2023-03-20 07:19:24
How can you easily learnt from the collapse of Sillicon valley in 3 minute without deep researching …
[Private Content] Hey everyone, today I want to discuss the collapse of Silicon Valley after conducting some research. I hope we can all learn something valuable from this event.
In the world we live in, it's crucial to remember:
"Nothing is too big to fail."Consider FTX, Silicon Valley, and many other banks.
So, what actually happened to Silicon Valley, and what can we learn from it?
1. Banks take money from depositors, which is called liquidity.
2. They held $200 billion in cash from customer deposits.
3. However, they couldn't lend the money out quickly due to time constraints and people.
4. Additionally, they had operational fees to pay.
5. So, they decided to purchase US Treasury bonds.
6. They bought yield-to-maturity securities (it takes time to get back the money with interest).
7. Unfortunately, they miscalculated how the government would continue raising interest rates.
8. When interest rates rise, bond prices go down.
9. They lost money on US Treasury bonds because the Federal Reserve kept increasing interest rates.
10. On Friday, panic ensued as speculators grew scared and urged everyone to withdraw money from the bank.
11. Suddenly, the bank didn't have enough cash on hand.
12. Consequently, they had to sell their stocks and Treasury bonds at a loss.
13. The situation worsened as tech companies, facing their own troubles with layoffs and such, also started withdrawing money.
14. This led to a "bank run" as everyone frantically withdrew their money.
15. Ultimately, the bank collapsed.
The key takeaway from this situation is to never underestimate the power of speculation and the fear of others.
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Thumbs-up if you guys learnt something and share this if you think is valuable.
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