 The U.S. government at the end of the day, when it comes to working class people going broke, is always saying, well, we don't really have the money, but when it comes to banks taking insane risky bets and completely collapsing, they say, don't worry, you're too big to fail and we got you covered. There's another banking crisis in the United States. The crash of the Silicon Valley Bank has set alarm bells ringing people and experts wondering what this means for the banking sector at large, even for the economy of the United States at large. Now, this is a complex subject. There's a lot of debates around interest rates. There's a question of how such a big bank crashed. The fact that the government was quick to come with the bailout for Silicon Valley Bank as well as offer similar facilities for other banks. To explain all this, we have with us Eugene Pridham, Breakthrough News. Eugene, thank you so much for joining us. So, news of yet another banking crisis, I mean, we're hearing a lot of terms about interest rates, about collapses, bailouts, et cetera, et cetera. But for the benefit of viewers, could you first maybe just give us a definition of or a description rather of what exactly is the crisis? Who are the players and what has brought us to this situation? Well, the current banking crisis or at least potential banking crisis in the United States is really centered primarily around one bank, Silicon Valley Bank, which is one of the major banks that facilitates the growth of the technology and biotechnology, biopharmaceutical industries. And other similar banks like Signature Bank in New York that serve a similar purpose. By and large, these are the banks that are used by the biggest investors when they are looking to facilitate the growth of the companies they're investing in in those sectors. They say, go bank with Silicon Valley Bank, go bank with Signature Bank. They are our friends and they do a very good job in this space in this sector. So, they're narrowly focused in that sense, but also very much embedded in the heart of the economy of the 21st century, if you will, and very much embedded in the heart of the speculative aspect of that because many of these companies, some will succeed, but many of them are companies that are being seated by these larger venture capital firms they're called or VCs that are big, multi-billion dollar behemoths in order to sort of see if they can find the next big app or the next big technological stock. So, the basic factor of what took place here is in Silicon Valley Bank in particular, which is where the contagion started. Like many banks in the United States and around the world, they of course do not hold the exact amount of money on hand as they actually technically are holding in deposits, which is never a huge issue as long as everyone doesn't ask for all of their money all at once. But what took place is the book value, if you will, the face value of a lot of the so-called safe assets and banks in the United States, including Silicon Valley Bank treasury bills from the US Treasury Department, government backed mortgages, things like that that are considered very safe because ultimately the government will pay, so you're more likely to get your money because interest rates have been raised by the Federal Reserve, their value is going down over time. So Peter Thiel, who is sort of like a dark prince of the VC world, very right-wing, pro-Trump guy, but very involved in the technology industry, big time funder, for whatever reason, and many people think he had his own sort of schemes here, he told all of the companies he invest in, pull out a Silicon Valley Bank all at once because they don't have the amount of money that they say they have and who knows what's going to happen with them over time. And the other people got worried of that, so then they start pulling their money out. So you have this situation where Silicon Valley Bank and then banks like Signature Bank and other technology-focused banks that are close to them investing in similar companies tied into some of the companies that are working with Silicon Valley Bank then also have a similar factor where people are like, whoa, well, if this is happening to them, I'm going to take my money out of here too because the two things are too closely connected. And so then you had this greater fear because of how deeply interconnected the banking system is that there was going to be a broader bank run. And that's where the US government stepped in to do this bailout of Silicon Valley Bank, Signature Bank and to also create a new what's known as a facility, basically a loan program from the Federal Reserve for all other banks in America to actually appeal to if they also felt that they were having similar problems where because of the book value of their safe assets going down, they would not actually be able to meet their deposits if a significant percentage of their customers asked for their money or even just not all their money, but a substantial amount of their money all at one time. So basically what we have is a classic banking run, but it's one that's centered very much in the technology sector of the economy and in the subsector of that part of the economy that is very much the so-called emerging markets, which really mean the biggest and the riskiest bets on what the next new big technological innovation is going to be. Even of course in this context, a lot of people noting that the government was quick to intervene with bailouts for many of these banks, whereas when it comes to of course the issues of the poor people, when it comes to student loans for instance, you know there's very little of that concern, there's suddenly a lot of debate about whether people deserve bailouts, whether they're not working hard enough etc etc. So there's a very clear class angle when it comes to many of these issues it seems. The class element of the financial infrastructure in America is on such full display here when we look at what's happening. I mean the issue of student loans and the hundreds of billions of dollars, there was all this conversation about well is it fair for people who have paid off their student loans for other people to have them forgiven? We saw the issue during the pandemic right after Joe Biden comes in of whether or not there's going to be another direct payment to citizens here of the United States to help with the rising cost of living and that became this whole big issue and ultimately there was one payment but it was significantly