SHOW NOTES:
Caitlin Long is the Founder and CEO of Custodia Bank. In this interview, we discuss the events that have led to three banking failures within a week, one of which saw the biggest bank run on record. We talk about anti-crypto coordination involving the US government, the inherent instability of the traditional finance system and how this is another signal that the game is up.
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TIMESTAMPS:
00:00:00 Introduction
00:01:02 Silvergate
00:06:38 Silicon Valley Bank (SVB)
00:14:28 How should banks make money?
00:21:28 SVB’s wild strategy; Dodd-Frank fail?
00:33:55 Narrow banks & speedy banks
00:41:08 Fed vs banks; nationalising banks
00:45:36 Signature
00:49:31 QE infinity
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#Bitcoin #Finance #Economics
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“The Fed’s going to end up having to expand its balance sheet again, to proverbially print money, in order to provide the extra cash for the banks to be able to meet the demand deposit withdrawal; the banks should have been sitting on that cash all along.”
— Caitlin Long
Caitlin Long is the Founder and CEO of Custodia bank. In this interview, we discuss the events that have led to three banking failures within a week, one of which saw the biggest bank run on record. We talk about anti-crypto coordination involving the US government, the inherent instability of the traditional finance system and how this is another signal that the game is up.
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As the saying goes, to lose one bank may be regarded as a misfortune, to lose two banks looks like carelessness. How should we regard the loss of three banks within a week? To the uninitiated, this may look like a contagion, but it’s the impacts of two different systemic problems affecting two different markets: crypto and fiat. What it lays bare is the hypocrisy and instability of the traditional financial system.
The failures of Silvergate and Signature are rooted in the 2022 implosion in crypto. Precipitated by the collapse of Luna, we all know what followed: a nest of over-leveraged, hypothecated and fraudulent investments that fell like a house of cards. Who knows when it will end. Regardless, more recent failures seem to have been expedited by coordinated government action.
The obvious signal from the levers of power is that crypto is bad, and traditional finance is good. But what should have been an opportunity for the government to present the perceived weaknesses within digital asset markets, was significantly undercut by the biggest bank run in history: Silicon Valley Bank’s customers were withdrawing more than $1 million per second for 10 hours straight a little over a week ago.
The sorry mess is actually a clear vindication of Bitcoiners’ assertions that both crypto and fiat are both fundamentally unstable. The search for yield is endemic. The management of risk is too often criminally deficient. The argument is that narrow banking (full reserve banking) will suck deposits from risky banks, making risky banks even riskier, increasing systemic risk.
However, the system is becoming increasingly dysfunctional. Moral hazard seems endemic. Increasingly large bailouts are being used to keep the game going. The aim is to maintain the illusion that the financial system is stable. It is anything but, and everyone knows it. We’re entering a period on unknown risks. The time to change the rules of the game has long passed….(read more)
LEARN MORE ABOUT: Bank Failures
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Bank runs, or the sudden mass withdrawal of deposits from a bank due to rumors or lack of confidence, have been a recurring event throughout history. The first recorded bank run occurred in 1636 in Sweden, and since then, there have been numerous examples of bank runs worldwide. The advent of the modern banking system has provided a certain degree of confidence to bank depositors, but these runs still occur, especially during times of financial crisis.
Banks that experience a bank run can potentially face insolvency if they are unable to meet the withdrawal demands of their customers. In such cases, central banks can step in and provide a bailout by injecting liquidity into the troubled bank. This is essentially a form of insurance for the depositors, who may have lost their savings had the bank gone bankrupt. However, bailouts also have negative side effects, such as moral hazard and the creation of “zombie” banks that are kept alive by constant bailouts.
However, there is an alternative to traditional banking and bailouts that is gaining popularity: Bitcoin. Bitcoin is a decentralized digital currency that is not tied to any central authority or government. It is based on blockchain technology, which makes it resistant to fraud and manipulation. Bitcoin holders are in complete control of their money, and there is no need for central authorities to bail out banks or manipulate the money supply.
Caitlin Long is a well-known advocate for Bitcoin and blockchain technology. She is the founder of Avanti Financial Group, which is a digital asset bank that aims to provide a secure and compliant platform for institutional investors to manage their assets. Long believes that Bitcoin can provide a more stable and secure financial system compared to traditional banking.
In an interview, Long explained that Bitcoin can prevent bank runs by providing a safe haven for depositors. Since Bitcoin is not tied to any central authority, there is no need to worry about bank runs or bailouts. Long believes that Bitcoin can serve as a store of value that can protect individuals from the negative effects of inflation and government intervention in the financial system.
Moreover, Long stated that Bitcoin can provide an alternative to traditional banking services, which are often laden with fees, restrictions, and regulations. Bitcoin allows individuals to transact securely and directly, without the need for intermediaries. Long believes that Bitcoin can democratize the financial system and bring economic freedom to people who are currently underbanked or unbanked.
In conclusion, bank runs and bailouts have been recurring events throughout history, and they have negative effects on individuals and the economy. Bitcoin provides an alternative to traditional banking and can prevent bank runs by providing a safe haven for depositors. Caitlin Long is a prominent advocate for Bitcoin and believes that it can provide a more stable and secure financial system compared to traditional banking. As the world becomes more digitized, Bitcoin and other digital assets will continue to gain prominence and change the way we think about money and finance.
Caitlin Long Discusses the Relationship between Bank Runs, Bailouts, and Bitcoin appeared first on Inflation Protection.
