by Claudio Grass, Claudio Grass:

Part II of II

To be fair, it is true, this time is different. Indeed, this time the rescue plan for the bust banks is not comparable to what we saw in 2008. In the US, the guarantee for deposits up to $250.000 comes from funds that are maintained by participating banks and not from the taxpayer. The official answer to how they’re going to pay everyone back is also plausible and possible: Some, or even most, of the money can and will be recovered from winding down the failed bank’s operations and selling assets. And if all that is still not enough, then the Fed can basically just print some money to cover the difference. Obviously, that could be construed as ultimately costly to the taxpayer, due to the inflationary impact it would have. However, realistically, that impact would likely be negligible compared to what the more regular printing operations have unleashed or to what the “emergency” measures (“covid relief” monetary and fiscal policies) of the last three years have given rise to.

by Claudio Grass, Claudio Grass:

Part I of II

The recent turmoil that has roiled the global banking sector has placed central bankers in an impossible position: Cut rates and avert a domino-style disaster in the industry and a possible deep and prolonged recession in the wider economy or stay the hiking course to combat the still untamed inflationary pressures? Arguably the great losers in both cases will be the taxpayers and the average working household.