FTX collapse brings down a mainstream bank

Duke of Marmalade said:
You are using your own definition of FRB.
Click to expand...
No - just calling you out on the lie that you've tripled down on.
Duke of Marmalade said:
To you if someone makes a deposit and the bank uses that to purchase a different asset rather than keep it in a vault then that is FRB.
Click to expand...
To me? It's not 'to me'. lol. Full reserve - the bank retains 100% of the money you deposited to a current or demand account. Fractional reserve - the bank keeps 3-10% available. It goes out and uses the rest.

Duke of Marmalade said:
To you banks should just be vaults or custodians
Click to expand...
I didn't necessarily say that - you're making an assumption. What I am doing is pointing out a clear risk and drawback of fractional reserve banking. Any reasonable individual would recognize that.
Duke of Marmalade said:
not in any way managing the assets which must at all times be identical to what was deposited with them.
Click to expand...
You mean taking depositors money and putting it at risk to make a profit? Like I said, I'm not necessarily against such a thing but lets call it what it is and recognize that there's a major risk element that comes with it.
Duke of Marmalade said:
It is the mismatch between assets and liabilities which causes bank busts not FRB.
Click to expand...
Lol. What you're saying is an impossibility. In a full reserve scenario, explain to me where the mismatch relative to treasury bonds and shorter term obligations would occur? So in order to arrive at the mismatch scenario, depositors assets have to be fractionally reserved and then put at risk.

Duke of Marmalade said:
if speaking knowledgably about FRB when you haven't a clue what it actually means, massages your cult fetish I shouldn't rain on your parade.
Click to expand...
You've got yer knickers in a tangle there Duke - because what I've stated is accurate. But I do get it, you've been having difficulty over the past six years acknowledging that there might be the slightest deficiency in the conventional system.
 
From the FT today:


It's not likely that this could occur in Ireland (or in most of Europe even) as deposit bases just aren't as concentrated with large corporate depositors the way it seems SVB was.

I wonder why CFOs in tech firms were so heavily involved with SVB. Basic risk management says that if you hold big cash balances you should spread them across different institutions.
 
@tecate
Investopedia said:
Most countries use fractional reserve banking because it is currently the only financial system model that works.
Click to expand...
I agree that if banks could only lend shareholders' money then depositors would not be affected by bank busts.
Similarly if banks were forbidden to charge interest then there would be no bank busts.
If fossil fuels were banned there would be no car deaths on the road.

So are the extreme eco cultists right to blame car deaths on diesel or should they blame it on speeding?
Are anti usury fanatics right to blame bank busts on charging interest or should they blame deplorable risk management?

As to blaming fractional reserve banking for bank busts, I hate to preach to a confirmed believer but this is not actually what the High Priests of his cult have against FRB. Their complaint is that it enables banks to multiply their deposits and since deposits are money supply that is what they object to.

​

 
NoRegretsCoyote said:
It's not likely that this could occur in Ireland (or in most of Europe even) as deposit bases just aren't as concentrated with large corporate depositors the way it seems SVB was.
Click to expand...
If I were trying to find something similar - and slightly tongue I cheek - it does sound a little like what you might expect to find in a small credit union.

The difference being they would be retail deposits (i.e., less likely to run out the door). Also the CU world probably 'invest' those funds by putting them on deposit with an actual bank. Obviously that's not without counterparty risk but at least it wouldn't be the same level of maturity mismatch as with silvergate.

Perhaps we should send a delegation from the league of credit union's to show them how to do it!
 
Duke of Marmalade said:
As to blaming fractional reserve banking for bank busts....
Click to expand...
...
Duke of Marmalade said:
I agree that if banks only lend shareholders' money then depositors would not be affected by bank busts.
Click to expand...
So we had to go through 3x exchanges of you telling porkies before you finally admit that fractional reserve banking is the primary reason for both of these failures.
Duke of Marmalade said:
Similarly if banks were forbidden to charge interest then there would be no bank busts.
If fossil fuels were banned there would be no car deaths on the road.
Click to expand...

Of course. Here we have your answer to the large swathe of startups and their employees who could find themselves without paychecks and jobs. You have to understand that you don't have your business anymore and you employees dont have your jobs because it has to be like this and as long as I can explain it all logically to you, you'll be fine with that.

Duke of Marmalade said:
Are anti usury fanatics right to blame bank busts on charging interest or should they blame deplorable risk management?
Click to expand...
Firstly, you've already acknowledged (despite 3x rounds of lies) that there would be no bank bust without fractional reserve banking, remember? So mulling over whether it is the culprit or not seems like a poor use of everyone's time - having already found that it is.

