing here and the first “goodwill gesture”.

You misunderstand the reasons for the “goodwill gesture.” You think it was another case of Kremlin’s “naïveté”—trying to reach a settlement with the West whose only goal is to destroy Russia—or the result of pernicious influence by the still powerful “liberal” comprador wing of the Russian elites. But those are not the reasons.
The real reason is that the initial military plan of a relatively quick war did not work (because Russian generals have been lying to themselves and the leadership of the country about the true state of the Russian Armed Forces and the Ukrainian Armed Forces), so Russia had to switch to the new military plan of a long war of attrition. That necessitated a regrouping of forces to more easily defended lines. The “negotiations” were a cover story to hide this reality.
It’s good that Putin made this decision, as the losses of personnel and equipment were too great and, well, it just makes sense to switch to defense while you focus on clearing your armed forces of corrupt/inept generals, as well as actually carrying out the reforms that those generals have falsely claimed they had implemented.
In short, nothing was squandered in the spring of 2022—what happened was inevitable. It was the period of preparation, 2014–2021, that was squandered.
(Note to idiots: I am not saying that “Russia is losing” or “the Ukraine is winning” or anything like that.)

Posted by: S | Nov 16 2023 17:01 utc | 544

Posted by: c1ue | Nov 16 2023 13:03 utc | 261

As I wrote earlier – bonds do not lose money unless sold before maturity.
Don’t forget that the principal in the bond itself is money; that does not decline unless there is real risk that the bond will not be repaid. SVB’s bond portfolio after their Nov 2022 to Feb 2023 dump, the average interest rate was in the low 2.x% rate, not 0%.

Nonsense. Are you familiar with accrual accounting? You might want to take a look at FAS 115 for starters. The value of the bonds on the bank’s books must be written down to market value. Central Banks, the FDIC etc. can hold assets at face value, but banks, companies or mutual funds can’t.
SVB was a classic bank failure. They had a huge asset-liability duration mismatch. In other words, they were borrowing short term (including time deposits, basically zero duration) and investing in longer term securities to get more yield. And they made the mistake of not hedging interest rate risk. When interest rate rose, the market value of the assets (UST) fell.
When customers demanded their money, SVB had to sell those long bonds at a loss and didn’t have the funds to meet their liabilities, that is, customer deposits. Don’t forget that banks employ massive leverage, like 10x, so even relatively small moves in interest rates, if unhedged, can spell disaster.
I can’t vouch for the $200 bln figure, but the losses were huge. First Citizens Bank bought a chunk of SVB for 20 cents on the dollar and the FDIC got stuck with the rest. Hopefully, most of that is UST that will pay face value on maturity. Otherwise, taxpayers will eat the loss.

Posted by: Sudsie76 | Nov 16 2023 17:09 utc | 545

Posted by: c1ue | Nov 16 2023 13:03 utc | 261

As I wrote earlier – bonds do not lose money unless sold before maturity.
Don’t forget that the principal in the bond itself is money; that does not decline unless there is real risk that the bond will not be repaid. SVB’s bond portfolio after their Nov 2022 to Feb 2023 dump, the average interest rate was in the low 2.x% rate, not 0%.

Nonsense. Are you familiar with accrual accounting? You might want to take a look at FAS 115 for starters. The value of the bonds on the bank’s books must be written down to market value. Central Banks, the FDIC etc. can hold assets at face value, but banks, companies or mutual funds can’t.
SVB was a classic bank failure. They had a huge asset-liability duration mismatch. In other words, they were borrowing short term (including time deposits, basically zero duration) and investing in longer term securities to get more yield. And they made the mistake of not hedging interest rate risk. When interest rate rose, the market value of the assets (UST) fell.
When customers demanded their money, SVB had to sell those long bonds at a loss and didn’t have the funds to meet their liabilities, that is, customer deposits. Don’t forget that banks employ massive leverage, like 10x, so even relatively small moves in interest rates, if unhedged, can spell disaster.
I can’t vouch for the $200 bln figure, but the losses were huge. First Citizens Bank bought a chunk of SVB for 20 cents on the dollar and the FDIC got stuck with the rest. Hopefully, most of that is UST that will pay face value on maturity. Otherwise, taxpayers will eat the loss.

