The Bank-Run Genie Is Out of The Bottle

The comments below are an edited and abridged synopsis of an article by Quoth the Raven

 “One night you go to bed and everything’s fine. The next morning you wake up, and everything’s different.”

The Bank-Run Genie Is Out of The Bottle - BullionBuzz - Nick's Top Six
bank run word highlighted on the white paper

It feels like one of those moments as some venture capital banks are on the verge of collapse. They were led by SVB Financial Group, shares of which fell on Friday to $106.04—down 60.41% in the cash session—before falling further in the after-hours session, plunging another 22.2% to $82.50.

Things aren’t likely to get better. Now there are two genies out of the bottle that feed off psychology: Inflation and systemic-style questioning of banks’ solvency.

We know the drill: If the panic gets bad enough the Fed will step in. But, unlike days past, its options are limited because inflation is nowhere near under control.

The Raven could “spend another hour prattling on about deleveraging cycles and the perils of a bank with $200 billion in deposits facing a run, but I don’t want to insult your intelligence. You know how big of a deal it is.”

It feels as if the snowball has officially been pushed off the hill and that it will gain steam until the Fed caves. But with CPI where it is, what can the Fed do with the tools it so often boasts about?

This is officially the rock-and-the-hard-place predicament everyone said the Fed would be backing itself into for the last 18 months. What are the bureaucrats going to propose next as the solution—QE 5, 6 and 7? Longer-dated maturities? Raising the target inflation rate to 10%? Minting a $100 trillion coin? Backing the US dollar with waffles manufactured under the Eggo brand name?

It’s going to be brutally ugly, and we’re just getting started.

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