“The question is no longer that of liquidity, but of interest rates which are driving up the cost of debt”

VSLike giving, lending is a practice as old as mankind, long before that of money. And lending is a matter of trust and projection. The irrational of psychology and the rational of anticipation. The Californian bank SVB could have survived without the brutal and disorderly defiance of its depositors, who withdrew their savings en masse. But she could also have got away with it if she hadn’t invested all her savings in long-term loans without thinking about protecting them from the threat of rising interest rates.

Psychology is all about Michael, the little boy in the film mary poppins who thoughtlessly triggers a bank panic when he howls “Give me back my money!” » to the old banker who wanted to steal his pocket money to invest in the glorious achievements of Victorian England.

Witnesses to the scene, clients in top hats are suddenly frightened for their savings and want them back immediately, like the start-up clients of Silicon Valley Bank. Financiers call this a liquidity crisis, when an immediate request for reimbursement can no longer be met. Today, it is the bankruptcy of this small provincial bank which, like the young Michael, scares all the financiers of the planet, whose confidence in the system is flying away.

Obvious but overlooked danger

Because behind the irrationality of the reaction always hides a fund of truth. And this one takes the strange form of a gray rhinoceros. It’s huge and menacing, but it’s been there for so long… The proof, it’s not moving. Until the day he decides to go for it. This concept of obvious but overlooked danger was coined by American essayist Michele Wucker in 2016.

The chief economist of the financial company Atlantic Financial, Bruno Jacquier, summoned this wild beast to explain, in a January note, why the big banks, until recently, were not alarmed by the consequences of the rise in rate on the current financial system, built on a colossal debt, that of households, companies and States.

It represented 120% of the world’s gross domestic product in 1981. It has now reached 250%. However, unlike the 2008 crisis, the question is no longer that of liquidity or credit, but that of interest rates which, by rising sharply under the impetus of central banks, cause the cost of debt, both private and public. We have become so used to living next to this gigantic and peaceful rhinoceros. Some even affirming that it had been domesticated definitively. Today, the beast wakes up.