more pared down in 2021 than what we saw in 2020. So when it comes to working class people no matter how dire the situation there's always this conversation about whether or not they're deserving enough to get this money despite the fact as we saw during the pandemic the government has all of these myriad of different ways that they can make sure they get money directly to people. But I think as we can see and as many people have pointed out the role of the Federal Reserve in particular but even just the broader structure of US politics is 100% biased towards the interests of the ultra-rich Wall Street in particular the needs of the investors and that is identified with the quote unquote economy like the economy as it exists this Wall Street casino gambling is allegedly the whole thing it's the only way it can work and if you don't save these big banks everyone's life is going to be over despite the fact that there are multiple other ways that even if these banks failed the government couldn't provide money directly to individuals who have lost income to small businesses who need assistance in order to make sure that the actual economy and the actual people who need help keep going but instead there's this sophistry to try to make it seem like helping the big banks is actually helping the working class people and I think the quickness with which the Federal Government stepped in here is really indicative of so much in particular the fact that they spent all this time saying well we're not bailing out Silicon Valley Bank and sort of hiding their hand that they had created this new Federal Reserve facility that any bank can come to and seek loans from which is backed by taxpayers which is essentially a bailout and in fact a stealth bailout of potentially huge swaths of the banking system including the largest banks who knows how many tens of billions of dollars it could be they've already set aside 25 billion dollars to backstop this new program and so you can see right there the US government at the end of the day when it comes to working class people going broke is always saying well we don't really have the money but when it comes to banks taking insane risky bets and completely collapsing they say don't worry you're too big to fail and we got you covered you know of course the other aspect I wanted to talk about is something we've discussed in many of our shows you've been talking about it for quite a few years now which is the issue of interest rates and we have often discussed how these interest rates are very much an increase in interest rates so very much an attack on the poor on the working class but although in this case it seems even the big banks have suffered in their own way due to this so what really is the politics behind the interest rates here you know the politics of the interest rates is basically the politics of who's going to bear the most chain I mean the real issue becomes who the working class or the capitalist class who is going to have to take the biggest burden in terms of the impact of trying to quote unquote curb inflation now we know that 54 cents out of every dollar of inflation is going to profit so in addition to supply chains in addition to the war in Ukraine a huge amount of inflation that's happening is actually just the outright greed of corporations that are taking advantage of these broader situations in the world in order to jack up prices to keep their profit margins high so obviously the most effective way to address inflation over the past two years would have been windfall profit taxes higher taxes on the richest people maybe price caps or something like that that would have ultimately put the lid on profiteering but that would mean that the whole capitalist class would lose out on this massive bonanza of the most profits they've ever had in the history of capitalism in America which is what happened in 2021 in 2022 was a little less but it was just like the second most profits that they had ever made so of course the broader ruling class does not want to see something like that so raising the interest rates is a way to essentially put the burden on the back of the working class because raising interest rates essentially means what we saw with Silicon Valley Bank that all of the rot in the economy all of the risky bets that really don't mean anything all of the companies that are so-called zombie companies that are only able to survive because their debts keep rolling over that those would be just wiped out because they wouldn't be able to get any more financing and they would be wiped out millions of people would lose their jobs according to the Federal Reserve they think as many as 2 million people could lose their jobs based on how they want to raise interest rates over the next several months or over the rest of this year 2023 I should say as many as too many people losing their jobs and that ultimately this will bring down inflation because it will slow down the economy when you slow down the economy it brings prices you know quote unquote back down to earth but by and large even though some capitalists will lose the Silicon Valley banks of the world and some of the companies that are in there some of them will lose they'll be brought up by bigger corporations the capitalist class overall will take the lesser burden of the pain where if you put the emphasis on taxes the emphasis on price controls then it would be the capitalist class that would have to bear the majority of the pain so even though some capitalists are bound to get hurt and this interest rate increase that's okay to them because that's essentially the sacrifice that is being made and the biggest players are of course going to be protected by the government which they know so some people are going to lose out but by and large the biggest people are going to be protected and the biggest losers are going to be the millions of people who lose their jobs as their companies go under thank you so much Eugene for explaining the crisis as well as I think aspects which a lot of the media are not talking about which is it there are clearly some people who are benefiting and some who are suffering from this crisis thank you so much thank you so there we have it a bank crash which is more than just about one bank shows more about the entire economy and as well as how the economy of the United States is structured that's all we have time for today for more such issues for more such analysis from around the world do keep watching People's Dispatch