Silicon Valley Bank could be a canary in a coal mine.
The California bank’s failure Friday shined a spotlight on the large losses that the whole banking system has seen on investments in bonds as a result of rising interest rates.
After having created a credit market bubble with its ultra-aggressive response to the COVID-induced recession, the Federal Reserve would be well advised to think carefully before continuing to slam the brakes as it tries to control inflation.
If not, we should brace ourselves for a hard economic landing as additional parts of the financial system start to break.
Image by Walter Knerr from Pixabay
