Miguel de Icaza α―…πŸ‰Mar 19, 2023

Two career economists (not the ones minted last week on twitter) explain what happened at SVB, and what could be done.

Their books are delightful reads, but this post creates clarity in 5 minutes. Share and enjoy.

https://stephaniekelton.substack.com/p/magical-thinking-monetary-thinking?post_id=1091874

Magical Monetary Thinking at the Fed Killed SVB

By L. Randall Wray and Stephanie Kelton

The Lens
Show threadMiguel de Icaza α―…πŸ‰Mar 19, 2023

Once you read the post, if you want two great follow ups, their books are fresh, clear, and in my opinion, worth reading for every citizen:

- Making Money Work for Us: How MMT Can Save America https://a.co/d/9xs2GZ6

- Deficit Myth https://a.co/d/gEWEq6F

Show threadNatik GadzhiMar 19, 2023
@Migueldeicaza thank you for the recommendations, and the post link.
Show threadMiguel de Icaza α―…πŸ‰Mar 19, 2023
@natik ph you are entering a magnificent world as the veil of obscurity lifted and you can see arcane potions for what they are: quack medicine
Show threadNatik GadzhiMar 19, 2023
@Migueldeicaza what should I read to get an understanding of how banks valuations affect their assets and solvency? I have a basic intuition, but want to learn to quickly read a high level picture of what’s happening with a given bank, and what type of assets it holds / what consequences it’s collapse could trigger short term and long term.
Show threadMiguel de Icaza α―…πŸ‰Mar 19, 2023
@natik I am not sure. But you should start by thinking that a well-ran bank keeps customer deposits and investments separate from their own assets. FTX was an example of someone mixing both assets for their personal gain.
Show threadMiguel de Icaza α―…πŸ‰

@natik so there are the banks assets and liabilities (their real estate, their own cash, their customer base, their ongoing income based on their operations) and the assets under management: third party assets they are trusted with and they invest.

Their valuation is a function of what the market believe they are worth based on the former, and to some extent on what they believe they are able to achieve with the latter.

Mar 19, 2023 at 8:21pmIvory for iOS
Show threadNatik GadzhiApr 1, 2023
@Migueldeicaza huge thank you for recommending The Deficit Myth. My brain doesn’t like thinking about economics, but the book does a great job of explaining the basics of it.
Show threadMiguel de Icaza α―…πŸ‰Apr 1, 2023

@natik glad you liked it! What this crew has done (the mmt folks) is turn a bunch of disconnected and unrelated components into an explainable system. It really removes the aura of dark art from it.

I think citizens needs to learn these things to make better policy decisions.