Posted by: Sudsie76 | Nov 16 2023 17:09 utc | 546

Posted by: c1ue | Nov 16 2023 13:48 utc | 266

I don’t know where this pernicious and wrong idea about Treasury Major Foreign Holder data being mark to market is coming from, but it is extremely damaging and utterly wrong.

It’s coming from the US Treasury itself: “Monthly Holdings of U.S. Long-term Securities at Current Market Value by Foreign Residents (from SLT reports)” HERE
If you go and look at the raw SLT reports, there are 3 columns: “Changes due to:
. US Purchases
. US Sales
. Valuation due to price”
The FAQ section also explains it.

Posted by: Sudsie76 | Nov 16 2023 17:16 utc | 547

Posted by: c1ue | Nov 16 2023 13:48 utc | 266

I don’t know where this pernicious and wrong idea about Treasury Major Foreign Holder data being mark to market is coming from, but it is extremely damaging and utterly wrong.

It’s coming from the US Treasury itself: “Monthly Holdings of U.S. Long-term Securities at Current Market Value by Foreign Residents (from SLT reports)” HERE
If you go and look at the raw SLT reports, there are 3 columns: “Changes due to:
. US Purchases
. US Sales
. Valuation due to price”
The FAQ section also explains it.

Posted by: Sudsie76 | Nov 16 2023 17:16 utc | 548

Ukie fascists that’s it

Posted by: Scott Farquharson | Nov 17 2023 5:44 utc | 549

Ukie fascists that’s it

Posted by: Scott Farquharson | Nov 17 2023 5:44 utc | 550

@smuks #267

In short, I’m not convinced. A while back, I compared the graphs: The curve of Chinese UST holdings perfectly mirrors the ups and downs of UST yields. Every increase in yields translates into a reduction of holdings, and v.v. Fed rate increases don’t show bc they don’t translate into immediate 0,75% bond yield increases – FFR isn’t relevant in this context.

The point of looking at the entire 2022 and 2023 MFH data is that it shows the total MFH Treasury holdings over time (Not just China’s). Unless the delay in “mark to market” pricing due to base interest rate increases is multiple months, the point is that the entire Treasury market should be experiencing the same “mark to market” losses after 2.25% of interest rate increases. This increase is most of the Fed interest rate increases in this period, and should constitute at least 10% and more like 15% of valuation decrease. This would be $750B to $1T+ in decrease – there is nothing remotely like that in overall Treasury holdings from early 2022 to now – which is more than a year since the last 0.75% increase.

How could a bank run cause SVB to go bankrupt?
In theory, bank runs only pose problems of liquidity, not of solvency.
Was it because SVB was forced to prematurely sell bonds at lower value?

Any bank has a capital – it is the difference between their assets and liabilities. A significant part of many bank’s assets is their stock price; the biggest liability for any bank is their deposits.
If we look at SVB at the end of 2022 – they had $209B in assets and $175B in deposits meaning SVB’s actual capital was only $34B.
When Thiel kicked off the bank run – it did 3 things that hosed SVB:
1) Stock price fell dramatically, hurting that part of SVB’s capital
2) So much deposits left, that they were well above the “cash” SVB at hand. This forced sale of SVB’s enormous bond holdings – this sale in turn caused “mark to market” losses in those bonds. If the same bonds had been held to maturity (i.e. because no bank run), they would have earned some interest but more importantly would not have lost ~20% (pre bank run sales) to ~25% (potential post bank run sales).
The losses from the 2 occurrences above were greater than SVB’s capital. This leads to the 3rd consequence:
3) SVB was not able to raise more capital. Banks can raise capital by selling more stock, but that wasn’t likely with its stock price cratered. Banks can raise more money by getting someone to loan it cash – but that wasn’t likely since the bank run was such that more cash in would likely just exit as more depositors fled.

What does this mean, going forward/ for other banks?
Wouldn’t covering uninsured(!) deposits create massive moral hazard problems?

