The emperor has no clothes.<p>How many crises do we have to go through before we admit the fed and banks either have no idea what they are doing or they know exactly what they're doing and it's malevolent?<p>The number of people here defending the system and saying this isn't inflation is mind boggling. Where do you think the money comes from when the government rescues banks? No matter how you slice it, the taxpayer pays through higher fees, higher rates or inflation.<p>This system of rescuing banks with no prosecution of the people responsible and printing a mountain of money is unsustainable. It's clear that humans will never implement an equitable system and it makes the case for Bitcoin every day...unless you profit from the financial system and then I'm sure you'd be thrilled to kick the can down the road.
No, I remember 2007-2008 pretty clearly. That felt much more precarious. Right now it seems pretty clear that if your bank fails you're going to get your money.<p>That's not to say that this isn't the start of <i>some</i> kind of a financial crisis. But it could be very different from 2008. In this case I think the risk is more towards high inflation - for example, if enough banks were to fail (hypothetically - I doubt this will happen) and bunch of money essentially has to be printed up to make everyone whole, that's going to devalue money hence more inflation.
Yes, because interest rates clearly need to go a lot higher to get inflation under control around the world, yet banks are already starting to fail from the stress of it at these low rates, and the central banks' bailout mechanism is itself inflationary.<p>Although, strictly speaking the answer should be <i>no</i>, this is not the start of a new financial crisis, it is a continuation of the 2008 crisis.
I have no idea but I'm laughing because HN is almost always wrong about these things.<p>I remember about a year back reading a thread here about the UN FAO food price index showing inflation and most of the responses were about how wrong it was to say that there was inflation, how it won't correlate with that index, etc, etc. The funniest thing about that thread, IMHO, was the surety and confidence of all the responses.<p>If someone is answering this prompt with confidence, chances are they have no idea what they are talking about.
Note that this thread will have the same Danning-Kruger level of plausible but wrong info as would a banker forum discussing "do you think ChatGPT will be able to drive cars?".
I don't think this will be anywhere close to 2008.<p>In many ways, SVB was a perfect storm of many factors. High uninsured deposits. Few, tech-savvy despositors. Bad investment choices w.r.t. interest rates. Makes sense why a run was possible.<p>Other smaller banks - while they may even have similar investment choices - are likely to have many depositors who are under the FDIC limit. So... rationally... they shouldn't call in their money. But also practically, it seems unlikely the masses will be able to effectively coordinate.<p>I think, however, that this will start a slow long-term erosion of many community banks. How it affects a short-term recession that's looming is hard for anyone to predict. If you're in the camp that the Fed is being too aggressive, maybe this actually slows down interest rate hikes... which might end up being a good thing!<p>All in all, fundamentals of banks just aren't as bad as '08.
>There are people on HN who weren't alive in 2008.<p>Are there that many under-15s here?<p>As someone who lived through the S&L crisis of the Middle Ages, the current agitation doesn't even rise to that level; so far there hasn't been an indication of widespread outright fraud perpetrated by bank execs. This seems more like a less favorable (i.e. less free money from the Fed) environment exposing a few banks with very poor/incompetent management.
The vibes are similar to early 2008. But the financial structure is different. Banks are not overleveraged. Housing is not all adjustable rate.<p>That being said, easy to see weakness. Commercial real estate is a big one. I'm somewhat concerned about non-bank Financials. Some large foreign banks (CS(dead)
, DB, HSBC) I'm skeptical of.<p>And a recession feels imminent (felt to me this way even before SVB).<p>To sum up, I don't think this is over. There's no telling how bad it might get - we might get off fairly easily, might be bad.<p>One thing that concerns me is that there is much less room for fiscal/monetary action given where inflation is.
Every crisis introduces a new type of failure that was not expected. The 2008 came with the realization that the housing market was not as bullet proof as people thought.<p>This one is no different. It's possible we recover from it very quickly, but it's also possible that the bank run that we saw earlier this month introduce a new type of failures that no one thought was possible. I'm of a curious nature, so I really wonder what's coming.
It’s not a great situation. What we’re seeing is that the fed can’t raise rates to fight inflation without further eroding the balance sheet of big institutions holding large amounts of low yield bonds. So they’re kinda stuck. Hello stagflation.
