The heart of Silicon Valley finance needs a defibrillator as two of its biggest banks have imploded this week, including Silvergate Capitol and Silicon Valley Bank. Some might say it's related to Bitcoin's fall to $16,000 range from $67,000 high or the FTX fraud and they're probably right.
Looking at the bigger picture though, a pattern may be developing in which banks are experiencing sudden losses, crashing to record lows or shutting down completely. We're not talking about small community banks either. Credit Suisse, the 17th largest bank in all of Europe based on balance sheet totals has seen its shares drop to record lows below 3 francs this week after delaying the release of its annual report this week at the last minute following questions from the Securities & Exchange Commission. The S&EC has requested cash flow records from 2019 and 2020. I expect there will be more news in coming days.
MarketWatch has put out an article this morning stating that European banks are broadly down, including the biggest, Deutsche Bank which has seen its stock price drop by more than 7% following news that Silvergate was voluntarily winding down one of its subsidiaries and Silicon Valley Bank is launching a $1.75 Billion share sale in an effort to offset massive losses from its Treasury securities portfolio.
Last October, Forbes stated that 'China is suffering a major financial crisis'. Of course, we can't forget about Evergrande's $300 Billion debacle. China's debt to GDP is doing so good. It's nearly impossible to get a true number but needless to say, their debts are at record highs.
The Wall Street Journal reports 4 of the U.S.A.'s biggest banks have suffered a $52 Billion drop in market value, literally overnight and can be attributed to the Silvergate / Silicon Valley Bank 'problems'.
I had also read somewhere recently that New Zealand's biggest bank was in trouble as well but there seems to be news black out on that. If anyone from New Zealand reads this and has any info to share, it would be greatly appreciated.
This could spread into a full blown financial crisis, especially if Credit Suisse implodes. It could take down Deutsche Bank which is regarded as the most systemically important bank in Europe. If that happens, look out. That's when we enter bail-in territory. If you don't know or understand what a bail-in is, please click here for a detailed explanation.
This could spark a bank run or bank runs as news spreads. I hope it can be contained but honestly, I think a 'cleansing' is long overdue.
Better keep a close eye on your money!
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