Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A7066475417573998593
The Wall Street Journal on #Interest #Rates: #Real #Money Has #Real #Value: How That Value is Suppressed: (A) Real Money Has Real Value: https://lnkd.in/ghTXTThX : #Bank #Runs Trash Long-Held Assumption on #Deposits: #Regulators and #lenders valued customer accounts higher when #rates rose: Recent spate of #bank #failures is upending a long-held theory among #banking #executives and #regulators—that the value of a lender’s #deposit business goes up when interest rates move higher. The theory rests on an assumption: *** That banks don’t have to pay depositors much to keep their money around, even as rates rise. *** The #deposits would be a stable source of low-cost #funding while the #bank earned more money lending at higher rates. The more #rates rose, the bigger the franchise value of those deposits would become—a natural #hedge against the declining market values of a portfolio of fixed-rate #loans and #bonds. But if rising rates or plunging #asset #values cause a bank’s depositors to flee en masse, the franchise value is zero—and, worse, it could beget other bank runs. That is what happened with #SiliconValleyBank.
(B) How That Value is Suppressed: Where Last #ZIRP #NIRP #Rates Started: https://lnkd.in/gFEUBD5V :
BBC: Interest rate ‘rigging’ evidence ‘covered up’ by banks: UK and US #regulators were told of a #state-led drive to “#rig” #interest #rates in the 2008 #financialcrisis, but covered it up, evidence indicates. Documents suggest #lenders sharply dropped their #interest-#rate estimates after pressure from #centralbanks. Evidence was not shown to #juries at the time when bankers were jailed for smaller-scale interest-rate “rigging”. Some evidence has previously emerged of Bank of England and UK government involvement in #manipulation of #interest #rates. But the evidence indicating it was part of a broader, international drive not just by the UK but by central banks across the western world to push key interest rates down in October 2008 has never been published before. The evidence indicates that in October 2008, central banks including the Bank of England, the Banque de France, the European Central Bank, Banca d’Italia, Banco de Espana and the Federal Reserve Bank of New York #intervened on a large scale in the setting of #Libor and #Euribor. At the height of the 2008 #financial #crisis, when #bank #lending had almost ground to a halt, central banks around the world urged calm. But my investigation reveals evidence that, behind the scenes, they were pulling levers to restore calm #artificially – #measures which would later be ruled to be #against the #law in the #UK.
Latest:
#Interest #Rates #Rigging: https://lnkd.in/gCD-zZUG
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