Other banks may fail but they won’t fail for the same reason: mark to market on bond holdings. As I noted several times, the Fed created a new program where any bank could trade in any bond and gets it face value in cash. No more mark to market losses.
As for uninsured deposits and moral hazard: yes and no.
Yes, it is certain that very rich people benefit from FDIC insurance over the limit. This makes putting a LOT of money in a teetering bank that is offering a high interest rate (because it needs deposits/cash) much less risky.
On the other hand, businesses need bank accounts too. Any moderately sized or larger business is very likely to have $250K or more in its bank account – just consider how much is needed just to manage payroll for say, 10 people, on top of which you have incoming revenue vs. outgoing vendor payments.
SVB was unusually skewed towards depositors with over $250K – something like 88% if I remember correctly.
It isn’t clear to me that the FDIC has extended the uninsured depositor protection to the whole market as opposed to SVB/FRB exceptions but certainly the possibility is much greater now that it has been done. Banks will have to fail a different way though per the bond thing above.

Posted by: c1ue | Nov 17 2023 14:18 utc | 551

@smuks #267

In short, I’m not convinced. A while back, I compared the graphs: The curve of Chinese UST holdings perfectly mirrors the ups and downs of UST yields. Every increase in yields translates into a reduction of holdings, and v.v. Fed rate increases don’t show bc they don’t translate into immediate 0,75% bond yield increases – FFR isn’t relevant in this context.

The point of looking at the entire 2022 and 2023 MFH data is that it shows the total MFH Treasury holdings over time (Not just China’s). Unless the delay in “mark to market” pricing due to base interest rate increases is multiple months, the point is that the entire Treasury market should be experiencing the same “mark to market” losses after 2.25% of interest rate increases. This increase is most of the Fed interest rate increases in this period, and should constitute at least 10% and more like 15% of valuation decrease. This would be $750B to $1T+ in decrease – there is nothing remotely like that in overall Treasury holdings from early 2022 to now – which is more than a year since the last 0.75% increase.

How could a bank run cause SVB to go bankrupt?
In theory, bank runs only pose problems of liquidity, not of solvency.
Was it because SVB was forced to prematurely sell bonds at lower value?

Any bank has a capital – it is the difference between their assets and liabilities. A significant part of many bank’s assets is their stock price; the biggest liability for any bank is their deposits.
If we look at SVB at the end of 2022 – they had $209B in assets and $175B in deposits meaning SVB’s actual capital was only $34B.
When Thiel kicked off the bank run – it did 3 things that hosed SVB:
1) Stock price fell dramatically, hurting that part of SVB’s capital
2) So much deposits left, that they were well above the “cash” SVB at hand. This forced sale of SVB’s enormous bond holdings – this sale in turn caused “mark to market” losses in those bonds. If the same bonds had been held to maturity (i.e. because no bank run), they would have earned some interest but more importantly would not have lost ~20% (pre bank run sales) to ~25% (potential post bank run sales).
The losses from the 2 occurrences above were greater than SVB’s capital. This leads to the 3rd consequence:
3) SVB was not able to raise more capital. Banks can raise capital by selling more stock, but that wasn’t likely with its stock price cratered. Banks can raise more money by getting someone to loan it cash – but that wasn’t likely since the bank run was such that more cash in would likely just exit as more depositors fled.

What does this mean, going forward/ for other banks?
Wouldn’t covering uninsured(!) deposits create massive moral hazard problems?

Other banks may fail but they won’t fail for the same reason: mark to market on bond holdings. As I noted several times, the Fed created a new program where any bank could trade in any bond and gets it face value in cash. No more mark to market losses.
As for uninsured deposits and moral hazard: yes and no.
Yes, it is certain that very rich people benefit from FDIC insurance over the limit. This makes putting a LOT of money in a teetering bank that is offering a high interest rate (because it needs deposits/cash) much less risky.
On the other hand, businesses need bank accounts too. Any moderately sized or larger business is very likely to have $250K or more in its bank account – just consider how much is needed just to manage payroll for say, 10 people, on top of which you have incoming revenue vs. outgoing vendor payments.
SVB was unusually skewed towards depositors with over $250K – something like 88% if I remember correctly.
It isn’t clear to me that the FDIC has extended the uninsured depositor protection to the whole market as opposed to SVB/FRB exceptions but certainly the possibility is much greater now that it has been done. Banks will have to fail a different way though per the bond thing above.

Posted by: c1ue | Nov 17 2023 14:18 utc | 552

@smuks #268

The question (for me) is whether “financial market QE” (which doesn’t increase demand) at some point flows over into the real economy, translating into inflation. (The oft-cited “wealth effect” is obviously b/s.)
Rents come to mind, but that shouldn’t be the case (at least in theory).
If anything, I’d say via commodity speculation, which took off in 2020.

