Thread by @janemiami

🧵 SVB BANK FAILURE; A simplified explanation.

The ways in which financial institutions make $ is more complex than what I am describing in this thread. I’m going to over-simplify, but I ask that you RT, even if you already knew this. Your followers may not. #SVB 👉🏻

2/We have been suffering from the consequences of Progressive Monetary Policy (Modern Monetary Theory, to be specific). I will not go into great detail, but we have arrived at the ‘crushing the middle class’ part of this experience. Many of you may fall into poverty 👉🏻

3/Government overspending has increased the debt. They have printed money to pay the debt. This devalues the dollars you are holding (or earning). What are your dollars worth now; 70 or 80% of their buying power in 2020? That’s called $8/carton eggs and $4/gal gas. #inflation 👉🏻

4/Now we are at the ‘what do we do about inflation’ question; the crushing part of this. The Feds will raise interest rates, which will cause job loss. The combo of high interest rates & unemployment destroys buying power. When that happens, demand falls off and prices fall. 👉🏻

5/ To hide government financial mismanagement, politicians will move to raise taxes by saying things like ‘tax the rich’ and ‘everyone should pay their fair share’ with pretend outrage. This won’t just cost ‘them’. It will cost you too! 👉🏻

6/Corporations, now facing higher interest rates (financial cost) and higher taxes (cost inputs) will pass those costs on to YOU! It costs more to make a bar of soap or grow an ear of corn. So YOU are paying that tax hike. It’s called inflation!👉🏻

7/This statement deserves a page to itself:

Inflation is a tax on the poor and the middle class !

👉🏻

8/So, we’ve breezed through economics 101 and I haven’t really connected it to the failure of Silicon Valley Bank. Let’s look at that. I’m going to oversimplify👉🏻

9/Banks need liquidity to handle the stress of recession. IOW, they need money in reserve. They lend money at a certain rate of interest, but when interest rates rise rapidly (like now) they can get in trouble. Let’s talk about what that looks like. 👉🏻

10/ SVB bought bonds (in this case, ‘long paper’) with the massive deposits that they had (that’s what banks do), but they bought those before interest rates started going up, so they weren’t making enough money (yield). 👉🏻

11/ So just like you and I, sometimes financial institutions need to crash their bonds (like you would do to a CD). SVB did that and it cost them $2 billion. 👉🏻

12/ SVB also had a lot of money out on the street (loans) at a lower interest rate, because interest rates keep rising. This puts a stranglehold on banks; their margins are shrinking; they’re getting nailed at both ends. 👉🏻

13/ when this happens, Banks becomes stressed. It affects their deposits and their profitability, and therefore also their stock values, because investors will sell their stock if they’re not making a good return, or if they feel their investments are at risk. 👉🏻

14/ so we really have to look at why the federal reserve is raising interest rates, don’t worry. It all goes back to Modern Monetary Theory. When you screw up in economy as badly as the Biden administration has done in the last 26 months, you have to take action. 👉🏻

15/ every American should read up and learn about MMT, because that’s what’s hurting you right now, stupid progressive policy. They have overspent and created so much debt and printed so much money. They have caused inflation.👉🏻

16/ now they will raise interest rates, which will cause job loss. These two things will diminish buying power. When people are buying less things, the cost of things will go down (the law of supply and demand). This is the crushing the middle class, part of the experience.👉🏻

17/ you’re also going to here 4 narratives 1) SVB was reckless 2) the federal reserve is miss handling the economy 3) the banking regulatory system is broken and 4) billionaires don’t pay their fair share of taxes. Pay attention to the grift. 👉🏻

18/ nowhere, and that narrative will Joe, Biden, and Company take responsibility for crashing the strongest economy in US history. It only took them 24 months. But make no mistake, you will be paying the bill. 👉🏻

19/ government employees, and elected officials will get their raises and keep their jobs. Billionaires have already hedged their bets and protected their assets for the most part. 👉🏻

20/ vultures will be there to buy your homes in foreclosure or short sale when your credit card debts exceed your salary and your home is not worth the mortgage amount. Sound familiar? That could happen if we keep on this trajectory. 👉🏻

21/ there is a silver lining, requiring Americans to be awake, not woke. We need to look at spending and debt at the government level. That is the only thing that is going to protect your pensions your savings accounts, your homes, and your jobs. 👉🏻

22/ we need to prioritize at the government level what is really the most important. This means the government cannot be the solution to everything. “Everything” costs a lot of money. It has to stop. All of this is connected to the SVB banking failure… all of it. Wake up. 🔴

Disclaimer: please excuse the typos. I don have the edit function.