Money and Banks

Jeff and Bob walk through the mechanics of how a full reserve bank could work in a truly free market based on the concepts and taxonomy of Mises’s Theory of Money and Credit.

If even in the years when the mainstream said that there was “no inflation,” we all saw costs rise well above real wage growth, imagine what is happening now.

The story of the failure of Silicon Valley Bank is the story of nearly every bank failure. Fractional reserve banking invites the risky behavior that brings down the banking system.

The FOMC has slowed down in its monetary tightening over the past two months, and at Wednesday's press conference, Fed chairman Jerome Powell continued his shift to dovish territory.

Even if Powell is sincere in this stated desire to slay inflation with more rate hikes, recent bank failures will put the Fed under enormous pressure to end its rate hikes and to once again embrace easy money to save the banks and Wall Street. 

Some have wrongly blamed the current bank failures on the Federal Reserve’s interest rate increases. The real problem is how the Fed encouraged the entire financial system to get addicted to easy money. 

The Fed is launching a new billionaire bailout designed to keep banks afloat, and the FDIC is promising to back potentially trillions in deposits. The taxpayer will ultimately be on the hook. 

Federal authorities want us to believe that by bailing out Silicon Valley Bank, they have prevented a financial crisis. Instead, we will have a crisis with bailouts.

The incredible growth and success of SVB could not have happened without negative rates, ultra-loose monetary policy, and the tech bubble that burst in 2022.

Did the central bank break the law by effectively authorizing unsecured loans to banks based on the face value—rather than significantly lower market value—of those banks' Treasury holdings?