The official date given by NBER says that the recession began in December of 2007, which put the economy into a fragile state, which was intelligently managed for another 9 months, before circumstances went beyond anything that could be managed. Then the financial meltdown began in September of 2008.
Which it had lowered more dramatically due to 9/11.
https://www.bankrate.com/banking/federal-reserve/history-of-...
Let that sync in, is my 2c.
(Extra:The FED interest rates takes 2 years to kick in to Adjustable Rate Mortgages which where the first to fall.)
The fed did not cause the crypto crash. It didn't force people to gamble on cryptocurrencies. It didn't force them to not sell, at the top of the naked ponzi schemes they participated in.
Question, though, and coming back on topic: Did the rising interest rates trigger this (FXT)? There might be a path here, and it would not have the two-year delay of adjustable rate mortgages.
Recall FTX used a bunch of cash to save failing companies which would create systemic shock (ironic), acquire and invest lately, including in the Silicon Valley. My guess here: "1-2/3-4 Billion" is enough for liquidity, nobody is going to run on us, we are trusted, especially after us saving the world.
There was "bad event rolls" in the system and when they came, nobody can/will/would give them that amount of money.
I am sure in great times, they would also find liquidity/loans more easily -- which is what they are still trying to do. ("Everyone" is keeping cash to the chest, waiting to see what happens right now.)
The business models that relied on a perpetual supply of new capital, & other overly risky gambles become less attractive to investors when you can go get 5-7% on some boring bond with no risk.
You also have liquidation spirals as speculative investors need to sell asset X because of margin calls on asset Y. Which then causes a margin call on customer2 who owns asset X which has now gone down so they go sell some asset Z.. and so on.
https://i2.wp.com/financialsamurai.com/wp-content/uploads/20...
This may mean that the US part of the exchange and the associated customer funds were not lent out, but we shall find out.
[1]https://coinmarketcap.com/currencies/tesla-tokenized-stock-f... [2]https://www.cnbc.com/2022/11/08/binance-offers-to-buy-ftxs-n...
It pretty much does. The free-for-all disregarding of laws (including laws against fraud) is the stated purpose of crypto. They've been pitching this as Fight Club For Finance since the very beginning. The exchanges with a legitimate appearance are just fronts to get you to the back room with all the unregulated tokens offering insane interest rates. If you didn't come for a scam-or-be-scammed fight to the death, there isn't any reason to use crypto. The crypto bros just missed the part where Fight Club falls apart if you tell everyone about it. Or maybe they got too excited and forgot about that rule.
b) Bank runs happened in 2008 (U.S.), 2010-12 etc. A lot of crypto companies buy insurance similar to what the government says, but lacking regulation and the government behind you makes it as you said problematic.
But: banks are years old and keep making the same mistakes and failures. Big banks (not your corner side community bank that acts as intermediate and its job is community welfare and good relations) haven't changed. I'd be surprised if we avoid another bank related incident, if we enter a recession.
Spain used to have a lot of these, and the financial crisis blew almost all of them up: https://en.wikipedia.org/wiki/Savings_bank_(Spain)
As for banks - as soon as these crypto scams fail, everyone will find out just why the SEC and FDIC are there. They were not created just because some politician had an idea for more bureaucracy.
SEC and FDIC aren't usually, to the general public, negatively seen due to their mission. Its the fact they don't prevent criminal / unethical behaviors beforehand, and banks get away with alot before anyone intervenes.
I actually don't think the average US citizen is "anti regulation" with this. I think - and I include myself in this - that we see agencies like the SEC (more so than the FDIC) don't act fast enough or often enough, and when they do, the fines are a slap on the wrist vs the profit made by the bad behavior.
In a nutshell, they just aren't acting effectively, and thats why they get a bad wrap.
A better example is the IRS with a double standard of overzealous enforcement against individuals and small business who cannot defend themselves and complete non-enforcement against higher tiers of wealthy.
In the case of the SEC or FDIC, this has resulted in the near elimination of smaller fish aside from protective carveouts like the Durbin Exempt Interchange.
As far as I can tell.
These can be reduced but not entirely eliminated by setting reserve requirements, LTV ratios, etc., which is what https://www.bis.org/bcbs/basel3.htm is all about.
You can't really eliminate the duration mismatch without eliminating anything recognisable as a "bank", and it becomes much more expensive to get credit and to do basic financial operations.
The answer is quite simple, just keep going down with interest rates even if they are negative. That is fully consistent with the loanable funds model.
And billion dollar bailouts. With a few billions every decade or so, FTX probably survives such crises multiple times over.