New York Community Bank's Hair-Raising Ride and Gold's Shining

10 de mar.

After returning from a European trip, I have found themselves out of sorts, with no desire to write articles or code, preferring instead to lounge on the sofa in a state of contemplation. It seems that our moods and states of mind have their own cycles; sometimes, things we once loved can lose their appeal, and our attention gets drawn to other matters. Only when the next cycle comes around can we make up for lost time. So, please allow this cat to take things slow and easy.

In this world full of uncertainties, the American banking industry seems to have started a "collapse relay race." Recently, New York Community Bank's performance has been like playing a game of "who falls to the bottom first," and it has inadvertently become the leader. Let's discuss what's going on.

Imagine a bank as a giant piggy bank where people deposit their money, and the bank lends it out to others. If the borrowed money isn't returned, the bank runs into trouble. That's the case with New York Community Bank, whose commercial real estate loans resemble a stack of IOUs that might never be paid back, accounting for a significant portion of its total loans. Commercial real estate refers to buildings used for business, such as office buildings and shops. However, many of these properties now stand empty because, post-pandemic, people prefer working from home, reducing the need for offices.

New York Community Bank's financial report is like a report card that everyone expected to be an A but turned out to be an F. With this result, the bank's stock plummeted like a rollercoaster, its market value plummeting from billions to mere scraps, akin to a millionaire turned pauper.

Now, let's simplify this complex situation with a story. Imagine you have a massive piggy bank filled with gold coins. You lend these coins to your friends, who use them to buy a bunch of toys that might not sell. As a result, these toys fill up the warehouse, and your friends can't repay the coins. Your piggy bank empties, and your friends lose trust in you. That's the current state of New York Community Bank.

The Federal Reserve, like a bank's parent, seeing the children (banks) in trouble, quickly brings out the printing press to create money, hoping to help them overcome their difficulties. However, this solution is like giving children candy; while it temporarily makes them happy, it could lead to long-term problems like cavities (inflation).

Now, the market price of gold has reached a new high, as if everyone is saying, "We don't want this paper money; we want real gold and silver!" Gold is like the superhero that always provides a sense of security during crises. When people doubt the reliability of paper money (the US dollar), gold shines brightly, capturing everyone's attention.

Lastly, let's talk about the Federal Reserve's interest rate hike policy. Raising interest rates is like a parent telling their children, "You can't borrow money so freely anymore; you need to learn to save." This policy makes borrowing more expensive, so people are less inclined to take out loans. However, this policy also has side effects; it can put immense pressure on those who have already borrowed a lot (like New York Community Bank).

So, the story ends here, and we can see that the "collapse relay race" in the American banking industry is ongoing. New York Community Bank is just one example, teaching us that even large banks can fall into trouble due to seemingly minor issues. As observers, we might learn a lesson: whether it's individuals or banks, managing finances wisely is always crucial.