Is there another bad assumption today?
The recent failure of Silicon Valley Bank has raised fears
of a new banking crisis. One way to look at SVB's failure
is: SVB assumed that interest rates won't rise.
what i don't understand: how did they handle the banking crisis of the eighties? Somehow that one didn't manage to kill the economy, how?
My guess is less concentration, debt and leverage in total. We seem to have progressed to a point where the entire system is very unstable and always at risk, and the only tool we seem to have left is creating more debt/money. Our modern fiat money is one of the greatest experiments in human history, and we have no evidence yet that such a system can be stable long term.
For one we hadn't gutted Glass-Steagall yet so banks were still separated into investment and savings/commercial so banks weren't as leveraged. We keep undoing and rapidly relearning why these things were put in place and the cycle from repeal to collapse is only getting tighter.