I've talked to a number of bankers over the last week and most of them don't seem to think so. The counter-argument to crisis is that most banks structured their investments differently (soundly) vs. how some banks (e.g. Silicon Valley Bank) structured theirs. There will be some more shakeout of banks with bad investments but not a broader crisis. Of course, take that how you will, but certainly doesn't feel like 2008.
The fact that lots of people are predicting absolute doom is kind of a contrarian indicator to me. If everyone was like meh no big deal it’d be more worrisome.<p>This isn’t just cynicism. It’s based on how markets work. If lots of people think there’s a possibility of major doom then (1) they are preparing now and (2) it’s likely at least somewhat priced into the market already.
As far as I can tell, the banks aren't misbehaving en masse like they were in 2007. The failures seem to stem from some unfortunate or boneheaded decisions that ignore likely future interest rates.<p>And TBH... market needs a little cooldown. I am no expert, but I dont like where P/E ratios and such are even after the last mini downturn.
Yes, it feels like it felt just before the 2008 crisis - I was looking into banks financial statements and it was pretty incredible feeling - like wow it can’t be that bad ! Markets didn’t start to tank yet, so you don’t know if you’re crazy or not.<p>Same here - there are bubble signs everywhere (SPACs, startup valuations, joke money called Dogecoin with market cap of 10B$ !), banks are sitting at >600B$ of unrealized losses - this is all public knowledge.<p>A 166 years old Swiss bank was bailed out this weekend.<p>So yeah, it definitely feels like a big crisis ahead. Gradually then suddenly !
I think it's more like 2000 when there was a significant over-investment in tech, then Greenspan increased interest rates quickly and all the companies had to adapt to non-free money.<p>I think the housing market will correct (crash) and tech jobs will be harder to come by for junior folks and people who aren't that great at it. Not a great time to job hop. It won't be horrible like 2008 but it won't be great. Should be over by the 2024 election.
No. Contagion is so far limited. Economy is still doing relatively well and inflation is still hot. BTFP is arguably QE-lite and has reversed some QT as far as I can tell. When we crash you won't need to ask if we're crashing. It will be obvious.<p>China reopening trade has been softer than expected so far, but could still put pressure on commodities. Honestly the market is very confused right now. The bond market is saying recession(see rates dropping/curve steepening). The stock market is saying everything is more or less fine. Gold is up, but maybe because of dollar weakness and lack of faith in the fed to maintain a strong dollar.<p>The upper half of Americans really haven't felt enough pain yet. They still have plenty of money and are keeping demand high. I fully expect us to crash, but I don't think the bank crisis is more than a waypoint on a journey that started with the first rate hike(and, arguably, 2008).<p>Re: BTFP. It seems like QE-lite to me because banks were sitting on underwater assets that can now be used as collateral at full PAR value meaning the banks can reanimate these dead investments and put that money to work. I would love to be proven wrong but after going back and forth this is my current understanding.<p>Also, this is HN. Don't expect a high degree of accuracy on economic predictions here. Economics is hard. Even the fed and all of their PhDs can't get it right.<p>I think there are a lot of unknown risks out there now. Banks at least have the FDIC, the treasury and the fed(at least if you're big enough to present a systemic risk). There are non-bank lenders and other parties in our grossly complex financial system that are also under stress and could be the catalyst for major reversion soon.
Yes. Not that it necessarily means it will be the same scale.<p>The biggest difference is that this will hit everything that was (knowingly or not) built for a near-zero-interest-rate environment, not just financial companies but speculative tech startups that need lots of VC patience, etc. So probably not as focused on just financial companies.
I doubt this will be as contagious, plus the Fed is completely leaning into interventionism at this point. If only we could get Congress to do their part, we might avoid the crises in the first place.<p>There will still be a fair amount of pain to go around, but it won't be across the board like 2008.
It is easier to create the future than predicting it (just paraphrasing).<p>First, I think looking only at the economy is shortsighted: worldwide politics is broken: discussions that are not moving "civilization" forwards with the knowledge we have. For example, I see in the medical sector a lot of mala-praxis that is not connected with the state of art.<p>Now, returning to economics: I see more a shift than a big crisis. Politicians and regulator cannot put the dirt under the sofa and than needs a change.<p>I think power is a little bit more distributed and there could be someone with enough imagination somewhere.