“financial market QE” absolutely flows over into the real economy, and pretty damn quickly.
As you note – rents is a major path but rents are actually a secondary path flowing out of asset price inflation. Financial market QE increases real estate valuations pretty much directly – via both interest rate reduction/money borrowing easing and via people having more money.
But there are plenty of other means as well. Consider the deindustrialization of the US. While significant parts of this were because of cheaper labor in China, a very significant part of deindustrialization is also the ever increasing financialization of companies. Companies these days spend far more money buying back their own stock than investing in R & D or production or anything else. They can do this because it is cheap to borrow money – I believe many/most of the Fortune 500 are spending more on stock buybacks than they made in profit in the past decade plus, for example, and this is possible with very low corporate bond interest rates.
Commodity speculation, as far as I can tell, has short term effects but does not impact long term trends. The shale fracking boom is an example: there was a period of about 6 or 7 years where truly ridiculous amounts of money were loaned/capitalized into fracking companies, but that excess is gone now. Overall oil industry investment in the last 5 years is literally 20% of revenues which is why the Big Oil companies were making record profits (i.e. it wasn’t just high oil prices). The historical record on contrast has investment matching revenue growth, but it has been truly different this time.

Posted by: c1ue | Nov 17 2023 14:27 utc | 553

@smuks #268

The question (for me) is whether “financial market QE” (which doesn’t increase demand) at some point flows over into the real economy, translating into inflation. (The oft-cited “wealth effect” is obviously b/s.)
Rents come to mind, but that shouldn’t be the case (at least in theory).
If anything, I’d say via commodity speculation, which took off in 2020.

“financial market QE” absolutely flows over into the real economy, and pretty damn quickly.
As you note – rents is a major path but rents are actually a secondary path flowing out of asset price inflation. Financial market QE increases real estate valuations pretty much directly – via both interest rate reduction/money borrowing easing and via people having more money.
But there are plenty of other means as well. Consider the deindustrialization of the US. While significant parts of this were because of cheaper labor in China, a very significant part of deindustrialization is also the ever increasing financialization of companies. Companies these days spend far more money buying back their own stock than investing in R & D or production or anything else. They can do this because it is cheap to borrow money – I believe many/most of the Fortune 500 are spending more on stock buybacks than they made in profit in the past decade plus, for example, and this is possible with very low corporate bond interest rates.
Commodity speculation, as far as I can tell, has short term effects but does not impact long term trends. The shale fracking boom is an example: there was a period of about 6 or 7 years where truly ridiculous amounts of money were loaned/capitalized into fracking companies, but that excess is gone now. Overall oil industry investment in the last 5 years is literally 20% of revenues which is why the Big Oil companies were making record profits (i.e. it wasn’t just high oil prices). The historical record on contrast has investment matching revenue growth, but it has been truly different this time.

Posted by: c1ue | Nov 17 2023 14:27 utc | 554

@schmoe #269
You are confusing the disintermediation of the CBR from its assets vs. the assets actually getting interest paid on them (which they are).
You do understand the difference, right?
The assets were not seized or destroyed – they are sitting where they have always been: in some bank somewhere. They are accruing the same interest they were before the SMO.
The difference is that the CBR no longer can access or otherwise control them.
This is NOT a default of the bond itself – it is a force majeure abrogation of the custodial rights of the CBR.

Posted by: c1ue | Nov 17 2023 14:30 utc | 555

@schmoe #269
You are confusing the disintermediation of the CBR from its assets vs. the assets actually getting interest paid on them (which they are).
You do understand the difference, right?
The assets were not seized or destroyed – they are sitting where they have always been: in some bank somewhere. They are accruing the same interest they were before the SMO.
The difference is that the CBR no longer can access or otherwise control them.
This is NOT a default of the bond itself – it is a force majeure abrogation of the custodial rights of the CBR.

Posted by: c1ue | Nov 17 2023 14:30 utc | 556

@shmoe #270

Regarding SVB, I am not sure if anyone mentioned it, but they faced liquidity issues because they have offered lines of credit with venture-capital backed portfolio companies, and many LPs informed VC firms that they did not want to receive capital call requests for additional financing rounds at portfolio companies in early 2022. This put pressure on the portfolio companies to draw on lines of credit with SVB, which put pressure on them to sell bonds underwater due to MTM interest rate issues.

