Topic: Should we take the collapse of SVB and Credit Suisse as indicators of Woes Ahead (Read 212 times)

Deutsche Bank seems to have taken a steep dive, stocks are down 15% today, and credit default swap prices have skyrocketed.

Potentially problematic banks in the Eurozone - Deutsche Bank, Societe Generale, Credit Lyonnais. At the same time, one must understand that there is no bank in the world that is able to withstand a massive influx of depositors who want to cash out their deposits here and now. It's just that the existing architecture of the banking system does not imply full provision of depositors' funds with the bank's own capital. Therefore, the stability of the financial system in the Eurozone largely depends on the ability of the ECB to extinguish the panic with verbal interventions and prompt provision of additional liquidity to banks. Of course, in this case, many previous efforts to combat inflation will be crossed out.

A few days ago I read that as much as $120 billion has been withdrawn from banks in the US since the beginning of this banking crisis. People are of course afraid for their money, especially those who have more than $250 000 and know that everything over that amount is not insured. I don't want to believe that bad history will repeat itself, but every day some bad news comes from the US, and the only positive in everything is that the price of BTC is rising, which suggests that part of the money leaving the banks ends up in BTC.

What I am particularly interested in is whether a bank will appear in the EU that will be in trouble, because Switzerland is in Europe, but is not part of the EU or the eurozone.

The global economy isn't collapsing. It's heading towards a recession. A recession is a normal part of the economic cycle. The capitalist economy can't just continue growing forever without any recessions. The global economy has been running on steroids for several years(really low interest rates, quantitative easing, money printing, etc.). It's pretty normal for all those financial steroids to have negative side effects.
It was pretty much expected for the interest rate hikes to cause trouble for the weaker and not-so-well managed banks(like Credit Suisse).
Higher interest rates lead to the price of treasure bonds going down, which means that they are harder to sell. Many banks have treasure bonds in their portfolios.

According to the FT, the outflow of funds from Credit Suisse reached $10.8 billion a day. The allocated credit line will not be enough for a month, the fate of the bank with 167 years of history will be decided tomorrow (and it will probably be voluntarily-compulsorily sold to UBS under a state bank guarantee with a total reorganization and dismissal of tens of thousands of employees).

Yes, undoubtedly this is just a hint of a crisis to come. I guess more banks are going bust both in Europe and the US. But that's an opportunity for Bitcoin to become a safe haven for investors.

Credit Suisse is a huge bank that has been around for a century, if they are struggling to afloat, the rest of the banks may just also be neck deep.

Not all banks are like SVB though. The ones that are withdrawing though are the investors like VCs on SVB. After finding out the bank can not provide the cash the VCs are withdrawing, everyone VC hurries to also get thier money out.

The issue I have with bailouts is that the money introduced into the economy never finds its way out of circulation so inflation is only going to worsen when USD is currently inflating at 40 year highs.

I didn't think there should have been a bailout in 2008 either to be clear. I would argue the '08 recovery was attenuated with the actions the government took in bailing out the institutions that were giving sub prime mortgages knowing their investment to be high risk. Then you have years of QE finally crashing down.

Certainly, the collapse of both banks is a strong indication of the major economic problems that the global economy as a whole suffers from, because this system is interconnected with each other, as it is clear that the collapse of Credit Suisse came after the collapse of SVB, as investors feared that this infection would reach banks around the world. So started selling shares in many banks, including Credit Suisse.

These incidents are not the first and will not be the last. It is necessary to diversify the sources of income, as well as it is necessary to take the necessary precautions by using more than one means of safe storage such as gold and bitcoin.

This is affecting all banks worldwide. I am in Canada and I even got emails from my bank that they will pay more interest in my accounts to prevent withdraws. Hence why Gold and Bitcoin are going up because people are losing faith in the financial system.

Sure FDIC will bail out most retail people but its gets tricky when someone has a business and that business has millions in some bank account. Hence people are buying safe assets like Gold to prevent this from making them go bust. Looks like Gold will break its ATH very soon.

I read something about it, but I must admit that I was not fully aware of the extent of the damage suffered by the bank due to their decision to freeze Russian money. Obviously, this "neutrality" has its limits, and while for some such a move is logical, for them, from a strictly business perspective, it was a bad decision. I am not aware of whether CS is the only one that has this "problem" when it comes to Russian money, or whether some other banks in Switzerland have similar problems that have not surfaced yet.

Credit Suisse has problems much deeper than the lack of liquidity. The bank's downfall began a year ago when it violated centuries-old Swiss neutrality and froze some 19 billion Russian money. After that, the outflow of funds from Asian clients (mainly from China and the Middle East) began from the bank. Only in November last year, 84 billion dollars were withdrawn from Credit Suisse - this is to understand the scale of the problems. The current credit line will last for a maximum of a month if the bank fails to urgently address the loss of confidence among Asian customers.

