March 17: Banks in the “best economy ever”

In which, banks and drones crash, inflation doesn’t, and China goes big on the whole peacemaker shtick.

BREAKING: Putin on ICC’s wanted list

The International Criminal Court has issued arrest warrants for Vladimir Putin and at least one other Russian official for crimes against humanity in Ukraine. This is something of a milestone moment for the ICC. Though it has little real enforcement power, the ICC has generally stayed away from indicting leaders of world powers. This move, symbolically at least, confirms Russia’s status as a pariah state, and will likely make it more difficult for China to maintain a very tight alliance with Moscow.

Banks in the “best economy ever”

OK, President Biden has probably not used the phrase “best economy ever,” but as has been noted several times in this newsletter the President has been very, perhaps excessively, bullish about the economy despite a lot of data to the contrary.

As this newsletter went to your inboxes last week, a story broke about a California bank no one had heard of suddenly going broke and being taken over by state regulators. By Monday, all of America had heard about Silicon Valley Bank and financial markets panicked as SVB’s contagion started to spread. 

Despite repeated assurances from Secretary of Treasury Janet Yellen that America’s banking system was sound and that no 2008-esque bailout would be forthcoming, by the end of the week Secretary Yellen was still saying the banks were solid… after a 2008-eque bailout. And while the contagion appears to have been contained in Europe, Credit Suisse still asked for a multi-billion dollar loan from the Swiss Central Bank.

So, while SVB’s collapse and subsequent bankruptcy doesn’t seem to have triggered a massive bank run, it certainly has slowed the Fed’s interest rate hike schedule and dampened the economic mood in a tech industry that continues to shed jobs, and banks remain shaky which is most definitely not where one expects a “best” or “strongest” economy to be headed.

What goes up must come down, right? Inflation, right?

Right on the heels of the SVB meltdown and Round 2 of Meta job cuts came the new numbers on inflation, and… it’s going back up. After a brief “pause” which was merely a slowdown in the upward climb of inflation, the 6% plus rate is back. 

With the Fed slowing its rate increases for fear of … wait for it… breaking the bank, inflation looks set to be “sticking” around.

Look on the bright side, though. At least we’re not Argentina.