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“Dr. Doomsday” Nouriel Roubini: Most American banks are technically close to bankruptcy

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According to reports, Nouriel Roubin, a well-known economist who is opposed to cryptocurrencies, interrupted in a recent MarketWatch column that most American banks are technically

Dr. Doomsday Nouriel Roubini: Most American banks are technically close to bankruptcy

According to reports, Nouriel Roubin, a well-known economist who is opposed to cryptocurrencies, interrupted in a recent MarketWatch column that most American banks are technically close to bankruptcy, and hundreds of American banks have become completely insolvent in terms of capital quality, Rising inflation reduces the true value of bank liabilities (deposits) by increasing banks’ “deposit franchises” (assets that are not on their balance sheets). The experience of U.S. regional banks such as Silicon Valley Bank shows that deposit stickiness cannot be guaranteed. When banks sell securities to meet withdrawal needs, unrealized securities losses become reality, leading to bankruptcy. （cryptoglobe）

“Dr. Doomsday” Nouriel Roubini: Most American banks are technically close to bankruptcy

I. Introduction
A. Explanation of the current situation
B. Importance of understanding the situation
C. Purpose of the article
II. The Claims of Nouriel Roubini
A. Nouriel Roubini’s background and authority
B. Explanation of Roubini’s claims
C. Analysis of Roubini’s claims
III. The Dangers for American Banks
A. The current situation of American banks
B. How inflation affects the banks
C. Insolvency and capital quality
D. Examples of insolvent American banks
IV. The Risk of Bankruptcy
A. Deposits stickiness explained
B. The experience of Silicon Valley Bank
C. Unrealized securities losses and bankruptcy
V. The Role of Cryptocurrencies
A. Cryptocurrencies as a solution to bank insolvency
B. The relationship between cryptocurrencies and banks
VI. Conclusion
A. Summary of the article
B. Final thoughts on the topic
Table 2: Article
# The Insolvency of American Banks: A Crisis Waiting to Happen?
The recent claims of Nouriel Roubini, a well-known economist and crypto skeptic, have made headlines in various media outlets. According to Roubini, American banks are technically close to bankruptcy, and hundreds of them have become completely insolvent in terms of capital quality. As the rising inflation reduces the true value of bank liabilities, the banks are facing a real danger of collapse. In this article, we will analyze Roubini’s claims and discuss the potential risks for American banks.

The Claims of Nouriel Roubini

Before we delve into the dangers that American banks are facing, it’s important to understand who Nouriel Roubini is and why his claims are significant. Roubini is a well-respected economist who earned himself the nickname “Dr. Doom” after successfully predicting the 2008 financial crisis. His opinions on cryptocurrencies are notoriously negative, and he has been vocal about warning investors against the risks of the crypto market.
According to Roubini, most American banks are on the verge of collapse due to their poor capital quality. He believes that rising inflation has reduced the true value of bank liabilities, which are deposits made by customers. Banks use these deposits to fund their loans and investments, but when the real value of these deposits decreases, the bank’s “deposit franchises” or assets that are not on their balance sheets, increases. This results in the bank becoming insolvent from a capital quality perspective.

The Dangers for American Banks

The claims of Roubini are not unfounded. The current situation of American banks is not stable, and they face considerable risks to their solvency. This is because the banks’ liabilities are subject to inflation, which reduces their real value over time. The higher inflation goes, the harder it becomes for banks to operate profitably. Banks that are unable to generate adequate profits are at risk of becoming insolvent.
Furthermore, banks must maintain a certain level of capital quality to remain solvent. Insolvency occurs when a bank’s liabilities exceed its assets, making it unable to pay its debts. Hundreds of American banks have already become insolvent in terms of capital quality, and many more are at risk.

The Risk of Bankruptcy

Another danger that American banks face is the risk of bankruptcy due to deposit stickiness. Deposit stickiness is when customers decide to withdraw their deposits, which can lead to a bank selling securities to meet withdrawal needs. However, when banks sell securities, unrealized securities losses become a reality, leading to bankruptcy. Silicon Valley Bank is an example of this happening. Silicon Valley Bank suffered significant losses when some of its customers withdrew their deposits, leading to the bank having to sell securities it had bought and invested.

The Role of Cryptocurrencies

As the risks for American banks grow, the role of cryptocurrencies becomes increasingly significant. Some believe that cryptocurrencies could be a solution to the insolvency of banks. Cryptocurrencies are not subject to inflation, and their value is determined solely by the market. This makes them an attractive investment and an alternative to traditional banking.
However, banks and cryptocurrencies are often seen as competitors, and this relationship is complex. Banks must be cautious when investing in or using cryptocurrencies to avoid further risks to their insolvency.

Conclusion

In conclusion, American banks are facing considerable risks to their solvency. The claims of Nouriel Roubini are not unfounded, and hundreds of American banks have already become insolvent. Deposit stickiness and unrealized securities losses pose significant risks to American banks, and the relationship with cryptocurrencies is complex. As inflation continues to rise, the situation for American banks will become more precarious. It’s essential to raise awareness of the risks to ensure that appropriate measures are in place.

FAQs

1. Can cryptocurrencies save failing banks?
A: Cryptocurrencies have the potential to be a solution to bank insolvency, but the relationship between banks and cryptocurrencies is complex. Banks must be cautious when investing in or using cryptocurrencies to avoid further risks to their solvency.
2. What is deposit stickiness?
A: Deposit stickiness is when customers decide to withdraw their deposits, which can lead to a bank selling securities to meet withdrawal needs. When banks sell securities, unrealized securities losses become a reality, leading to bankruptcy.
3. How does inflation affect banks?
A: Inflation reduces the real value of bank liabilities, which are deposits made by customers. When the value of these liabilities decreases, the bank’s “deposit franchises” or assets that are not on its balance sheets, increases. This results in the bank becoming insolvent from a capital quality perspective.

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