Subject: Re: SVB bailout
This is one of the 44% of the time I pretty much entirely agree with Goofy

You can't take away risk from anything having to do with capital markets or things will spiral into unsustainable.

I mean, isn't that self-evident? (I think the "Capitalism without failure is like sin without hell" quote has already appeared in this thread).

I'll add a few things:

1) a number of years ago I did a several thousand-page dive into the evolution of mediums of exchange: coinage, bills of exchange, letters of credit, paper monies. One of my broad conclusions from that was a) fiat currencies are unavoidable in a post-Industrial Revolution world; b)issued by a stable government with a robust economy, and well and wisely managed by mature adults, there is no reason that the Xanadu Blimpo (XBL), say, shouldn't be good forever, but c) people being people, however, they historically haven't been regulated that way and thus sooner or later the XBL will falter quickly, badly and very painfully and d) no one is quite sure where that limit is...until it's reached.

I think of enormous stimuli, long-term ZIRP and the like the way I think of investments in general - specifically as a large frozen lake, with thick ice near the low-yield shore, with ice thickness and yields varying inversely as the less mature, careful, wise adults choose to stride go further and further out. That cracking sound will come too suddenly and too late for the boldest.

(The FT had an article today: " Asia investors 'gobsmacked' by $17bn Credit Suisse bond wipeout". Gated, but crux was "the <AT1> instruments were popular with wealthy individuals who appreciated the brand names and the yields. A Credit Suisse bond issued last year and paying a 9.75 per cent coupon was particularly popular." And apparently a lot of those HNW/VHNW investors had those bonds leveraged(!) Ow ow ow)

2) sometime after the 2008 debacle I remember reading an ex-Wall Street banker who said something like, "We have to be regulated. We can't help ourselves".

I wish I could find the original. At the time it seemed a truism (as well as very like a line from (iirc) the Lutheran order of confession,"we confess that we are in bondage to sin and cannot free ourselves"

3) Sheila Bair (FDIC Chair during 2008 debacle) agrees with us, on this week's Stay Tuned (In Brief) podcast. Unfortunately, probably gated: https://cafe.com/stay-tuned/in... Worth a listen if you can. She feels the let's-guarantee-everybody approach was an unnecessary and unwise intervention which contributed to the instability we've seen - the mature adults, above, giving into a tantrum as it were.

4) Finally, the concept of a much higher guarantee (not "unlimited", as that term gives me angina), but say xx million XBL for non-interest bearing deposits - e.g. payroll - I can see being appropriate.

- sutton
remembers being uneasy with >$250K - earmarked for payroll, short-term AP - in the bank