Banks are still as greedy as ever in a market that is no longer really theirs, especially in real estate. They have high mortgage rates, yet CDs are approaching 5% which I haven't seen since 2004-2005. I remember socking some $5000 into one of those for 10 years when I had just turned 18... at the time it seemed like a good idea and I was collecting about $50 - $60 a month, which was a good ROI of around 144%. Although it definitely sucks, as I wasn't able to touch it for that long.<p>In 2008, I just learned about stock market and investing right as the market crashed. I sent about $250 a month towards a variety of stocks every month. In 2023, I took out all my money from the stock market, having lost a bit, but still over $100k, and I bought a condo outright with a mountain view across the street from a hospital which has now become popular with travel nurses. Since it doesn't carry a mortgage, I'm able to completely profit from it and make a way better return than if I were to have left my money in the stock market or even put it in a CD again.<p>For now, it is what it is: <a href="https://www.cnn.com/2022/11/07/investing/stock-market-biden/index.html" rel="nofollow">https://www.cnn.com/2022/11/07/investing/stock-market-biden/...</a><p>Once there is more confidence / new leadership in our economy, I'll start putting my money back into the stock market. For now, I'm working on obtaining a third property for additional passive income though these interest rates are still insane. My latest quote was around 6% - 7%. Everyone and everything just seems to affect the stock market though it's still got a history of decent returns if you invest in the right places and even more slowly over time, as I had done.
No.<p>I lived through GFC and 2023 is nothing like that. Sure, some banks will go bust, especially the ones who have duration/liability mismatch. They are systematically unimportant (by definition, else they would have had stricter regulation).<p>Fed is also doing what common people would prefer to happen - letting equity holders go bust (aka rich people) and protecting deposits (esp 100% of the poor are helped because, again by definition, they have <250K in deposits and those are 100% guaranteed). While protecting deposits may also end up helping the rich, that should not be a big deal <i>in practice</i> because the rich are already savvy enough (like Thiel) to pull out their at-risk deposits and move those to SIBs. So by guaranteeing 100% deposits, Fed encourages rich to continue parking money at smaller regional banks which is again something a lot of common people want - avoiding concentration into 5 big banks.
US debt to GDP ratio has been over 120% since 2020. By IMF definition that's an economic death spiral. By 2028 all of our loan payments for all this printed money will only be going to the interest, and the death spiral will be irreversible with insolvency by 2042. Unless they reset the system or erase debt globally.
> For people who lived through 2007-2008 do you think the current times feel similar to how the last financial crisis unfolded?<p>Not even slightly. Largely, because it wasn’t preceded by anything like the hollow post-2001 expansion, which, despite being an expansion (the period of aggregate growth between recessions), saw the upper income limit of the four lowest quintiles, and the low limit of the top 5%, <i>all decline</i> in real terms, with all of the gains concentrated in a very narrow segment at the top. It took the top of the bottom quintile until <i>2018</i> to bounce back to the 2001 level, for the second quintile that was 2016, for the third 2015, for the fourth quintile and the bottom end of the top 5%, 2013. For most of society, despite the gains at the top between recessions, the crisis was really 2001-2009, not just the “Great Recession” years of 2007-2009.
In 2008 the leading news was mortgage write-down, with the prospect of $200/bbl crude somewhere in the background. In 2023, the leading news is raging inflation (with crude trading for zero just 3 years ago) and people vaguely aware of a lockup in the real estate markets.<p>History doesn't repeat, but it sure does rhyme.
