Exploding Like a Firecracker

I keep thinking about the swiftness with which Silicon Valley Bank (SVB) collapsed. In the span of 48 hours, it went bust because as interest rates rose, VC capital to SVB’s portfolio companies decreased. That required the companies to start withdrawing deposits from SVB to fund day-to-day business operations but those deposits sat in bonds that were losing value by the day. The need for cash forced the bank to sell their illiquid bonds at a loss, and boom, financial panic. Whenever I hear stories like these, I strangely have a surge of hope that it portends the fall of capitalism. More in this week's post.