As for risk management, the moment these banks invested in treasury bonds, risk management went out the window. Imagine investing in something where your central bank alchemists can tinker around with interest rates from one FOMC meeting to the next?
Powell said during the week he will speed up rate hikes if necessary - so I guess we can get to see what he breaks next.

The same fiat money gods that brought the reserve requirement down to ZERO three years ago. Is that what you're talking about when you refer to risk management going out the window?
A Federal reserve who denied a master account to Custodia Bank - which is a full reserve bank - on the basis that that same full reserve bank presents risks to the banking system (Cusodia is suing the Fed for its protectionism), then has its Vice-Chair for Supervision come out on Thursday speaking in the knowledge that Silvergate is toast and that SVB is in dire straits and stating that Fed-regulated banks are well protected from bank runs!!!!

In his testimony before Congress during the week, Powell said that the US will have real-time payments and settlement soon. How do you think the banking system is going to be protected from bank runs in a real time settlement environment, Duke?

But that's one for the future - in the meantime, lets recap. Brendan started this thread to feature as part of a long series of crypto doom threads. And yet, crypto has little to do with what's gone down here. Crypto isn't the reason why we're now faced with greater potential of further bank runs and the likelihood that a whole raft of startups are going to go bankrupt, with their employees losing their jobs. Rather than it being the 'look, crypto bad' thread that he thought it would be, the subject area of the thread is a clear demonstration of the deficiencies of the current system.
 
tecate said:
So we had to go through 3x exchanges of you telling porkies before you finally admit that fractional reserve banking is the primary reason for both of these failures.
Click to expand...
The primary reason these banks failed is asset failure and I note that you actually agree with me that it happened because "risk management went out the window"; nothing to do with FRB.
The primary reason cars crash is human error but yes cars wouldn't crash if they had no fuel.

You gave a knee jerk cultish explanation for the busts though the High Priests would probably tap you on the shoulder and whisper in your ear "chill out my son, actually that's not why we are against FRB".

Don't lecture me on the misfortunes of employees without pay checks and jobs. Consider first the poor mugs who swallowed the cult's promise of salvation at $70,000 a bitcoin.

Yes it is difficult to see why this classic failure of the fiat system has anything to do with crypto and yet it caused bitcoin to fall 10% against the dollar.

Anyway, I will let you have the last word as usual.
 
Sweet Jehovah
Bank runs are a clear and stand out drawback of fractional reserve banking. The use of fractional reserve banking is the primary factor in creating the conditions for a bank run. 'Risk management' by a given bank is secondary - and as we have seen, banks cannot be relied upon to implement systems that are adequate. Neither can the regulator with its zero reserve requirement and having eased bank stress testing more recently - yet lying to the public about its ability to prevent ban runs in the very middle of those bank runs occurring.


Duke of Marmalade said:
Don't lecture me on the misfortunes of employees without pay checks and jobs. Consider first the poor mugs who swallowed the cult's promise of salvation at $70,000 a bitcoin.
Click to expand...
I very much will call you out on it. That's a disingenuous response. You very much have been presenting this as all acceptable and logical. BS. Your precious banks screwed up. Your precious regulator screwed up. The outcome is REAL. Fess up and acknowledge the shortcomings - that's what any reasonable person would do.
And now to your swipe at bitcoin. The promise of "salvation" you say? I ran a search on the word "salvation" in this section and you're right - it's been mentioned a gazillion times - by you. Nobody else but you. Otherwise, you think that taking someone deciding to speculate on bitcoin at the top of what was clearly a well-flagged hype cycle (run a search here on 'hype cycle' and you'll see it mentioned lots of times - by me) and someone leaving funds in a current account are comparable?
(and for reasons that have been thrashed out ad nauseum, none of what you just stated detracts from the qualities of bitcoin. You made exactly the same claims in 2018 - pity the poor mugs that bought at $20k, etc.).

Duke of Marmalade said:
Yes it is difficult to see why this classic failure of the fiat system has anything to do with crypto and yet it caused bitcoin to fall 10% against the dollar.
Click to expand...
Conveniently not looking very hard. The 'run' on Silvergate came as a result of a lack of faith in your precious banking system. In the case of SVB, while it wasn't a stand-out crypto-friendly bank (it's focus is tech more generally), they did bank Circle. Circle had $4B deposited in your banking system that can't be trusted.
So to answer your question, Bitcoin fell because of the systemic risk of banking to crypto.

