Great Depression 2.0: Is the US Banking Crisis Dangerous for Russia?

On March 11, 2023, one of the most recognizable lenders in the technology startup industry, Silicon Valley Bank, went bankrupt in the United States. This was the largest bankruptcy since the 2008 global financial crisis, journalists from The New York Times noted. Following SVB, the commercial bank Signature Bank closed on March 13 due to financial problems and systemic risks. Against the backdrop of these events, the United States was on the verge of a new economic collapse. Former President Donald Trump has already predicted a second Great Depression and blamed current leader Joe Biden for the economic problems. On the evening of March 13, the American president addressed the nation, promising to “protect jobs and small businesses.”

About how real the scenario of the second Great Depression is, and whether there are threats to the Russian banking system, we tell in the material REN TV.

Biggest bankruptcy since 2008

On March 11, 2023, one of the most recognizable lenders in the technology startup industry, Silicon Valley Bank, went bankrupt in the United States. The New York Times noted that this was the largest bankruptcy since the 2008 global financial crisis. According to the publication, the bank was engaged in lending to companies from the technology industry and ranked 16th in terms of assets in the United States.

As it became known, the problems began after the closure of a competitive bank – trust was undermined. On March 8, customers began to massively withdraw money from their accounts. After that, the US Federal Insurance Corporation transferred all insured deposits to a new organization – Deposit Insurance National Bank of Santa Clara. The authorities assured that the financial system of the United States was seriously changed to prevent a repeat of the 2008 crisis.

After the closure of SVB, the American billionaire Elon Musk, responding to one of his readers on Twitter, announced his readiness to acquire the bank and make it electronic.

On March 13, it became known that the branch of the bankrupt Silicon Valley Bank was bought by the British group HSBC. Jeremy Hunt, UK Secretary of the Treasury, said the deal was facilitated by the Bank of England, costing the financial group just £1.

Following SVB, the commercial bank Signature Bank closed on March 13 due to financial problems. Treasury Secretary Janet Yellen, US Federal Reserve Chairman Jerome Powell and Federal Deposit Insurance Corporation Chairman Martin Grunberg said in a statement that the financial institution was closed due to systemic risks.

New Great Depression

Former US President Donald Trump predicted a new Great Depression for the country. The politician blamed the current owner of the White House, Joe Biden, for the economic problems of the United States.

“Based on what’s happening with our economy <...>, Joe Biden will become the Herbert Hoover (American president from 1929 to 1933) of the modern era. We will have a Great Depression, much worse than in 1929. As proof, the banks have already begun to fail.”Trump wrote on his Truth Social.

“Explain how the US authorities will “maintain the stability of the banking system”, every child can – with paper and paint. They will print even more unsecured dollars, which will cause even more problems in the world”– Zakharova wrote in her Telegram-channel.

Journalists of the American online edition Axios also noted that if the government does not resolve the issue with Silicon Valley Bank, then “Biden faces a catastrophic banking crisis.”

Message from Joe Biden

On March 13, Joe Biden delivered an address to the nation in connection with the banking crisis following the collapse of the SVB. The American leader urged his fellow citizens to believe in the safety of the US banking system and noted that all bank deposits are available if necessary.

“I will ask Congress and banking regulators to tighten rules on banks and reduce the risk of this kind of bank failure happening again. And also to protect American jobs and small businesses.”said the President of the United States.

In addition, Biden announced the intention of the country’s authorities to tighten regulations in order to reduce the threat of bankruptcy of large banks in the future. The US President also expressed hope that American taxpayers will not suffer losses due to the situation around bankrupt banks.

“Waiting to die”

Russian hacker and crypto trader Pyotr Levashov, known under the pseudonym Peter Severa, called the bankruptcy of Silicon Valley Bank the biggest event of its kind since the 2008 crisis. According to the expert, both SVB and Silvergate have had problems for a long time. Levashov believes that the story of the slow decline of financial institutions originates from the bankruptcy of the online digital currency exchange service FTX.

“At that moment, an imbalance appeared, that is, the bank had a balance deficit, which was simply hiding for a long time. And now it has become public. And since the bank essentially declared itself bankrupt, it was tormented by everyone who could for a very long time, waiting will die”– explained the crypto trader in an interview with “News”.

Levashov also stressed that the situation with financial institutions and cryptocurrencies are major macroeconomic problems that put pressure on banks around the world.

“Serious Precedent”

Economist, Associate Professor of the Department of Political Economy of the Faculty of Economics of Moscow State University named after MV Lomonosov Maxim Chirkov expressed a similar opinion. According to him, the bankruptcy of Silicon Valley Bank is a serious precedent.

“From my point of view, measures to prevent the crisis by Western countries are taken quite quickly, and it must be understood that Silicon Valley is a bank focused on high-risk companies, cryptocurrency, startupssaid in an interview with REN TV economist. – The reasons that led to the bankruptcy of Silicon Valley affected him in the first place”.

According to an associate professor at Moscow State University, the reasons are fundamental. Chirkov explained that financial institutions in the United States are “in fact deprived of cheap funding – what they lived off of for decades.”

“The problems with the United States financial sector will escalate. Servicing loans for banks is becoming very expensive. In addition, higher interest rates are making banks’ assets less valuable. Bonds, which are held by many US banks, are becoming much cheaper. This creates large Problems”added the economist.

Chirkov suggested that many other Western financial institutions will also go bankrupt in 2023.

Decrease in demand for dollars

Director of the Center for Political Analysis (CPA) Pavel Danilin, in turn, stressed that the situation with the fall of banks in the United States is in many ways similar to the Great Depression that began in the United States in 1929.

“The Great Depression began with a fall in stocks and ended with several years of a total economic crisis, a global economic crisis. Today we see serious concerns around the world in connection with the fall of the role of the dollar. This all the more accelerates the fact that the United States, together with the European Union, is conducting an extremely aggressive and destructive policy towards the Russian Federation, actually stealing part of Russia’s gold and foreign exchange reserves”– Danilin explained to the TV channel.

The expert noted that in connection with the collapse of the largest American bank, the demand for dollars is sharply reduced.

“And this, by the way, is the very foundation on which all the power of the United States is based. And, of course, we must not forget that the United States actually hangs over default every year, having a huge external debt, which is estimated at several US GDP. It is obvious that this debt will pile up and pile up until it rolls like an avalanche and crushes the American economy.”– said the director of the CPA.

Threats to Russia

Maksim Chirkov said that the banking crisis is developing as a domino effect: one bank “falls”, followed by others, since many financial institutions have certain obligations to each other.

At the same time, the expert believes, the US banking crisis does not threaten the Russian banking system. According to him, the Russian system is now the most prepared for a possible global crisis.

“The Russian banking system is quite strong, and the cleanup of the financial sector served as a guarantee for this. In addition, the sanctions that were introduced made the Russian banking system much more prepared for a global banking crisis, since we are less dependent on Western financial infrastructure, the economist explained. – The main blow that hit the Russian banking system in 2022 hardened it well and forced it to reconsider many indicators and modes of operation. In my opinion, nothing threatens the Russian banking system today, depositors can be absolutely calm”.

According to the interlocutor REN TVthe Russian banking system works well autonomously and confidently passed the crisis of 2022, when there were indeed losses.

“At the same time, it cannot be said that in the event of a global crisis, it will not affect Russian banks in any way, it’s just that the impact of a possible financial crisis on the Russian banking system will be limited and much weaker than it was during the 2008-2009 crisis, and much weaker. what it could be if the crisis happened in 2022″concluded the economist.