Silicon Valley Bank collapsed quickly last week following some ill-timed bad news that caused a panic.  Ripples moved through the entire financial system.

Timing the delivery of bad news is sometimes more art than science.  This week Silicon Valley Bank (SVB) used neither art nor science when it delivered news late Wednesday that it needed to “raise $2.2 billion to shore up its balance sheet.”  The news was unexpected by investors, and came on the heels of an unrelated collapse by crypto-oriented Silvergate bank.  

By the end of the day Thursday, panicked customers had withdrawn over $42 billion dollars from SVB.  This left SVB’s balance sheet $948 million dollars in the negative. “When you say, `Hey, get your deposits out, this thing is gonna fail,′ that’s like yelling fire in a crowded theater,” tech sector financier Ryan Falvey said. “It’s a self-fulfilling prophecy.”  During the chaos, SVB’s advice was to “stay calm,” as if anyone in history ever calmed down by being told to calm down. 

Silicon Valley Bank’s collapse was due to poor communication that it was getting killed on its bond portfolio because the Fed raised interest rates so rapidly, CNBC’s Jim Cramer said Friday.  There’s the root of the initial problem: the Fed keeps raising interest rates.  

I’m no financial wizard, but here’s my understanding of the recent economic cycle.  Things were OK, then there was a virus.  In response to the virus, the government at all levels from Federal to city shut down various parts of the economy.  People still had to make a living, but they also were forced to stay home.  Consumption patterns changed substantially, but manufacturing and supply sectors remained hobbled by closures.  Both supply and demand were influenced by the shutdowns, unfortunately in opposite directions.  As the closures loosened up and the economy “got going” again, demand increased further even as supply was unable to catch up due to the long shutdowns. About the same time, the Fed increased the money supply and Congress handed out stimulus checks.  This easy money predictably increased demand, which coupled with decreased supply led to inflation.  The Federal Reserve then started making interest rate hikes to tamp down demand and combat inflation that the government caused in the first place.  Now these hikes are themselves causing challenges within the economy.

Make no mistake: Covid 19 did not wreck the economy.  Government’s response to Covid 19 wrecked the economy.  Unfortunately they’re not done yet. Silicon Valley Bank got caught up in the crossfire this time.  We’ll have to wait a bit to see what next time looks like.

If only there was a better alternative.

Texas has its own gold depository, authorized by the legislature in 2015 and opened in Leander in 2017.  The Texas Nationalist Movement was active in lobbying for the creation of the depository, as sound asset-backed monetary policy is in Texas’ best interests as a future nation.  

Mixed in with the flurry of last-day bill filings at the March 10 filing deadline for this legislative session was HB 4903 and its companion SB 2334 that would authorize the creation of a gold-backed digital currency. The TNM will be working toward the passage of this bill.

The Federal government prints money, manipulates money, screws up the economy, then claims only they can fix it.  The Texas government has taken steps to secure real assets, and is now taking steps to create a gold-backed currency. Texas is leading the way toward a stable national economy post-Texit.  The Fed is leading the way toward economic collapse. The contrast could not be more clear.