Naked Capitalism has the article Michael Hudson Talks to Ben Norton About SVB and Bank Failures.
The introduction by Yves Smith is well worth the read. Here is a small excerpt.
Yves here. Michael Hudson gives yet another meaty take on the recent spate of bank implosions in the US, with the spectacle of sick man Credit Suisse taking a big heave adding to rattled nerves. We’ll take the liberty of providing some additions and qualifications.
Here is the description of the video below.
Economist Michael Hudson analyzes the collapse of Silicon Valley Bank, Silvergate, and Signature Bank, explaining the similarities to the 2008 financial crash. He also addresses the US government bailout (which it isn’t calling a bailout), the role of the Federal Reserve and Treasury, the factor of cryptocurrency, and the danger of derivatives.
The introduction by Yves Smith is worth the read, and the video with Ben Norton and Michael Hudson is worth the price of admission (Of course the money price of admission is zero. You just have to spend the time to listen.)
If you don’t want to be financially swept away in the current crisis, you couldn’t make a better investment than watching this. If you don’t want to understand this, I will forgive you when you no longer can afford your “free” access to the internet.
I am just starting to read an article recommended by Michael Hudson. He seems to have a more favorable view of the author, Ellen Brown, than I do. The article is Ellen Brown: The Looming Quadrillion Dollar Derivatives Tsunami.
Unlike in 2008-09, when the big derivative concerns were mortgage-backed securities and credit default swaps, today the largest and riskiest category is interest rate products.
The original purpose of derivatives was to help farmers and other producers manage the risks of dramatic changes in the markets for raw materials. But in recent times they have exploded into powerful vehicles for leveraged speculation (borrowing to gamble). In their basic form, derivatives are just bets – a giant casino in which players hedge against a variety of changes in market conditions (interest rates, exchange rates, defaults, etc.). They are sold as insurance against risk, which is passed off to the counterparty to the bet. But the risk is still there, and if the counterparty can’t pay, both parties lose. In “systemically important” situations, the government winds up footing the bill.
Here is the bone I have to pick with MMT proponents.
While it is true that banks create the money they lend simply by writing loans into the accounts of their borrowers, they still need liquidity to clear withdrawals;
My contention is that these are deceptive words to use in conjunction with what private banks do. I contend it would be more honest to say that “banks create promises of money they lend by writing loans into the accounts of their borrower.” The description of the repo market explains one of the ways that banks make good on their promises when they have to fulfill those promises.