The collapse of Silicon Valley Bank may or may not reverberate beyond the world of tech start-ups and venture capitalism. My guess is that it won't. Silicon Valley turned out to be deeply reliant on low interest rates, probably because all those high flying tech firms don't make any actual profits and so they have to keep floating debt and taking loans. SVB filled an important role in the make-believe world of virtual wealth. With tech companies laying off employees - despite no underlying weakness in the economy - I would wager that it was the inability to continue borrowing at low rates that forced them to layoff workers and now led to a run on SVB.
However, it's not just about the centrality of debt to tech companies. It's also about a certain type of libertarian tech bro (they are melting down all over Twitter, naturally) who thinks that they and they alone have figured out a new way to print money. We also can't rule out that the bank run was created by actual vampire Peter Thiel in order to short the stock.
The Federal Reserve has continued their aggressive raising of rates to quell inflation. That seems weird, because inflation has stalled. It almost feels like the Fed is trying to force a small recession on the country that seems completely superfluous to our needs.
The moral of the story, however, is a simple one: there is no magic formula to avoid the laws of economic gravity. Regulation is the only proper way to control these malefactors of great wealth before they tank the economy again.
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