Rear view mirror thinking. It has been a good idea to lend you money to a bank so that they can invest it for you to offset your banking expenses - it isn't anymore. 3% yield does not adequately cover the risks current depositors are taking with their money."Full faith and credit" doesn't mean what it used to. FDIC schmedDIC ... there's a thin veneer on top of a mountain of potential losses. Will the rest of the world be OK with the US using the reserve currency to paper over huge deficits and losses? Probably, but not certainly.

By 100% reserved I mean that I put 100K of USD or RMB or gold in the bank and they don't lend it out. They keep it in their vault (or somewhere safe) like a safety deposit box. Write a check against your cash, your balance goes down and you get charged a $1 fee.

As a depositor in the B of A we just loaned 5B to First Republic. I'm happy to pay 3% to not lend my money to First Republic. Or, for that matter to offer 30 year mortgages or buy govt debt at 1/2 the appropriate interest rate.

Someone posted that it was SVB's fault for buying a 10 year treasury and not hedging it. Who in there right mind would offer hedges at a reasonable price on 10 year treasuries with blowout deficits, high inflation and record low interest rates? .... Not me.

Berkshire Hathaway FAQ

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