4287 sats \ 2 replies \ @Undisciplined 11 Mar 2023 \ on: America’s Banking Situation - What Am I Missing? bitcoin
Historically, Americans move into hedge assets like gold when there are banking issues. It's typically international financial troubles that drive foreign investors into treasuries. However, you're thinking in the right direction, because people try to move into lower risk assets.
The magnitude of US debt dwarfs commercial deposits, so a move into US Treasuries won't significantly impact the amount of purchases by the Fed. This is even more clear when you consider the fact that if too many people try to withdraw their savings the other banks will fail, because they don't have the reserves to support large scale withdrawals.
What does seem plausible, is that depositors losing an enormous amount of money might be taken as an opportunity to launch the cbdc: issuing them to replace lost deposits. I could also imagine a similar dynamic playing out with unpayable maturing treasuries.
I don't think the U.S. is anywhere near ready to launch a CBDC of their own, from a technology standpoint, or from a regulatory one. Which is why I generally disagree with the post on SN from earlier today claiming that SVB's failure was centrally planned in order to launch a cbdc. I think the Fed (and other central planners) are simply incompetent and bogged down by bureaucracy. Although, I wouldn't be surprised if I ended up being wrong on this.
And I agree that when they do end up launching one, it will probably be in response to a crisis.
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I agree with everything you said.
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