With 3 banks failing and 8,558 stores closing, what are the problems facing the U.S. economy?

Consumption in the United States is now very sluggish, which has also caused the financial industry and manufacturing industry to be greatly affected. The United States is the most economically developed country in the world, but recently the United States is facing a big economic problem, that is, the economic growth rate continues to slow down, consumption continues to be sluggish, resulting in many industries in the United States are unsustainable, especially in the financial industry and manufacturing industry, many enterprises have closed down and cannot continue to operate.

Weak consumption has led to a lot of ripple effects. Economic growth in the United States has always been driven by consumption, but consumption in the United States has continued to be sluggish this year, and many retailers have performed far worse than before, or even less than half of the same period in previous years. This makes the development of the U.S. economy very slow, and the weak and sluggish consumption has led to the poor development of the first unit, especially some manufacturing enterprises.

For manufacturing enterprises, consumption and demand is the key to their production, and now the sluggish consumption means that their production does not have any meaning, so it can be said that the sluggish consumption has lowered the overall efficiency of the manufacturing industry, which has led to some small enterprises and even some medium-sized enterprises can not continue to survive, and can only choose to close.

The loan pressure is high, and the impact on the financial industry is very large. In the United States, loans are a very normal thing, many Americans have a lot of mortgages, car loans, and even tuition loans, in the era of normal consumption, these loans can be planned normally according to the date, but due to the current weakness of the American economy, these loan arrears are very serious, which also makes many banks unable to pay the negative impact, leading to the collapse of banks.

The U.S. economy faces many problems, such as the continuous contraction of the manufacturing industry and the increasingly sluggish retail industry.

Since the 2008 financial crisis, in order to recover the economy, the United States has lowered the monetary interest rate to 0 and carried out three rounds of easing quantitative easing (commonly known as "money printing"), resulting in a flood of social funds and a frenzy of borrowing money throughout the United States, which has exacerbated the expansion of the U.S. debt and also led to the expansion of the U.S. banking industry.

It's quite a lot, and the economy of the United States has not been very good in recent years.

Because the United States is very chaotic internally, especially the common people, their lives are also very difficult.

Bank of America collapsed because of a liquidity crisis in banks due to interest rate hikes that led to a large number of depositors withdrawing cash.

Due to the epidemic, the United States has had three circuit breakers, and the Federal Reserve issued a large number of dollars to bail out the market to rescue the economic collapse. That is, the use of tight monetary policy, through the bank to raise the interest rate, go to the bank to save money, the market circulation of money back, so as to reduce the amount of currency, the dollar will appreciate, people are more willing to hold the dollar, and the currencies of other countries will depreciate, which is equivalent to transferring the economic crisis to other countries.

High interest rates will cause a large number of deposits to pour in, Silicon Valley Bank's deposit scale growth is huge, and it mainly provides financing for start-ups in the technology industry, but now the economy is not good, many technology companies are laying off a large number of people to reduce the scale to reduce costs, so the loan scale of Silicon Valley Bank can not keep up with this growth rate. Therefore, banks buy a large number of US Treasury bonds, which have a certain maturity and can only be withdrawn at the interest rate when they mature.

Later, a large number of customers came to withdraw deposits, and the bank's cash flow could not be supported, and Silicon Valley Bank tearfully ground the treasury bond portfolio assets to replenish cash. After learning of this news, a large number of Silicon Valley companies have launched withdrawal requests to Silicon Valley Bank, and the withdrawal scale has greatly increased in one day, and Silicon Valley Bank is completely unable to meet the withdrawal needs of customers. On March 10, Silicon Valley Bank's stock price was urgently suspended, and it declared bankruptcy overnight.

The impact of bank failures on our country:

1. China's exports will face greater pressure, the Federal Reserve's slowdown in interest rate hikes, the weakening of the US dollar after the cessation of interest rate hikes, and the passive appreciation of the RMB, thereby weakening China's export competitiveness.

2. ** and commodities ****, the wave of bank bankruptcies has caused a panic in the market, and everyone will take out the money in the bank to buy ** in order to avoid risk. There is a negative correlation with the U.S. dollar because it is denominated in U.S. dollars. With the depreciation of the US dollar, ** and commodities **.

3. China is the world's largest foreign exchange reserve country, especially holding a large number of U.S. Treasury bonds and U.S. dollar reserves, so once there is a crisis in the U.S. financial industry, the impact on China's foreign exchange reserves and foreign exchange market will be catastrophic, further threatening China's economic operation.

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The financial crisis triggered by Lehman Brothers in the United States in 2008 was different from today. Because Lehman Brothers is an investment company, much of its main business is leveraged financial speculation. The leverage ratio used is not only 5 times the leverage in the domestic market, but 20 times or even 50 times the leverage.

