24. Mai 2024

US Senator: Banks Sophisticated Ponzi Schemes

Senator John Kennedy’s Remarks on Banks

• Republican Senator John Kennedy of Louisiana recently called banks “sophisticated Ponzi schemes” while discussing the US banking crisis.
• He believes that no bank is safe from the panic of a bank run in today’s social communications age.
• According to him, banks exist on the basis of trust and have been made more vulnerable in the era of advanced communications technology.

Banks Exist on Basis of Trust

Republican Senator John Kennedy of Louisiana recently discussed the US banking crisis that’s claimed multiple crypto-supportive financial institutions in the past two months. In an interview with CNBC that aired in full on Friday, he stressed that banks “exist on the basis of trust,” and have been made more vulnerable in this era of advanced communications technology. It has become easier for a herd to “panic and stampede” to a point where “anybody can go broke,” he said.

Silicon Valley Bank Seizure

Silicon Valley Bank (SVB) was seized by the Federal Deposit Insurance Corporation (FDIC) in March after experiencing a run on deposits which left it unable to satisfy all customers’ claims. Depositors were quickly bailed out in full by both the FDIC and Federal Reserve upon its realization that it had suffered from a $1.8 billion loss following a $21 billion bond portfolio sale to restructure its balance sheet.

Inflation Rates Need To Increase?

Kennedy also spoke about inflation rates during his interview, expressing his belief that they need to increase at least 8% so as to cool down future crises such as these. By increasing inflation rates, there is potential for economic growth if done correctly; however, too-high inflation rates can cause further economic issues such as asset bubbles or massive price increases for goods and services not backed by wages or income growth respectively.

Conclusion

It is clear from Senator Kennedy’s remarks that banks are incredibly vulnerable when it comes to trust and communication technologies that allow information regarding their weaknesses to spread quickly throughout society—even leading people toward panicking and running away with their money if not handled correctly. Inflation rates must be monitored closely so as not to result in further financial crises caused by asset bubbles or extreme price hikes across industries due to lack of wage growth or income respectively; however, having higher inflation rates may bring about beneficial economic growth if done right.