Silicon Valley Bank, SVB, a California-based commercial bank which deals with tech start-ups and similar venture capital has collapsed after a bank run (ref. 1).
This is the most significant US bank collapse since Lehman Brothers in 2008. Lehman Brothers went bankrupt because of America’s subprime mortgage scandal, the financial wizardry and mortgage fraud that brought about a global financial crisis.
What is remarkable about this collapse is that it was SVB’s substantial holding of US government bonds that caused it. It was this supposedly risk-free part of SVB’s holdings that got it in trouble.
Apparently, by December last year, SVB’s portfolio of US government bonds had notched up a loss of some 16 billion USD out of a total of 57 billion USD (ref. 1). Subsequently, a rating agency signalled that it would downgrade the credit status of the bank. This panicked depositors, and so there was a bank run.
The bank could only honour the many withdrawals by selling more US government bonds before maturity. This selling at falling prices pushed bond prices down further. Thus, the situation snowballed, and ultimately the bank went bankrupt.
Now, why have the prices of US government bonds been falling? US government bonds across the spectrum have generally been falling because over the last year or so, in an attempt to curb rampant inflation, the US Federal Reserve has been increasing interest rates. For a bond, price moves inversely to yield; so, as interest rates rise, bond prices fall.
Some analysts are now of the view that the US Fed will probably not increase interest rates further, in order to avoid similar bank runs (ref. 2). However, stabilising the US banking sector this way would come at the expense of higher inflation. More on this later.
In the aftermath of SVB, on Wall Street and across the world, share prices of banks are plummeting (ref. 3). The share price of another California-based bank, First Republic Bank, has lost 60% in value (ref. 3).
Signature Bank, a New York-based bank with links to the crypto industry, has also had some sort of bank run (ref. 4). With 110 billion USD in assets, the failure of Signature Bank is the third largest in US history.
The US government, through the Federal Deposit Insurance Corporation, FDIC, has promised certain types of depositors their money. Still, the fact remains that a lot of organisations and entrepreneurs are out of pocket. What is more, the possibility of a financial contagion is high, because US government bonds have long been the mainstay of risk-free investing and so many financial institutions are invested in them.
Now, what has all this to do with Bible prophecy?
The third seal of the apocalypse, the rider of the black horse (ref. Revelation 6:5-6), is all about hyperinflation. In these last days, there will no doubt be hyperinflation in Mystery Babylon, the land of the coming False Prophet, because hyperinflation there will destroy the existing currency so that a new currency must be introduced. The new currency that will be introduced will be the prophetic mark of the beast.
And he [the False Prophet] causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads: And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.Revelation 13:16-17
Right now, in the USA and also in other countries that have embraced the idea of quantitative easing, there is increasing inflation. Prices, especially of food, are rising. I have covered this.
If the US Fed will not increase interest rates for fear of triggering further bank runs along the lines of SVB, then inflation in the USA will continue.
However, for the inflation to turn into hyperinflation, I think, the US government bond market must also collapse.
The run on SVB was triggered by a fall in US government bond prices.
The US national debt is now around 31.46 trillion. By any measure, the USA is bankrupt. There is not enough tax revenue to pay for civil servants and the US military. To keep it all going, the Fed must print money and finance the government through US government bonds. If the US government bond market were to completely collapse – that is to say, the price of bonds were to plummet and remain extraordinarily low – then printing money and spending that money would quickly mean hyperinflation.
I realise some of the elites of America, who have enjoyed living deliciously at the world’s expense, might want it all to continue.
How much she [Mystery Babylon] hath glorified herself, and lived deliciously…Revelation 18:7
France’s Valéry Giscard d’Estaing once described the US dollar being the premier international reserve currency as an “exorbitant privilege” for the USA.
Still, the point remains that, in these last days, the US dollar is to make way for the mark of the beast.
So, I think, the bank run and consequent bankruptcy of Silicon Valley Bank served to draw attention to the danger of putting money into US government bonds.
1. Ian Verrender (14 March 2023), “The collapse of Silicon Valley Bank reveals cracks in a system that leans on government bonds”, abc.net.au
2. Richard Partington (13 March 2023), “Silicon Valley Bank collapse could force central banks to stop interest rate rises”, theguardian.com
3. Richard Partington, Kalyeena Makortoff and Edward Helmore (14 March 2023), “Silicon Valley Bank: global banking shares slide as fallout spreads”, theguardian.com
4. Romain Dillet (13 March 2023), “After SVB failure, regulators close crypto-friendly bank Signature Bank”, yahoo.com