Of course, the money has to come from somewhere, as it came after the 2008 crisis and saved many who were supposed to fail. The same is happening today, although at least for now it has not reached the stage where a chain reaction has been created and everything starts to collapse at such a speed that it cannot be prevented. This is why the reactions of the authorities are very quick and effective in order to calm the panic while they still have room for maneuver. And the ECB recently declared that the eurozone is stable and that in case of any problems they can act quickly - which means that the life belts are ready in case they are needed.


Ordinary people are always the ones who pay the highest price, that's how it was throughout history, and that's how it is unfortunately today. However, I hope you are not right when you say that this is just the beginning, because after the pandemic and the war that is still going on, I sincerely hope that we will avoid a new large-scale economic crisis, although some say that we are already living in one, we are just not aware of it yet.

Whether there is a global economic collapse coming soon on not, you should always diversify your investment. It is not prudent to put all your investment or funds in one place. Your funds too should not be in one bank since we've seen what is happening.
I don't think the collapse of these banks is a pattern for "multiple economic woes ahead". In the case of Credit Suisse, it has been struggling for years. In 2014 they were found guilty of charges that allowed some of their customers to evade taxes. They were fined about $2.6 billion for that. There are a series of events that has led them to this point. 

Large systemic banks, deeply integrated into the economy of the country and the global financial community, will not be allowed to sink, they will be supported and kept afloat. It's just that their collapse is objectively not beneficial to anyone. Yes, and there is a lot of free money, i.e. what and how to save - is. And if this is someone's "personal" bank for "their own affairs" - then this is the problem of the owner and those who entrusted him. But this will not lead to a global or noticeable, on a global scale, crisis.

Credit suisse took bad risks but also with SVB I read they merely had traded government debt (and lost cash) & due to excessive volatility in pricing encountered problems.  So in that respect this will repeat, if holding the safest asset of all can mean you are no longer liquid it would be unfortunate for the balance sheets of many entities.    The whole of QE was likely a bust, some think regardless it wont register as an actual failure and cause losses but also it seems inevitable to occur though long delayed by constant recycling.

Skip the details and opinions,  its all whatever but yes volatile pricing in everything has, is and will be a rising trend.  We should expect increasingly large amounts of upset and volatility, over years and the next decades.  Its a very large problem, multi national I think hard to predict but not conducive to productivity is an easy guess.

I think the question is: how did people live in previous eras when there were no police, no state pension, no state funded schools, firefighters or universal healthcare. If people wake up one day and realize they can't rely on the government to help them. What is the rational and logical course of action?

Organized and networked communities could become a thing. If people can't rely on the government, they might turn to their neighbors and nearby friends. If they're professionals they will begin to communicate, organize and cooperate to achieve mutual goals. As well as to organize mutual defense to protect against rising crime during times of crisis.

To an extent, we might observe these trends occurring in places currently being hit with natural disasters, with little or no state intervention or aid. But the adjustments and adaptations could take time. Months. Years. Perhaps even decades, if they happen at all.

It is possible society has become somewhat isolationist in nature. Most of us have an army-of-one mentality where we will try (and perhaps fail) to do everything themselves. The value of team work and cooperation is somewhat underrated in the current era. Which could mean that the next mutant superpower people will race to develop is better leadership skills and greater investment in learning to cooperate better within group settings. While an army-of-one makes for good movies and good tv shows. Its not a good format for communal gardening and other basic societal formats which could become fundamental and necessary moving forward.

The global economy is becoming uncontrollable and no job is secured. Like OP advices it is not good to put one's egg in one basket. There is need to learn a new skill, get a higher degree, establish a business or invest in any other business to make one get other sources of income. Report shows that many US banks has very high rate of uninsured deposits range that could lead to their collapse. We must be prepared for the worst.


The US banking regulator will not allow SVB and other regional banks to fail. The US Federal Reserve have already promised to bail the Silicon Valley Bank. Customers losing their deposit will give the US a bad reputation and I think the government might not want that to happen.

When the banks are 'saved' by the government, they're injecting new dollars into the economy that shouldn't be there in the first place. Switzerland doesn't have a terribly high inflation rate but USD is inflating at a high rate so the federal reserve has reason not to bail out the banks. Also, do we want to be in a position where tax payers will cover the losses of the banking institutions should their investments go sour? Individual investors do not have such luxury, so why should the banks?

I'd expect for larger banks to purchase the assets of SVB and every other failed bank at a discount which would provide some liquidity for their creditors. But people are still losing money even if the government provides support. The economy is in for a blood bath. This is only the beginning.

When the question comes to upcoming economic downturn, I definitely see a reason to worry. Multiple tech giants constantly firing people to safeguard their revenue. This trend is not going to end soon. More news of downsizing people are on the horizon and will come out in next couple of weeks. And when such mass firing happens, it's usually not a good news for the economy. The demand will slump and corporate spending will go down as a result. Which will create room for more job losses.

As of now, the situation is quite complicated and can't be concluded on what's coming up next.