> Any depositor who could read the WSJ or watch the stock ticker could understand that there was no upside in waiting to see what would happen next.
The whole point of regulations is precisely that I don't have to read a journal or scrutinise a stock ticker to watch my money. As it turns out I have more productive and useful ways to spend my time. Maybe he doesn't have anything better to do all day; but pretending that regulation are not needed because there is some way for some people to get some insight about what's going on under the hood is just not a receivable argument.
> but pretending that regulation are not needed because there is some way for some people to get some insight about what's going on under the hood is just not a receivable argument.
What are you going on about?
If you listen to the All-in-podcast, where Sacks and the other guys talked about what happen, they actually point out that the problem was improper regulation that allowed banks to get in that state in the first place.
"improper regulation" is a funny way of saying "deregulation"
Banks want deregulation so they can have riskier investment profiles, but suddenly when that risk materializes, it's somebody else's fault that they can't cover their obligations.
The main counterpoint (to this article, he seems to mainly talk about others) seems to be "it was no bailout", and "insuring 100% of deposits is small government and totally logical for me as a stance". The former I can see, the latter I’ll have to put clearly in the article’s column.
How much money does the government spend on insuring deposits? Seems like it’s less than one day of social security or military spending. So I find it hard to argue that deposits insurance alone makes the government ‘big’
The points Sacks makes there contain some truth but, make no mistake, they are selectively chosen and completely self-serving.
1. Talk of inflation doesn't mention a way more effective tool for tackling it: taxation. Inflation is offhandedly blamed on the government too for not being "transitory". Sacks is actually torn here. Non-zero interest rates hurt the VC model but as a rich guy he certainly doesn't want, say, a corporate windfall profits tax;
2. He claims he wanred about pumping trillions of dollars into the economy. Why 2 years ago and not 14-15 years ago when the zero-interest QE started? What's the difference? Oh, who got the money in 2020? This is part of a consistent narrative from rich people that it's only ever a problem when poor people get government money. Then it's a moral hazard.
3. Further to the "2 years ago" narrative, we should remember that Covid relief started under Trump, not Biden. So why not "3 years ago"? Is Sacks trying to avoid criticizing Trump? Weird. I wonder why.
Inflation is too much money chasing too little stuff. Taxation is less money that the people have, but more money that the government has. If the government just set the money on fire, that would help with inflation, but they won't. They'll spend it. At that point, we will have the exact same amount of money chasing the exact same amount of stuff; the only difference will be who has the money. So we'll have the same amount of inflation, but people (and businesses) will have less money to try to deal with the inflation. That doesn't sound like an answer at all.
Inflation is caused by printing too much money. Taxation does not directly reduce inflation (I suppose you could argue some indirect effect since it means the government will need to print less but then there are other secondary effects we would need to include, etc)
Interest rates hurt everyone. Taxation targets only those who are profiteering.
The inflation we have now is opportunistic and self-referencing. "We have to raise prices because prices are rising". In truth it's really "we're raising prices because we can".
At least taxation would encourage companies to use those profits to invest in the business, possibly even pay people more (God forbid) and not necessarily profiteer. All instead of just using those huge profits for share buybacks.
Funny. First "its collapse was first and foremost a result of its own poor risk management and communications" and then a looong rant how it actually was fault of Biden, Democrats and loose monetary policy.
So far I have not seen any evidence that the real reason was anything but "poor risk management and communications" A couple of percentage points change in interest rates is not a thing that should bring your bank down. If it does, you have failed, no excuses.
> A couple of percentage points change in interest rates is not a thing that should bring your bank down. If it does, you have failed, no excuses.
In context, it's even more egregious — Rates after that "couple of percentage points change" are still historically quite low, it's just that we've had a completely aberrant run of near-zero rates for the last decade or so. It was a matter of time until this correction happened, so preparedness was about "when", not "if", it happened.
The democrats and minorities forced them to hire conservative lobbyists to weaken regulation, then forced them to refuse to hedge their interest rate risk.
Yeah, personally I'd trace it back to the 2020 covid money printing mania, or even the 2019 (nearly) negative interest rates. I do think he's right to blame the rate hikes, and in turn, the inflation that necessitated them. But he does skip over the fact that these rate hikes shouldn't have been a surprise. The bankers had poor risk management by not considering the effect the rate hikes would have on their long duration bonds. And frankly, Sacks misses an opportunity here to shift blame to the bankers, who IMO are the real cause of the crisis (as always).