Duke of Marmalade said:
Anyway, I will let you have the last word as usual.
Click to expand...
I think we've been down this road before. Run a search on "last word" - the only one talking about it is you.
 
Last edited:
tecate said:
Bank runs are a clear and stand out drawback of fractional reserve banking.
Click to expand...
Unless you envisage a banking system that does not lend out its deposits and places them all with the Central Bank (which you distrust so much) and makes its living purely by charging custodial fees for said deposits. It is a quaint idea, not shared by the High Priests of the cult. You used the word "fractional" as a cultist knee jerk put down.
Yes, I have stated before that our monetary system is a marvellous human advance, adopted by every nation on earth and having played a major part in the enormous explosion in economic growth witnessed over the past many decades. It has its weaknesses as do motor cars - the weaknesses of human beings. I repeat, do not lecture me on its casualties when you championed the attempted duping of El Sal peasants into the cult when btc/$ was a multiple of its present value. They may be peasants but my understanding is that they saw through the cult BS.
tecate said:
So to answer your question, Bitcoin fell because of the systemic risk of banking to crypto.
Click to expand...
Bitcoin fell 10% against the dollar. I could understand it falling against gold but surely the dollar was more exposed to the systemic risk of banking.
tecate said:
I think we've been down this road before. Run a search on "last word" - the only one talking about it is you.
Click to expand...
I might challenge you for the honour this time round.
 
Last edited:
Get out of it Duke. All any reasonable person would have done (for expediency if nothing else) is say "yes, the potential for a bank run is a major drawback of fractional reserve banking" - and done.

Duke of Marmalade said:
Yes, I have stated before that our monetary system is a marvelous human advance, adopted by every nation on earth. It has its weaknesses as do motor cars - the weaknesses of human beings.
Click to expand...
It's a shame that you can't be open to discussing and acknowledging those weaknesses alongside the benefits. At least you do identify the core issue (the weaknesses of human beings) which has led to an interest in decentralized, transparent trustless systems.

Duke of Marmalade said:
I repeat, do not lecture me on its casualties
Click to expand...

Lecture you? Last I heard this was a discussion. And if you are saying that we should only discuss the shortcomings of the things you loathe and ignore the shortcomings of items you roll in behind, it doesn't work that way Duke.
Duke of Marmalade said:
when you championed the duping of El Sal peasants into the cult when it was $70k /btc.
Click to expand...

Lets see. Thoughts. GFY. Secondly, show me the post where I 'duped' El Sal 'peasants' when it was $70k/btc.
El Salvador is a perennially challenged developing world country and yet, La Ley Bitcoin has been nothing but a positive step for it. The IMF told us that the world was going to cave in, that El Salvador wouldn't meet its loan repayments (which is the idea anyways) but it did without any issue. And all the while, you think that project bitcoin is dead in El Salvador when that's the farthest thing from the truth - it's doing just fine.

Duke of Marmalade said:
Bitcoin fell 10% against the dollar. I could understand it falling against gold but surely the dollar was more exposed to systemic risk.
Click to expand...
If you want to talk about the dollar, talk about the dollar. My understanding was that you queried why bitcoin fell. I gave you a rational answer. Now you can't understand why it fell against a particular currency? The answer is the very same. USDC is a key component within the cryptocurrency ecosystem. It being affected by the failure of a regulated bank, together with the risk related to other regulated banks - is the reason for the drop. Banking failure is a threat to the crypto ecosystem right now.

Duke of Marmalade said:
I might challenge you for the honour this time round.
Click to expand...
I'm not interested in childishness. This is a discussion board. You have something to write - write it. You don't? - then don't. It's that simple.
 
Last edited:
tecate said:
Get out of it Duke. All any reasonable person would have done (for expediency if nothing else) is say "yes, the potential for a bank run is a major drawback of fractional reserve banking" - and done.
Click to expand...
You "get out of it". You throw in the word "fractional" as some sort of cult virtue signalling. Everybody else just calls it banking. If you allow a system which can do other than place deposits with a Central Bank you are open to bank runs
tecate said:
Lecture you? Last I heard this was a discussion.
Click to expand...
"Get out of it". I was challenging your use of the word "fractional reserving" and you drag in employees waiting for pay checks,
tecate said:
Lets see. Thoughts. GFY. Secondly, show me the post where I 'duped' El Sal 'peasants' when it was $70k/btc.
Click to expand...
My dear tecate I would not give you that sort of influence. I said you "championed" the duping by the cult, and you have proved my point.
tecate said:
If you want to talk about the dollar, talk about the dollar.
Click to expand...
Yes, I want to talk about the dollar. Why did the arch pillar of the banking system rise 10% against bitcoin when this systemic weakness unravelled?
tecate said:
I'm not interested in childishness. This is a discussion board. You have something to write - write it. You don't? - then don't. It's that simple.
Click to expand...
I'm currently ahead
 
