David Cay Johnston on SVB failure and bitcoin (24 minutes)
One of the people who really cuts through the BS in the economic field. In an article at his DC Report, Johnston takes a critical view of “magic money”:
The collapse of Silicon Valley Bank (SVB) last week raises serious issues far more significant than the obvious ones cited by the financial press and a broad range of Washington politicians.
Chief among these are bank loans against dubious assets. That’s not getting much if any attention in the news or from Washington and is likely to soon be swept under the rug, allowing needlessly risky banking practices to continue.
Before its collapse last week, SVB made loans against Bitcoin and other cryptocurrencies.
The question: why is any bank anywhere allowed to accept crypto as collateral for loans?
Bitcoin and its imitators are not money. They are not currency. They’re hardly used to buy and sell, an unsurprising fact given that by design the Bitcoin system can process only seven transactions per second compared to many thousands of transactions per second for credit cards.
Johnston also goes on to note that Reaganomics were a bad turn from sound banking policies of the New Deal era. New Deal policies, as we all know, came into being because of the excesses of the 1920s that resulted in the Great Depression:
We took a wrong turn when the prudent New Deal banking regulations in effect from 1935 were killed by Reaganomics, which re-regulated banks to reduce regulations and increase the risk of financial institutions failing. (There is no such thing as deregulation, only new regulation, which in our time on terms typically means regulations favoring corporations, including banks, over customers, financial prudence, and public safety.)
David Cay Johnston is once more warning us. Bitcoin is magic money and is not real. We need to heed his warning!