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Tuomas Malinen Profile picture
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Mar 13 • 7 tweets • 3 min read
#SVB had around $175 billion worth of deposits vs. $125 billion in the FDIC Deposit Insurance Fund (total).

Deposits have already been transferred to Deposit Insurance National Bank of Santa Clara, where they should be available to depositors.

How is this going to go?
🧵1/7
Shareholders and uncovered debt holders (bond owners) will be wiped out.

Next the SVB (mostly its loan book and assets) is probably sold to whoever wants to buy it.

The money from the sell is then most likely used to cover some share of the uninsured deposits.
2/
The question becomes, if the funds from the sell do not cover but a fraction of #SVB deposits, what then?

Will the FDIC empty it's Fund or will the Treasury step in? Essentially no other options exist.

The process selected will be crucial.
3/
The U.S. has around $5.1 trillion worth of demand deposits and a total of around $18 trillion of other liquid deposits.

These figures should make the problem at hand obvious, which also became visible in the rapid response of authorities and President Biden.
4/
The U.S. banking sector 👇, and especially the regional banking sector is fragile.

The rapid and strong reaction of the authorities tells that the fear and risk of a contagion and a disruptive nationwide bank run is very real.
5/
 mtmalinen.substack.com/p/the-us-econo…
To summarize: the situation is not good. If nationwide bank run commences, financial lockdown would be likely to be enacted. 👇

I urge to take precautionary measures, that is, raise cash, preferably small-denominated bills.
6/
 mtmalinen.substack.com/p/up-next-glob…
You can find more information on our preparation reports.
@GnSEconomics
/End
gnseconomics.substack.com/p/how-to-prepa…

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More from @mtmalinen

Tuomas Malinen Profile picture
Mar 9
There are signs of escalation everywhere you look.

It seems that Russia used hypersonic missiles in its early-morning raid for the first time. Marked as retaliation, but could also be the beginning of new phase in #UkraineRussiaWar️ .
🧵1/5
Poland and others are sending more tanks, on which first ones should be in operation in Ukraine in this month. Bakhmut, on the other hand, is falling to Russian hands (to the Wagner group).

The war is not going as we in the west have been told. 2/
The buildup of Russian troops to Donbass region has been massive, according to many reports.
The reason for this is unclear, but large troop buildups rarely occur just as a "show of force".
3/
Read 5 tweets
Tuomas Malinen Profile picture
Mar 7
Many have asked me on preparation and my opinions about #gold , #stocks , #Cash and #banks .

We have presented these and preparation guidelines in the following reports, which will continue next week.

Our latest forecasts. 👇
@GnSEconomics
🧵1/10
gnseconomics.substack.com/p/deprcon-outl…
The fundamental thing to understand, concerning preparation, is how prices of different assets are likely to behave in the coming crisis.

In this report, we present historical patterns of key assets classes during crises.
2/
 gnseconomics.substack.com/p/the-preppers…
As a historical 'appendix' we also report the best performing stocks during and after the GFC and the Great Depression. (Free.)
3/
 gnseconomics.substack.com/p/the-best-per…
Read 10 tweets
Tuomas Malinen Profile picture
Mar 1
During the past week, I and we conducted an in-depth analysis of the U.S. #economy . The results were not encouraging.

First, I discovered that the banking sector was more fragile than previously thought.
🧵1/8
mtmalinen.substack.com/p/the-us-econo…
It also seemed that the U.S. credit markets were in the grips of a (fallacious) complacency, shown on the proportionally milder reaction of the "junk" bonds on the current tightening cycle.

But, can the #Fed support the markets in the current situation? We're not so sure.
2/ Image
The good news was that the "zombie-corporation" problem seemed to be less severe than previously thought.

However, we also know that the ultra-easy monetary policies has created weak highly indebted firms.
3/ Image
Read 8 tweets
Tuomas Malinen Profile picture
Feb 26
I have to admit that March worries me, while I "called" it already in November.

This is because it can become a month where "everything" converges to form a 'perfect storm'. I shortly summarize them here.
🧵1/6
I first warned on the risks ("fracture lines") in global liquidity in November.

We and I have been analyzing them further and it looks that there's a risk of an outright collapse of global market #liquidity in March. 2/
mtmalinen.substack.com/p/an-update-on…
At the same time the effect of waning China stimulus is likely to become visible in Europe and the world economy. 3/
gnseconomics.substack.com/p/derpcon-outl…
Read 6 tweets
Tuomas Malinen Profile picture
Feb 21
The global business cycle is forecastable around 4-5mo ahead and the provision of liquidity into the financial markets is forecastable around 2-3mo ahead, currently.

The onset of economic crises is much more cumbersome and uncertain to forecasts.

A short 🧵on what's coming. 1/6
The flow of aggregate financing in China sputtered in October and fell of a 'cliff' in Nov/Dec. This implied that

1) This month will see first signs of a renewed decline in econ. indicators.
2) Decline will deepen in March and April.

Details. 👇
2/
Global liquidity has been driven by China especially during this year with the onset of QT:s by the #FederalReserve and the #ECB.

The slump in October was followed by a massive increase in November, which lifted the markets. 3/
Read 6 tweets
Tuomas Malinen Profile picture
Feb 18
Past week I promised a (long) thread on global #liquidity and so, here goes!

I have been analyzing the current state global liquidity since early November. Then I warned on possibility of an outright collapse of market liquidity.
🧵1/25
mtmalinen.substack.com/p/global-liqui…
Basically, I re-iterated our original warning from October 2018, when we had discovered that:

1. Global outside-US dollar denominated debt has risen to a record.
2. The role of non-bank institutions on providing funding has increased.
2/
3. The composition of international credit has shifted from bank loans to debt securities.

These straight-forwardly implied that:
"The increased role of non-bank institutions in providing credit means that an increasing proportion of international finance comes..."
3/
Read 25 tweets

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