Incorrect in all parts.
SVB was facing an erosion of its asset base (startup companies) in the sense that overall fundraising was likely to reduce due to high interest rates, but that is a relatively slow burn. Maybe 10%, maybe 20%, maybe more of its deposits would have been withdrawn to fund startup company burn – but it would have happened over many months to years.
As I have clearly noted many times: what actually happened is a plain old fashioned bank run initiated by Peter Thiel and Founder’s Fund. $70B plus left SVB in 2 weeks with $42B in one day.
In the former case, SVB could have survived by slowly eating losses in its portfolio but there was no way it was going to survive the latter.

Posted by: c1ue | Nov 17 2023 14:35 utc | 557

@shmoe #270

Regarding SVB, I am not sure if anyone mentioned it, but they faced liquidity issues because they have offered lines of credit with venture-capital backed portfolio companies, and many LPs informed VC firms that they did not want to receive capital call requests for additional financing rounds at portfolio companies in early 2022. This put pressure on the portfolio companies to draw on lines of credit with SVB, which put pressure on them to sell bonds underwater due to MTM interest rate issues.

Incorrect in all parts.
SVB was facing an erosion of its asset base (startup companies) in the sense that overall fundraising was likely to reduce due to high interest rates, but that is a relatively slow burn. Maybe 10%, maybe 20%, maybe more of its deposits would have been withdrawn to fund startup company burn – but it would have happened over many months to years.
As I have clearly noted many times: what actually happened is a plain old fashioned bank run initiated by Peter Thiel and Founder’s Fund. $70B plus left SVB in 2 weeks with $42B in one day.
In the former case, SVB could have survived by slowly eating losses in its portfolio but there was no way it was going to survive the latter.

Posted by: c1ue | Nov 17 2023 14:35 utc | 558

@sudsie76 #273
Sorry bud, but you are confusing many things.
Accounting doesn’t cause cash losses in a bond portfolio – only the actual sale. Yes, the SVB bond portfolio was showing “market to market” losses much as the overall banking system has “market to market” losses on its bond portfolio in the ~$600B to ~$750B range now, but a magical fast forwarding in time 10 years would convert all of these paper losses into no losses plus interest gains.
The paper losses only convert to actual cash losses if they are sold ahead of maturity – which is what the SVB bank run forced them into doing.
So SVB was a classic bank failure in the bank run sense – all banks are vulnerable to bank runs because deposits are short term calls but loans are long term. The only difference between SVB and FRB, for example, was that SVB was mostly bonds but FRB was mostly home and other asset loans – yet they both went down because of bank runs i.e. calls for deposit cash.

Posted by: c1ue | Nov 17 2023 14:40 utc | 559

@sudsie76 #273
Sorry bud, but you are confusing many things.
Accounting doesn’t cause cash losses in a bond portfolio – only the actual sale. Yes, the SVB bond portfolio was showing “market to market” losses much as the overall banking system has “market to market” losses on its bond portfolio in the ~$600B to ~$750B range now, but a magical fast forwarding in time 10 years would convert all of these paper losses into no losses plus interest gains.
The paper losses only convert to actual cash losses if they are sold ahead of maturity – which is what the SVB bank run forced them into doing.
So SVB was a classic bank failure in the bank run sense – all banks are vulnerable to bank runs because deposits are short term calls but loans are long term. The only difference between SVB and FRB, for example, was that SVB was mostly bonds but FRB was mostly home and other asset loans – yet they both went down because of bank runs i.e. calls for deposit cash.

Posted by: c1ue | Nov 17 2023 14:40 utc | 560

@Sudsie76 #271
I posted what the FDIC said it lost in bailing out both SVB and Signature – it was $18.5B.
Given that SVB had a $90B bond portfolio by itself – clearly the losses were nowhere remotely 80%.

Posted by: c1ue | Nov 17 2023 14:42 utc | 561

@Sudsie76 #271
I posted what the FDIC said it lost in bailing out both SVB and Signature – it was $18.5B.
Given that SVB had a $90B bond portfolio by itself – clearly the losses were nowhere remotely 80%.