As long as a large loss occurs in the leverage operation of a certain key link during the delivery period, the principal of the entire Lehman Brothers company will be immediately lost, and the banks and other financial institutions that lend to Lehman Brothers will be trapped. This kind of loss with high leverage is often a loss of hundreds of billions, and the number of financial institutions that have been connected is also tens of thousands, and it is difficult to avoid causing a global financial crisis. In addition, globalization has caused a large amount of money and debt** to be dispersed around the world, and as long as financial institutions in various countries hold them**, once the U.S. loan crisis becomes a global financial crisis.

This will lead to the collapse of the global financial system based on the dollar and a recession. The reason for the failure of the Bank of America is because of the Federal Reserve's continuous interest rate hikes. In just nine months, the Fed raised the base interest rate from one to the other, with the undesirable effect of causing the interest rate on 10-year US Treasury bonds to be lower than the interest rate on short-term deposits.

Now that we know the reasons for the losses of the big banks in Silicon Valley, it is easy to rescue them: the Fed arranges loans to provide liquidity, or other banks inject capital to buy shares of Silicon Valley Bank's original shareholders to provide liquidity, which can be easy ways to defuse the crisis.

As of May 2023, three banks have failed in the United States.

On May 8, Wall Street** reported that cryptocurrency bank Silvergate Capital announced that it would cease operations and voluntarily liquidate its subsidiary, Silvergate Bank, which provides services to the cryptocurrency industry.

On May 10, Silicon Valley Bank was shut down by the California Department of Financial Closure Protection and Innovation, and the Federal Deposit Insurance Corporation was appointed as the receiver.

On May 12, the U.S. Treasury Department, the U.S. Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) issued a joint statement announcing that New York City-based Signature Bank had been shut down by local regulators, citing systemic risks.

Bank failures quietly in the background

The failures of all three banks are related to the broader environment in which the Federal Reserve is raising interest rates.

Since 2021, the United States has entered a cycle of interest rate hikes, which has caused a large number of floating losses for financial institutions holding various dollar-denominated bonds such as U.S. Treasury bonds, ** support agency bonds, and MBS, including Silicon Valley Bank. As Silicon Valley Bank sold off its bonds to pay off principal and interest, the bank's profits and capital were eroded significantly, eventually triggering a collapse in confidence.

For the two cryptocurrency banks, Silvergate and Signature Bank, under the multiple pressures of interest rate hikes, regulation, and liquidation, cryptocurrencies have shown a collective diving trend, with the amount of bank deposits significantly reduced, and their deposit-to-loan ratios and capital adequacy ratios are lower than the level of safe operation of banks.

First, the investment disturbance has been greatly slowed down by the decline of Zhengmei bonds, and the book loss is serious. In the past, the U.S. monetary easing and interest rates were extremely low, and most of these flooded funds were used to buy U.S. bonds, but due to the Fed's rapid interest rate hikes, bonds continued to rise. Second, deposits are declining and liquidity is running.

In the context of interest rate hikes, interest rates continue to rise, and it is said that deposits are easier to absorb, but in fact, the United States is a country with a very low savings rate, and Silicon Valley Bank's customer base is those technology startups. Silicon Valley Bank (SVB), founded in 1983, is a subsidiary of Silicon Valley Bank Financial Group, with assets of $5 billion and $2.6 billion in loans to venture capital and startups through 27 offices in the United States, 3 international branches, and an extensive network of business relationships in Asia, Europe, India and Israel. Silicon Valley Bank mainly serves technology companies, and has successfully helped star companies such as Facebook and Twitter.

On March 10, 2023 local time, according to a statement issued by the Federal Deposit Insurance Corporation (FDIC), the California Department of Financial Protection and Innovation (DFPI) announced the closure of Silicon Valley Bank on the same day and appointed the FDIC as the bankruptcy administrator; On March 11, Democratic Senator Elizabeth Warren said that SVB executives must be held accountable for the bank's failure due to its malfeasance and mismanagement. On March 12, the U.S. Treasury Department reported that the Treasury Department, the Federal Reserve and the FDIC jointly issued a statement saying that decisive action is being taken to protect the U.S. economy by increasing public confidence in the banking system.

There is Washington Mutual.

The crisis of Washington Mutual:

On September 26, the largest savings and loan bank in the United States, the Seattle-headquartered Washington Mutual Bank, was seized and taken over by the Federal Deposit Insurance Corporation (FDIC), which was established in 1889 and involved assets of $307 billion, and its collapse became the largest bank failure in the history of the United States.

2. The trigger for the current round of financial crisis is the financial derivatives created by Wall Street - residential mortgage backing** (MBS), which has triggered thinking about financial derivatives and their regulation. Financial derivatives not only have the function of diversifying risks, but also have the function of amplifying risks, which is very two-sided.

Question addendum: A group or enterprise that filed for bankruptcy in the United States There are many, many of them, do you mean those who file for bankruptcy in the United States?