The speed and sharpness with which politicians in Europe and the USA took on the banking problem speaks for itself. Above all, it is a sign of how serious the situation was and still is, because the basic problem that is currently weighing on the banks cannot be solved in the short term.
At the same time, efforts were made to reassure the population as much as possible, because the last thing one could and still needs in this situation is a population that knows how bad things are with the banks and the security of their own deposits.
Banking crises are not natural events, but rather “cultivations” of our economic and monetary system. If this is overstretched, crises are inevitable and it is not without reason that major crises such as the global economic crisis of 1929 or the financial crisis of 2008 were accompanied by the collapse of banks.
Even now, the danger is greater than the majority of the population suspects. The reason for the imbalances is of a systemic nature and, unlike in the years before 2008, one cannot even blame the bankers in many areas. If greed was the problem in 2008, today it is the conservative approach.
Now the years of low interest rates are taking revenge
Before the financial crisis, many banks took incalculable risks. Products were designed that no one understood in the end. Today the problem lies in the valuation of classic bonds and there is not much to understand about them. Crucially, the current price of bonds fluctuates as the interest rate changes.
For years, interest rates have changed little or not at all, and when there has been a change, it has usually been that interest rates have fallen. As a result, the prices of the bonds rose and a bank had to sell a bond held early in order to create liquidity, resulting in pleasing price gains.
These paradisiacal times have meanwhile turned into their opposite. Interest rates are rising and bond prices have fallen sharply with them. If a bondholder is able to hold the bond until maturity, the book losses incurred in the last few months can simply be sat out.
However, the situation threatens to quickly become critical if the bond has to be sold on the market before it falls due. In this case, book losses immediately become real losses. They can be so big and painful that they can easily bring down a number of banks.
Despite the efforts of the last few weeks, this latent danger is far from over.