Replying to Avatar Byzantine

this is not 2008 despite a lot of the comparisons because --->2008 was bad loans destroying credit via defaults

this is duration mismatch with illiquid banks that are solvent on a very long timeframe.

banks become insolvent when loans are defaulted but since no one is defaulting it is nowhere near as bad as 2008.

when defaults happen then we are in trouble
Avatar
Mark Camper 2y ago

I'd start using "Nominally solvent".

Reply to this note

Please Login to reply.

Discussion

Avatar
Byzantine 2y ago

ha great term. "nominally solvent"

bank runs could happen anytime on any bank pre 2008 and post 2008 so this is nothing new it is just that high interest rates that get high quickly made this very bad for fractional reserve banks

in 2008 bad loans were made and bad loans destroy bank assets

right now banks have plenty of assets but no client cash (hence the bank run)

we will see a 2008 crisis once defaults on loans (cars, houses, small business) start occurring due to a poor economy