The end of 20 years of low rates is creating problems in the plumbing of global markets. Here are some areas that could be heading for trouble.
While each event can be explained away by unique circumstances, there are connections: the collapse of cryptocurrency Terra last year blew a hole in the fraudulent finances of FTX; this collapse weighed on crypto bank Silvergate, which fell over on the day SVB tried to save its skin with a capital raising; and the panic over SVB put pressure on Credit Suisse.
The new world, he says, might actually look more like that of the 1980s, where interest rates are higher and economic shocks more frequent. Credit Suisse similarly has a unique set of problems that have been building for years, leading it to attempt a hugely complex, multi-year restructure at the worst possible time.
And when financial markets turn skittish, fears about liquidity turn toxic. The bank run at SVB – where a staggering $US42 billion was withdrawn in a day – and the– which sank its value by 30 per cent in a few hours on Thursday night – rapidly threatened to spill across the financial sector into other parts of the sharemarket and across the global economy.
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