Duke of Marmalade said:
You throw in the word "fractional" as some sort of cult virtue signalling. Everybody else just calls it banking. If you allow a system which can do other than place deposits with a Central Bank you are open to bank runs
Click to expand...
I use the term fractional reserve banking because its entirely accurate. Anyone other than a child would just say, "yes, the potential of a bank run is a serious drawback of fractional reserve banking" rather than engage in semantics.
Duke of Marmalade said:
I was challenging your use of the word "fractional reserving"
Click to expand...
There's no challenge. You lied three times and said that fractional reserve banking doesn't create the potential for a bank run, later to acknowledge that it does but to castigate me for bringing it up because its somehow inconvenient to you. Could it be that the vast majority of people have no notion what fractional reserve banking is - and that if they understood it, they'd be less likely to leave their funds in a system that really needs them to think that there's no risk to their funds and that their funds are always available to them?

Duke of Marmalade said:
you drag in employees waiting for pay checks,
Click to expand...
You can make light of this as much as you want - but you're entirely wrong to do so. The FDIC guarantee covers 3% of deposits in the case of SVB. The bank's clients are Silicon Valley startups. If they go under, they take payroll and jobs with them. That's before we consider further contagion if your alchemist friends don't get to grips with it.

Duke of Marmalade said:
My dear tecate I would not give you that sort of influence. I said you "championed" the duping by the cult, and you have proved my point.
Click to expand...
Your claim was/is that I 'duped' El Sal 'peasants' as you called them when bitcoin was at its all time high. I asked you to provide proof of that - you can't. That I've outlined that La Ley Bitcoin has been a success is unconnected with your wayward claim. Everyone knows that bitcoin relative to El Salvador was all about payments, remittances and that type of use case relative to bitcoin.

Duke of Marmalade said:
Yes, I want to talk about the dollar. Why did the arch pillar of the banking system rise 10% against bitcoin when this systemic weakness unravelled?
Click to expand...
It didn't "rise". I already clarified that bitcoin fell because of the risks posed by your beloved banking system.
 
Last edited:
I have conceded last word in the other bunfight - a prize I was never going to win
Anyway, I must tell you of a conversation I heard in a pub last night.
Person A, who we all know to be a Green cultist says "did you hear about the diesel car that knocked down a dog out there?" We all raised our eyebrows, here was the usual vice signalling. Person B, a very reasonable person despite being gentry, decided to challenge A "why are you emphasising the word 'diesel'? The driver was totally drunk".
A replied "if it wasn't for the diesel the car wouldn't have been able to go, you heartless so and so having no compassion for that poor doggie - another victim of your cherished fossil fuels".
 
Duke of Marmalade said:
Anyway, I must tell you of a conversation I heard in a pub last night.
Click to expand...
"must" you say? I'd hate you to feel obliged to provide any more of these anecdotes. I'm pretending to myself that either Person A or B at least had an account at SVB, to kind of make it relevant in some way.
 
Anyway, in case it was a bit too subtle, my parable was related to the erroneous vilification of FRB in the SVB debacle - perfectly on topic. Cults are supposed to be good at parables. That should be the LAST WORD.
 
Duke of Marmalade said:
Anyway, in case it was a bit too subtle, my parable was related to the erroneous vilification of FRB in the SVB debacle - perfectly on topic. Cults are supposed to be good at parables. That should be the LAST WORD.
Click to expand...
There was no 'vilification' - but there was a clear statement of fact. Over 6 years here, there's been a lack of maturity to your argument in that you won't tolerate any discussion or acknowledgement of failures/drawbacks of our current economic and financial systems.
 
Ah, so you did understand the parable. Why did you suggest it was off topic? Anyway we are boring everybody else silly so that definitely is my last word.
 
@tecate what are your thoughts on Bitcoin losing ~10% of its value on Friday as SVB unravelled and how the price remains linked to the fiat banking shortcomings?
 
You must log in or register to reply here.
Menu
Log in
Register