I was wondering about this same question today. The reason was a PBS documentary[1] and Jeff Bezos' advice to not make big purchases[2] (which is a stunning stance for the CEO of an online shopping company). I don't know enough to know whether these folks know what they're talking about - I don't think anyone does. Maybe it's a wait and watch game since this is a complex system with millions of variables.<p>[1] <a href="https://www.youtube.com/watch?v=EpMLAQbSYAw">https://www.youtube.com/watch?v=EpMLAQbSYAw</a><p>[2] <a href="https://www.businesstoday.in/latest/world/story/dont-buy-tv-fridge-hold-onto-your-money-jeff-bezos-sees-a-recession-coming-353364-2022-11-18" rel="nofollow">https://www.businesstoday.in/latest/world/story/dont-buy-tv-...</a>
2008 was bad.<p>This is much worse, in my opinion.<p>At least the loans were backed by real property in 2008. Homes that will have value and in fact have came back way, way more valuable than the bottom of that crash.<p>What we have now is a crash in financial instruments themselves.<p>It's about supply and demand. The USA has been printing up dollars like crazy since the beginning of the Covid pandemic. Simple supply and demand. More money created, less value money is worth.<p>History is littered with governments printing too much money, , and their entire civilization comes down.<p>Even Rome, mighty Rome, was brought down by printing up too much money. Other shit, too, but mainly printing too much money. They don't tell you this, but there ya go.<p>.<p>Will we pull out? Hope so. Just like in 2008 - we managed to pull out of it.<p>But 9 lives, folks. We're using them up.
Housing is a big mess. Plenty of people very close to become homeless, and rooms cost as much as a whole apartment. Communities completely destroyed, good people gone replaced by invisible people.
Isn’t that a crisis?
No. There is absolutely no comparison to the US banking system now and in 2008. In 2008, banks were 4 times more leveraged than they are now, because regulations are far stricter. The source of the crisis was a giant asset class — private residential mortgage-backed securities — whose risks had been systematically hidden by the banks that made them, and the ratings agencies who were complicit.<p>So, banks were very vulnerable on the one hand due to over leverage, and they all owned a lot of an asset class that became unpriceable once people realized what had happened.<p>There is nothing like that now. The big issue is unrealized losses on 2020-1 vintage Treasury and government-mortgage securities because of rising rates. The Fed backstopped that by letting banks borrow against the full value of the bonds, not the depreciated value. If those bonds go to expiration, they are paid back in full, and the unrealized losses never become realized.<p>This is a tempest in a teapot caused by a few babies on Sand Hill Road who decided to destroy SVB, and then whine all weekend to the government to save them. They are libertarians until it hurts the bottom line.
Feels worse to me in scope. Subjective, of course, but the combination of inflation and interest rates seems to have a broader impact. It was easily possible to get through 2008 mostly unscathed unless you were just about to retire, but everyone's already been taking a hit for some time now and it could get worse. I have less confidence in the current admin than in 2008 as well. I 100% expect lies and corruption and for working people to get screwed the hardest.
In 2008, a couple of very large banks failed because they were more exposed to assets that every bank held, signaling widespread distress.<p>The bank failures going on right now are due to still large, but smaller banks courting customers that most banks don't deal with. Other banks still have to deal with the rise in interest rates impacting the value of bonds they hold as capital, but they aren't so uniformly exposed/overexposed as was the case in 2008.
I wonder how much bot written replies I read here. Sure it might be all storm in a glass of water (that's what I read in pretty much every top level quote). But we also know that big biz protects it's status quo and they have used bots before.<p>Familiar with the "dead internet theory"?<p>Also why do we like HN? Because here I can interact with some thought leaders: this would be exactly the place I'd point my bots at :)<p>Sorry for the paranoia spread. Take it with a grain of salt.
Every crisis is different IMHO.<p>If the Fed hadn't stepped up to insure the SVB deposits, we might be in a much worse situation, but as it is this feels like it could possibly maybe get out of control if a whole series of other bad things happen, but probably very unlikely.<p>There was one day in 2008 where it really felt like 'this is it, it really actually is all going to come crashing down, unless...'.
It’s probably worse since the 2007-9 era tech workers had the new iPhone coming out along with Facebook apps for high speed marketing. Nowadays the tech sector is saturated and home prices are barely coming down unlike in 2009 but mortgage rates are going up as well as apartment costs leading to a double whammy on housing costs.<p>But at least we have Uber and WFH.
