Roblox Is Being Handed $150 Million By Government After Bank Collapse, Money Isn't Real
The “schmoozing and vibes bank” was a revolving door of venture capital and crypto-friendly to boot, and it also required startups who it helped secure loans for to use it exclusively for their banking needs. Fast-forward to the weekend when people started appearing out of the woodwork online to beg for a bailout, even when in some cases they were responsible for creating the run on the bank in the first place, and were even trying to profit off of it in the interim.
All of which is to say that SVB was as far from It’s A Wonderful Life’s Savings and Loan as you could get. And in the act of bailing it out, the Federal Reserve has now committed to also giving loans to any other banks who are seeing short-term losses on investments following recent interest rate hikes. In plain English what this means is a preemptive promise to bail out other banks that might have screwed up. It’s all in the name of shoring up the financial system, even as things like credit card debt spike and student loan forgiveness stalls in the Supreme Court.
At least Roblox will get its money.
First, banks aren’t being bailed out. Their depositors are being bailed out. A financial crisis worse than 2008 (for Wall Street) can happen if this is the standard for bailouts now. It should have happened this way in 2008 by the way, and banks like Goldman Sachs would rightfully be gone. Bears can kill banks left and right, and the government will bailout the depositors. This can create chain reactions in financial markets. Bulls are sleeping on this fact.
Second, the government panicked over pennies. There are probably some depositors who had everything at SVB Financial, but most had money at different banks. The largest estimated loss for depositors I’ve seen is 10 percent. Realistically, it’s probably pennies of risk. This is clear corruption. Additionally, it sure looks like infinity bailouts have started. Bears are sleeping on this fact. I expect bailouts will be bearish, even more so than in 2008, but this time it will change the complexion of asset markets.
Third, following from two, the technology sector has all but sealed its fate with political activists. If mass violations of civil rights ranging from first amendment to privacy concerns weren’t enough, Silicon Valley instantly landed it in the same basket with Blackrock, Goldman Sachs and other perennial Wall Street villains. As with the banks, it’s not a risk unless and until the public gets mad enough to elect a capable revenge candidate.
Fourth, the bailout fast forwards left-right fusion populism. Lots of people who can be labeled far-right and far-left are pissed and only disagree on detail. What if they split the difference?
Fifth, following from four, that risks some wild alliances. It’s very difficult to oppose debt relief for anyone after the government panics about billionaires and millionaires losing pennies. Audits and limits on the Federal Reserve will get a hearing, as will abolishing it.
Sixth and finally, the government panicked over millionaires and billionaires losing pennies, but inflation cannot be tamed unless millionaires and billionaires lose a few of the dimes they grabbed during the lockdown and stimulus era. The government and Federal Reserve taxed every American with inflation and the wealthy gobbled up that tax revenue. Fair enough because they didn’t create the inflation and that’s how inflation works, it’s always going to play out that way in round one.
Corporate greed didn’t create higher prices; inflation did. Inflation creates artificial demand. People holding scarce assets, or producing goods or services with limited supply can reap the largest and fastest price increases in the first wave. Then comes the wage and cost increases that take it all back and then some…but we’re not there yet. By the end of the inflation cycle, the wealth gap should close as financial assets devalue and the wealthy take large losses. It’ll close as wage growth outpaces asset (home) prices or as home prices tumbled back to meet wages. Will they though, if the government always intervenes?
The wealthy demanded their losses get covered. What losses? They’re still up big from 2020. Meanwhile, everyone else in America bore the inflation tax that funded that wealth transfer. More than half the country has fallen behind. The vast majority of young people cannot afford to buy a home, a reversal from pre-2020 conditions. Where’s their help? They cannot be helped by bailouts because that will cause yet higher still home prices. The only path is a “Great Reset” for the wealthy and the ruling class.
It’s never coming so long as the bifactional ruling class in Washington remains focused on immiserating the middle class and its enemies are busy fighting each other.
Down with Silicon Valley
Down with Wall Street
Down with the military-industrial complex
Abolish the Federal Reserve
(munches popcorn)
'Dis gon' be gud.