The biggest news in the financial world these days should be the bankruptcy of Silicon Valley Bank (SVB).

I believe that in many rounds of information bombardment, you already know a lot of data about Silicon Valley banks, such as the 16th largest bank in the United States, the second largest bankrupt bank in American history, and so on.

So today we are not going to repeat, let's mainly take a look at popular science, how this banking hopeful star went bankrupt.

Silicon Valley Bank was founded in 1982, and by June 2020, Silicon Valley banks had deposits of about $76 billion.

At that time, when the spread of COVID-19 in the United States was the most rampant, the US government chose & ldquo; lying flat, printing money, handing out money & the anti-epidemic means of rdquo;.

This is a godsend for American technology companies, because the epidemic has seriously changed the way people work and live, a large number of home-based jobs have created more demand for technology, and the huge amount of dollars printed by the US government is looking for a good direction to invest.

So VCs keep getting money from banks and investing in many start-ups in Silicon Valley, and these start-ups get the money and deposit it in Silicon Valley banks & hellip;&hellip.

VCs keep getting money from banks and investing in many start-ups in Silicon Valley, and these start-ups get the money and deposit it in Silicon Valley banks & hellip;&hellip.

At that time, the whole of the United States was in a state of crazy stimulus, so the Federal Reserve kept interest rates close to zero for a long time. For Silicon Valley banks, with so many deposits at almost zero cost, it is of course necessary to find a stable and reliable investment channel.

After a long search, the Silicon Valley Bank made a decision:They decided to spend more than $100 billion on long-term treasury bonds and MBS (mortgage-backed bonds), both of which do not yield much, between 1.5% and 2%, but are stable and safe to change hands.

There is no risk if the trend of the US economy remains the same, but the Fed has raised interest rates.

After the most recent rate hike, the fed's interest rate reached 4.5% to 4.75%, up from close to zero just a year ago.

Interest rate hikes have led to a shortage of dollars all over the world, including prestigious technology venture capitalists, and their pockets have begun to tighten. Of course, technology companies in Silicon Valley do not have a steady stream of dollars, and if they want to continue their research and development and operation, they can only use the money in their bank accounts.

So they began to withdraw money from Silicon Valley banks.

For the whole of 2022, total deposits in Silicon Valley banks decreased by about 16 billion, especiallyInterest-free demand deposits decreased from 126 billion to 81 billion.This greatly increases the pressure on banks' interest payments.

Another straw that overwhelmed the camel came in November, when the sudden collapse of FTX, a big client of Silicon Valley banks, the cryptocurrency exchange, triggered intense scrutiny by US regulators.

Some customers of Silicon Valley Bank, fearing that strict censorship will affect their capital security, withdrew the company's funds from Silicon Valley Bank.

The superposition of the two aspects has led to a liquidity crisis in Silicon Valley banks.

At this point, Greg middot; Becker (Greg Becker), CEO—— of Silicon Valley Bank, made a decision.

He decided to sell some of his long-term bonds to ease the bank's liquidity crisis.

He decided to sell some of his long-term bonds to ease the bank's liquidity crisis.

Specifically, he plans to sell about $21 billion of bonds, resulting in a loss of about $1.8 billion.

After the self-rescue plan was announced, the market responded with two sharp falls of more than 60%, and in less than 48 hours, Silicon Valley Bank declared bankruptcy.

To make matters worse, the problems associated with Silicon Valley banks may be much bigger than their own.

On March 12th, signatory Bank (Signature Bank), about half the size of a Silicon Valley bank, announced its failure, the third-largest bank to fail in US history.

On March 12th, signatory Bank (Signature Bank), about half the size of a Silicon Valley bank, announced its failure, the third-largest bank to fail in US history.

In fact, it is conceivable that if, under the previous plan, each depositor could only withdraw $250000, then depositors across the United States would find ways to spread their deposits among banks and try to keep their deposits below $250000 per bank. and give priority to big banks.

As a result, small and medium-sized banks in the United States will face a bigger run and a greater risk of failure.

Analysts believe that the Fed, spooked by the rapid bankruptcy of Silicon Valley banks, may suspend or even stop raising interest rates.

But will there be no problem if we stop raising interest rates? With the huge amount of water released in the past few years, inflation cannot come without raising interest rates, and banks and companies with weak ability to resist risks cannot hold up without raising interest rates.

The US government seems to be sitting on the ldquo; volcano & rdquo;. This time, the quick reaction can be regarded as covering the ldquo; crater & rdquo;, but where is the next & ldquo; crater & rdquo;? When will it break out? Who knows about this?