This one has some similarities to '07 (banks starting to fail, overvalued real estate bubble, ultra low unemployment), but it feels more like the dotcom bust to me.<p>I feel like higher interest rates are going to be here for a while, and a lot of tech companies are absolutely blowing through cash, about to be caught with their pants down. Anything that isn't profitable will die.
imho. the related talk of prof. richard wolff is easily consumable for people w/o a deeper economic background:<p>"Prof. Richard Wolff: The Economics of the US-China Cold War & Ukraine War"<p>* <a href="https://youtu.be/aok4FvtsSeg" rel="nofollow">https://youtu.be/aok4FvtsSeg</a>
Might as well shake a magic 8 ball, nobody knows and 99% of the people who end up being right are just lucky.<p>Certainly not much point in asking on HN. If your question isn’t tech related then you aren’t going to get better answers here than you would on Reddit, Quora, Facebook, or your local pub.
I thought so, but ultimately, in terms of relative productivity, who is going to out-compete the US? If we really fear that our ability to produce, that our productivity (in the economic sense) is under threat, then I would genuinely be concerned.
There's lots of little differences, but the big difference is that in 2007-2008 I believed the government/fed would do the right thing and let the banks fail. They didn't, they created massive moral hazard, and communicated clearly they would be bailed out again.
No, I don't think it's the start, and no, it doesn't feel very similar. There's just no obvious asset bubble or other obvious overhang of risk. Credit Suisse and SVB feel like idiosyncratic outliers, not like the first pebbles of an avalanche.
It doesn’t feel similar to me, so far it seems like it’s a known problem and everything has been working ok-ish to prevent it from getting worse - last time it seemed like only very few people were ringing alarm bells and no one cared to listen
No, each time is different. We just had the biggest and longest bull run in history. The economy moves in cycles. The longer the prosperity move the steeper the correction. Something like this is long overdue.
It feels extremely similar. But this time we have had governments causing unemployment to curb inflation. So this crash could very well be much more severe than the 2008/09 one.
Each financial crisis gets progressively worse. Eventually will come one that we can't escape. That will make the Great Depression of the 1930s look like a picnic.
Yes. Everything is fine until it wasn't, and it was clear to those paying attention that things were out of whack for a little while prior to the big implosion.
ehh, not really. Watch The Big Short to get an idea of what was going on. Bankers were giving money to anyone with a pulse so they could buy a 3rd investment house. Liar loans, subprime mortgages, option-ARMS, etc. The real estate market last year was nuts but nothing like that.<p>Yes, car loan delinquencies are up and mortgage delinquencies are trending up but mortgage delinquencies are still at some of the lowest levels (~1%) in the past 15 years.
No.<p>2008 was Wall Street convincing folks to hand over cash for magical beans called mortgage backed securities. When that bad trip caused companies like AIG to vomit cash, the US govt bailed them out because they weren’t the only ones who bought magical bean securities. The entire US financial system was facing collapse. You can Wall Street a fool. But they got bailed out; private investors got squat. Who is the fool? Private profits and public bailouts is modern US capitalism. In the meantime, some will jump up and down swearing bailing out student loan borrowers is murder.
Yes/No/Maybe.<p>It feels a bit more like 2006 since the real economy is still mostly flying along fine and most of the business page pronouncements from 'respected leaders' are that a soft landing is still in our future. There's a lot more unrest among average people though, back then you couldn't really find anyone in your normal life that thought it would crash.<p>It isn't the same though, the pandemic and the inflationary period that we hit were not anything like what happened in the build up to the housing bubble.<p>At the same time I think some people think we're back to the 1970s and inflation and stagflation are here to stay. That is unlikely to happen because this Fed speaks very highly of Volker and has signaled their willingness to crash the economy into a wall in order to tame inflation. This isn't the 1960s Fed that grew up during the 40s and 50s and wanted to prevent a Great Depression at all costs so was running the economy hot. There will be a recession and unemployment will rise, and the Fed has done everything other than come out and state explicitly that is what is going to happen.<p>Because of the increase in interest rates things are going to break. We just saw one example of that, but there's also going to be a corrosive effect on bad companies/investments as the zombie ones that required rolling over loans at low interest rates see their borrowing costs increase and that pushes them into being liquidated. The blowup that I'm expecting is in commercial real estate and CMBS. The top will likely come off the housing market, and that can't possibly go down that easy without a lot of economic pain.<p>At the same time I don't think anything has fundamentally changed. When unemployment starts to spike up significantly again and the system starts to lock up, then they'll drop rates back down to zero again. It'll also probably work, since with enough destruction of zombie businesses and a glut of unemployment there won't be an immediate rebound in employment or inflation.<p>Might not happen this year though. The Fed rate tightening cycle has still not quite ended yet, and its usually 6-12 months after the tightening cycle ends that it gets bad. We can still see a counter-trend rally into e.g. a double top in the markets. A lot of people believe that interest rates rising are what causes economy pain, not holding interest rates at a higher rate (they thing it is an "edge trigger" rather than a "level trigger") and those people are likely to try to throw a party after the Fed stops raising rates. Or this cycle might be different and the aggressive Fed actions might start to blow up more stuff quicker this time, I can't really tell you (if I could I could make a ton of money, but I have no firm idea of the near-term trajectory of the economy).
