Three weeks ago, in the middle of the Silicon Valley Bank saga, some of my clients got really panicky because they read predictions that we would soon see a total banking system collapse. 

At the time, I advised sitting tight and, if indeed the market should fall, using this chance to buy durable assets at a discount. I know full well how messed up the system is, but I also know that as long as the US dollar remains the world currency, there is unlimited ammunition to deal with the problem. We are not Zimbabwe or Argentina. 

And that is exactly what happened (see the Fed balance sheet here.) In the three weeks since the SVB collapse, the Fed has printed nearly $400B of new money, reversing 2/3 of the tightening we have seen since March of 2022. In other words, since the Fed decided to fight inflation in March of 2022, about $600B has been unprinted (this compared to $5T that was printed after the Pandemic.) However, in just a short three-week time, $400B was printed to rescue weak banks.  

What lessons can we, as ordinary investors, learn from this situation?:

1. Don’t panic! More importantly, don’t sell in a panic.
2. Instead of worrying about the fluctuation of prices, focus on accumulating durable assets – assets that can not be “printed”, assets that represent businesses that produce real goods and services the world population wants. 
3. As long as the world population keeps growing and the demand for more goods and services keeps rising, these assets will grow in real value. If the price of these assets falls because of a banking crisis or a Pandemic, it is just a great chance to acquire more.

Don’t waste a good crisis!

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