Five Contributing Factors to Economic Collapse

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Five contributing factors to the imminent economic collapse in the USA

1. Silicon Valley and Signature Bank failure

The collapse of Silicon Valley Bank (SVB) is the second-largest bank failure in U.S. history. Shortly after, Signature Bank became the third-largest bank failure in U.S. history.

Bank failures are common for small regional banks

The recent bank failures in the U.S. have mostly been small, regional banks with an average of 60 to 100 million assets.

Silicon Valley Bank and Signature Bank, on the other hand, held $209 billion and $110 billion in assets, respectively, making them much larger than the failed banks combined.

The last bank to fail before SVB was Kansas-based Almena State Bank in 2020, with a mere $69 million in assets. Still, the other three failed banks held $136, $156, and $101 million in assets, more or less.

Why it’s a critical warning

According to the New York Times, SVB held $209 billion in assets as of December 2022, making it roughly 2,000 times the size of the most recent banks to fail. Signature Bank had $110 billion in assets at the end of last year.

Even in 2010, when 157 banks failed, the combined assets held by those banks totaled less than half of the assets held by Silicon Valley Bank alone. By comparison, Washington Mutual had $307 billion in assets when failed in 2008.

2. Tech industry domino effect

The collapse of these banks also highlights the vulnerability of the tech industry, which has been a driving force behind the U.S. economy’s growth.

SVB, in particular, was a significant lender to tech companies and startups, and its collapse could have a ripple and domino effect on the broader industry.

In 2008, the failure of large banks caused a chain reaction that led to the collapse of other banks and financial institutions and, subsequently, a credit crunch and a recession.

While bank failures are common, the collapse of two large banks, SVB and Signature Bank, is rare and could significantly impact the broader economy and should not be ignored.

3. War and inflation

Even before the collapse, inflation had increased as the U.S. government printed more money, bailed out businesses, and practically gave away money to its citizens during the pandemic.

America’s involvement in the war in Ukraine and Taiwan is further draining its already depleted finances, and the recent debt ceiling issue is not helping.

4. Open borders and housing problem

One of President Joe Biden’s major accomplishments is its border policy which has encouraged millions of people worldwide to seek refuge in America.

According to Cision, the government denies having an open border policy, but estimates suggest that approximately 5.5 million illegal aliens have crossed the country since President Biden assumed office.

According to N.Y. Post, adjusted for inflation, the projected “lifetime cost” to taxpayers will come to $200 billion, which is equivalent to the entire gross domestic product of New Zealand, Greece, or Peru.

The country is already facing a significant challenge with the housing market, and the local government is tasked with providing shelter for millions of undocumented individuals who have arrived.

The far-reaching consequences on the economy due to the housing crisis are unmistakable.

5. BRICS Alliance

Finally, de-dollarization, expected to occur as BRICS forge a broader alliance with other countries, devalues the dollar and may lead to economic collapse.

Ultimately, it will reduce the reliance of other countries on the U.S. dollar for trade purposes.

BRICS will also increase economic competition for the United States as these nations strengthen their industries and become more competitive in global markets.

This can cause shifts in the U.S. trade patterns and economy.

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