Whats been making the news, amidst the market turbulence created by the rapid and continuous rise, of interest rates to curb inflation and expected debt defaults by households, businesses, financial institutions & govts that would ensue, which could lead to Global Economic and Financial instability.

The US arm of Silicon Valley bank (SVB), went burst and into administration, after it failed to raise more liquidity to the tune of $2.25bn (£1.9bn), in order to, plug the sale of its assets, consisting mainly of US govt bonds that had been devalued by the rise in interest rates whilst the UK arm was bailed out by HSBC for a £1 and will be taking over all of the bank’s assets. SVB US Shareholders accused the Executives of fraud because they alleged that they concealed the fact that, rising interest rates would leave the bank 'particularly exposed and susceptible' to a bank run. They are therefore, seeking unspecified damages for SVB investors between June 16, 2021 and March 10, 2023 in the Class Action lawsuit.

The Fed intends to revive the supervision and regulation of Silicon Valley Bank to determine what happened whilst investigations continue. The demise of SVB was followed by Credit Suisse, announcing it was in material distress and the authorities had to come to its rescue by asking UBS to take it over, forcing a merger of the two banks. The Greensill Capital saga and penalties for involvement in laundering money, criminal activities have all led to the collapse of Credit Suisse. The bank took an $8bn hit for Greensill Capital and additional penalties for its involvement in criminal money laundering activities, which it was accused of helping to facilitate.

SVB owned 3,234 companies, mainly Technology Start-ups and Life Sciences and the deposits of the bank increased during the COVID pandemic between 2019 - 2021 up to $189bn. The bank then invested heavily in high yield, long-term bonds along an $80bn 10 year mortgage backed securities at 1.5% as against the short-term Treasury Dept. Securities at 0.25%, which meant that most of its Technology accounts (37,000) were well above the guaranteed $250,000 insured by the Federal Deposit Insurance Corporation (FDIC).

Credit Suisse had been scandal-prone for decades, with a long history of involvement in bribery, money laundering, tax evasion, corporate espionage, subprime shenanigans, and terrible risk management. The bank settled with the Securities and Exchange Commission, the sum of $125m, fine of $75m to the Commodity Futures and Trading Commission and €238m for money laundering and fraud case with French Prosecutors for alleged tax evasion scheme between 2005 - 2012. All of which, wiped out 70% of the bank’s stock market value.

To protect the financial stability of the Swiss economy in an exceptional circumstance, the Swiss govt. guaranteed UBS bank against potential losses up to $9.6bn (£7.9bn) with liquidity assistance from Swiss Central bank of $110bn (£90bn). UBS which was founded in 1862, rescued Credit Suisse founded in 1856 with a £2.7bn deal and the above liquidity loan by the Swiss Central bank.

 

Many of us had warned that, raising interest rates aggressively, as the Central banks and Fed did, would lead to severe household, business and Societal problems as many have borrowed on low interest rates and are now having to pay higher interest that they cannot afford. Start-ups are having to divert their funds/resources to paying down debt and are struggling to raise new venture capital, which is a recipe for disaster. If inflation doesn’t come down and the rise in interest rates are not stemmed and it continues to rise, there will be massive debt defaults by households, businesses, financial institutions, & govts. It would create economic and financial instability.

A passenger train carrying 350 people collided with a freight train in Greece after both ended up on the same track, causing the front carriages to burst into flames. 57 people, mostly University students returning back from holiday with their families, died. Greece hasn’t invested in its railways/networks since the debt crisis of 2010 that resulted in austerity measures and for which, the IMF and EU rescued the Greek economy.

 

Cyclone Freddy caused havoc in Southern parts of Africa, including, Mozambique, Malawi, North-East Zimbabwe and South-East Zambia. Millions of people have been affected with 300 dead in Malawi and many more in neighbouring Mozambique. Over 80,000 had been forced from their homes with more than 500 injured and at least 200 people missing. Our thoughts and prayers are with all and may those that have died, RIP!

 

Russian fighter jet dumped fuel on an unmanned US drone over the black sea within International waters with the intent of bringing it down but US forces, instead brought down the MQ-9 Reaper drone. The Pentagon released the images that showed the Russian aircraft flew “in the vicinity” of the drone for 30 to 40 minutes before colliding just after 7am Central European Time (CET). Russia denied it made an unsafe, reckless, environmentally unsound and unprofessional move and that they were not seeking to confrontation with the US.

The International Criminal Court issued an arrest warrant for Russian President for the abduction of Ukrainian children who were forcefully taken to Russia, under the disguise that they were being removed from danger that the Russian President created and caused, when he invaded a Sovereign nation. Some of the parents and guardians of the children were deceived into handing over their children. A citizen’s arrest would be very much in line!