Before it failed, Silicon Valley Bank had lots of cash and a low ratio of outstanding loans.
Their fatal mistake: They parked the majority of their money in US Government Bonds.
(You know, the safest, most risk-free asset in the world.)
SVB put $119.9 billion into low-interest, long term government bonds, like 10-year Treasury notes.
Here’s the problem: When interest rates go up, the value of the bonds goes down.
And SVB goes pfft.
We’re All Broke
If SVB’s fatal mistake was investing in US Government Bonds, then where does that put the rest of us?
Even the US government invests in US Government Bonds.
And the “unrealized losses” are stunning.
As you might suspect, this is not my work.
For an excellent description of this disaster —and its implications— I recommend…
The article is published by the Sovereign Research and Advisory Group.
They believe that, as society comes unglued, we should all have a Plan B.
In their words, options = freedom.
Click around their website. It’s interesting.