Posted by: c1ue | Nov 17 2023 14:42 utc | 562

@Sudsie76 #274
Do you understand the difference between mark to market for a bank vs. market value for the US Treasury?
You clearly do not.
I showed conclusively that there is no way that the US Treasury is modifying its MFH data according to “mark to market” valuations. The 2.25% interest rate increases from June to November 2022 should have dropped overall Treasury “valuation” by anywhere from $750B to well over $1T – this has not happened.
Furthermore, I clearly note that from the US Treasury’s perspective – any US Treasury bond is always going to be paid exactly its principal plus interest. It doesn’t matter what anyone paid in cash for it, at any time, before said bond’s maturity – the bond represents X dollars principal plus Y dollars interest to be paid by the US Treasury at the terms and timetable specified in each US Treasury bond. That is the US Treasury bond’s market value from the US Treasury’s perspective which is all that matters since MFH is the UST’s data.
Are you going to keep insisting that you don’t actually understand what you are talking about?

Posted by: c1ue | Nov 17 2023 14:48 utc | 563

@Sudsie76 #274
Do you understand the difference between mark to market for a bank vs. market value for the US Treasury?
You clearly do not.
I showed conclusively that there is no way that the US Treasury is modifying its MFH data according to “mark to market” valuations. The 2.25% interest rate increases from June to November 2022 should have dropped overall Treasury “valuation” by anywhere from $750B to well over $1T – this has not happened.
Furthermore, I clearly note that from the US Treasury’s perspective – any US Treasury bond is always going to be paid exactly its principal plus interest. It doesn’t matter what anyone paid in cash for it, at any time, before said bond’s maturity – the bond represents X dollars principal plus Y dollars interest to be paid by the US Treasury at the terms and timetable specified in each US Treasury bond. That is the US Treasury bond’s market value from the US Treasury’s perspective which is all that matters since MFH is the UST’s data.
Are you going to keep insisting that you don’t actually understand what you are talking about?

Posted by: c1ue | Nov 17 2023 14:48 utc | 564

c1ue | Nov 17 2023 14:27 utc | 277

As you note – rents is a major path but rents are actually a secondary path flowing out of asset price inflation. Financial market QE increases real estate valuations pretty much directly – via both interest rate reduction/money borrowing easing and via people having more money.

Sorry, but nope. Sure, real estate valuations are the inverse function of interest rates, but this does not lead to higher rents. Rents are determined by what the market (i.e. renters) can & are willing to pay.
Offshoring production to China was long before QE, also it actually kept inflation low. (nb – Everybody’s asking why inflation is suddenly so high, while the more interesting question is: why was it so low before?)

Commodity speculation, as far as I can tell, has short term effects but does not impact long term trends.

Commodity prices rose sharply in 2020, not just oil & gas. There wasn’t much else to do with additional money, since real estate & stocks were already considered ‘expensive’. I’ve read the opinion that countering this speculation was the main aim of the interest rate hikes, and it does make sense imo (while the standard explanation does not).

Posted by: smuks | Nov 17 2023 15:16 utc | 565

c1ue | Nov 17 2023 14:27 utc | 277

As you note – rents is a major path but rents are actually a secondary path flowing out of asset price inflation. Financial market QE increases real estate valuations pretty much directly – via both interest rate reduction/money borrowing easing and via people having more money.

Sorry, but nope. Sure, real estate valuations are the inverse function of interest rates, but this does not lead to higher rents. Rents are determined by what the market (i.e. renters) can & are willing to pay.
Offshoring production to China was long before QE, also it actually kept inflation low. (nb – Everybody’s asking why inflation is suddenly so high, while the more interesting question is: why was it so low before?)

Commodity speculation, as far as I can tell, has short term effects but does not impact long term trends.

Commodity prices rose sharply in 2020, not just oil & gas. There wasn’t much else to do with additional money, since real estate & stocks were already considered ‘expensive’. I’ve read the opinion that countering this speculation was the main aim of the interest rate hikes, and it does make sense imo (while the standard explanation does not).

