The Biggest Story of the Week

|March 18, 2023
Bank sign on glass wall of business center

All eyes were on the banking sector this week as a stream of bad news kept the headline writers busy.

Last weekend, news broke about Silicon Valley Bank and Signature Bank collapsing.

Readers turned to Andy on Monday to learn what was going on.

And in our most popular piece of the week… he did what we do best at Manward, showing readers the story behind the story.

It all comes back to one number.

$5 trillion.

That’s how much we printed to buy our way out of the COVID mess.

But when you spend more than you make… you get a system that’s upside-down.

Yet despite high inflation and rising interest rates, Washington hasn’t learned its lesson…

As Andy wrote…

Biden wants to take $5 trillion from the rich and give it to the poor. And he wants to cut the deficit by $3 trillion… but raise the national debt from $31 trillion to $51 trillion within a decade.

At current interest rates, it’d be a disaster. We might as well start the mountain of bankruptcy paperwork now.

That’s what the banks are thinking.

It’s hell in that world right now. With the rate to borrow for six months nearly 40% higher than the rate we get paid for a 30-year bond, the banking world is as upside-down as the yield curve.

Those pesky interest rates are causing a lot of problems.

Take Silicon Valley Bank… The firm reported a loss of $1.8 billion last week after selling assets to raise money. The news sent depositors fleeing with their cash.

Long the bank of choice for startups and venture capital firms – which powered their growth by spending money they could borrow on the cheap – SVB got into trouble when the Fed started hiking rates at a blistering pace.

The bank couldn’t pay its bills… and things came crashing down.

Look, we’ve said all along that you can’t print money with reckless abandon and not expect serious consequences.

And now the dominoes are starting to fall.

But will Washington let this play out the way it should?

No siree.

There’s talk of pulling back on rate hikes. Bailouts (that aren’t bailouts!) are getting handed out. More cash floating in the economy fuels higher inflation… which fuels higher interest rates.

Round and round we go.

As Andy wrote… “Hold on. It’s about to get bumpy.”

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Amanda Heckman
Amanda Heckman

Amanda Heckman is the editorial director of Manward Press. With unrivaled meticulousness, she has spent the past dozen or so years – give or take a few sabbaticals – sharpening Andy’s already razorlike wit. A classically trained musician and a skilled writer in her own right, Amanda takes an artistic approach to the complex world of investing. Her skill has led her to work with numerous bestselling authors, award-winning financial gurus and – lucky for us – the fine folks at Manward Press.