Yes - 2008 was like stepping on a land mine, and right now it feels like we’re staring at multiple rocket launchers pointed right at us.<p>Someone said they remember 2007-8 vividly and it felt precarious. I don’t, but from what Hollywood tells me, this person must be Michael Burry. Now we have a bunch of money that has been printed, which has done nothing to improve the economy and just caused a lot of wealth disparity and inflation. The Fed trying to get that under control is one of 2 concrete reasons for SVB. It has probably caused issues at many banks (they’re bag holding) with the only difference being their depositors are less reactive. What’s the solution? Print more money. Add to that geopolitical conflict between the US - which (let’s be real) doesn’t really stand for anything anymore other than the value of a dollar - and BRICS - which doesn’t stand for anything other than devaluation of the dollar. Putin once said the US economy is based on housing prices and he’s more or less right. It’s all tech and finance - which is either exploitative or can be done anywhere. BRICS has most of the resources and most of the production capability. A globalized world is more efficient and better, but debts need to be paid.
I think that's highly likely. Banks aim to maximize their profit margins and that necessarily means taking risks. When regulators close one loophole, banks find another one to exploit. This is a game of whack-a-mole that the regulators cannot hope to win.<p>SVB, Credit Suisse, and Signature Bank aren't outliers. These are just the first banks to get hit by the crisis. It's almost certain that most other banks have been playing exactly the same kinds of games and betting on a low interest rate environment. Now that the inflation has risen to unacceptable levels, the Fed has no choice but to raise rates. This will translate into further chaos in the banking system.<p>If the rates don't go up then we'll see inflation keep climbing, and this will cool investment because it's practically impossible for companies to produce any meaningful returns in high inflation environment. A company right now has to show consistent 6% growth simply not to lose money right now.<p>Furthermore, 64% of Americans are now living paycheck to paycheck [1]. 37% of people are working two full time jobs [2]. And typical debt is around 100k [3].<p>So, over half the population has no savings and can barely makes ends meet while nearly 40% of people are already working as much as humanely possible. If cost of living keeps climbing a huge chunk of population will become insolvent, we'll see large numbers of people defaulting on their debt. Banks are the ones who are holding a lot of this debt, and as people start defaulting the banks will start failing.<p>Meanwhile, overall economic activity will cool with people cutting discretionary spending in order to afford necessities. This will make companies go out of business creating mass unemployment, and further feeding into the debt crisis.<p>Incidentally, we're right on schedule for a crash in the boom/bust capitalist cycle [4].<p>[1] <a href="https://www.cnbc.com/2022/03/08/as-prices-rise-64-percent-of-americans-live-paycheck-to-paycheck.html" rel="nofollow">https://www.cnbc.com/2022/03/08/as-prices-rise-64-percent-of...</a><p>[2] <a href="https://www.denver7.com/news/national/more-americans-report-being-over-employed-by-working-2-full-time-jobs" rel="nofollow">https://www.denver7.com/news/national/more-americans-report-...</a><p>[3] <a href="https://www.firstrepublic.com/insights-education/average-american-debt" rel="nofollow">https://www.firstrepublic.com/insights-education/average-ame...</a><p>[4] <a href="https://www.investopedia.com/terms/b/boom-and-bust-cycle.asp" rel="nofollow">https://www.investopedia.com/terms/b/boom-and-bust-cycle.asp</a>