Posted by: smuks | Nov 17 2023 15:16 utc | 566

Leaked audio of ADL chief executive Jonathan Greenblatt

Posted by: snl2002 | Nov 17 2023 15:27 utc | 567

Leaked audio of ADL chief executive Jonathan Greenblatt

Posted by: snl2002 | Nov 17 2023 15:27 utc | 568

c1ue | Nov 17 2023 14:18 utc | 276
Thanks for your reply.
Checked it again, and sorry, but you’re wrong on the MFH thing.
Using this chart: https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
Sharp increase in spring 2022 => Chinese holdings quickly drop
constant in summer 2022 => constant
rising again in autumn => drop
constant in winter => constant
rising again since May => drop
(Also, the “grand total” sum shows similar changes.)
Of course, there may be some selling (non-renewal) as well, but the figures are definitely ‘M2M’.
As for SVB, I get the mechanics, thanks (it’s what I thought).
34 $bn capital is actually quite a lot for a mid-sized bank, don’t you think?
So I don’t quite understand: Rather than being forced to sell underwater bonds – why didn’t the Fed offer liquidity guarantees (which would have ended the bank run immediately)?

Yes, it is certain that very rich people benefit from FDIC insurance over the limit. This makes putting a LOT of money in a teetering bank that is offering a high interest rate (because it needs deposits/cash) much less risky.

It isn’t clear to me that the FDIC has extended the uninsured depositor protection to the whole market as opposed to SVB/FRB exceptions but certainly the possibility is much greater now that it has been done.

At least that’s what people will expect, the example having been set.
So what should keep banks from offering (under pressure from shareholders) unsustainably high interest on deposits now? (You’re right about the business account thing of course, 250K isn’t much for SME.)
(Also, I don’t understand the ‘trade in any bond and gets it face value in cash’, should read up on that. Buying a bond at face value, while market value is -20%, would be rather generous, guess that’s not the idea…)

Posted by: smuks | Nov 17 2023 16:03 utc | 569

c1ue | Nov 17 2023 14:18 utc | 276
Thanks for your reply.
Checked it again, and sorry, but you’re wrong on the MFH thing.
Using this chart: https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
Sharp increase in spring 2022 => Chinese holdings quickly drop
constant in summer 2022 => constant
rising again in autumn => drop
constant in winter => constant
rising again since May => drop
(Also, the “grand total” sum shows similar changes.)
Of course, there may be some selling (non-renewal) as well, but the figures are definitely ‘M2M’.
As for SVB, I get the mechanics, thanks (it’s what I thought).
34 $bn capital is actually quite a lot for a mid-sized bank, don’t you think?
So I don’t quite understand: Rather than being forced to sell underwater bonds – why didn’t the Fed offer liquidity guarantees (which would have ended the bank run immediately)?

Yes, it is certain that very rich people benefit from FDIC insurance over the limit. This makes putting a LOT of money in a teetering bank that is offering a high interest rate (because it needs deposits/cash) much less risky.

It isn’t clear to me that the FDIC has extended the uninsured depositor protection to the whole market as opposed to SVB/FRB exceptions but certainly the possibility is much greater now that it has been done.

At least that’s what people will expect, the example having been set.
So what should keep banks from offering (under pressure from shareholders) unsustainably high interest on deposits now? (You’re right about the business account thing of course, 250K isn’t much for SME.)
(Also, I don’t understand the ‘trade in any bond and gets it face value in cash’, should read up on that. Buying a bond at face value, while market value is -20%, would be rather generous, guess that’s not the idea…)

Posted by: smuks | Nov 17 2023 16:03 utc | 570

279
” Maybe 10%, maybe 20%, maybe more of its deposits would have been withdrawn to fund startup company burn -but it would have happened over many months to years.”
No, the LOC issue started well before March 2022. SVB’s risk management missed the correlation between interest rate MTM issues for its fixed-income holdings and that rising rates would also lead to portfolio company LOC draws due to institutional investors notifying VC managers that they did not want to receive capital call requests so they could focus on traditional fixed-income securities.
I think this thread is about to be retired so I will not respond on this thread further. As for the Treasury issue, we are talking past each other.

Posted by: schmoe | Nov 17 2023 23:43 utc | 571

279
” Maybe 10%, maybe 20%, maybe more of its deposits would have been withdrawn to fund startup company burn -but it would have happened over many months to years.”
No, the LOC issue started well before March 2022. SVB’s risk management missed the correlation between interest rate MTM issues for its fixed-income holdings and that rising rates would also lead to portfolio company LOC draws due to institutional investors notifying VC managers that they did not want to receive capital call requests so they could focus on traditional fixed-income securities.
I think this thread is about to be retired so I will not respond on this thread further. As for the Treasury issue, we are talking past each other.

Posted by: schmoe | Nov 17 2023 23:43 utc | 572