Silicon Valley Bank Collapse: Lessons to be Learned

Silicon Valley Bank Collapse: Lessons to be Learned

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The Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation in March of 2023. The bank, which had its headquarters in Santa Clara, California, was put out of business for various reasons, including the fact that the value of its investments had dropped dramatically and that customers had withdrawn significant sums of money. Later in March, First Citizens Bank purchased all the deposits and loans held at the insolvent bank.


Similar collapses of financial institutions have occurred in the past; from the year 2001 and the beginning of 2023, more than 550 financial institutions went out of business. But this one stood out from the rest in a significant way. Not only did it occur when many people in the United States already feared a recession, but it was also the largest bank to fail since Washington Mutual closed amid the financial crisis in 2008. 


Most information coming out to say a bank run caused the collapse. Bank runs are not just isolated incidents of financial panic; they are the visible manifestation of deeper issues within a banking system. As depositors frantically rush to withdraw their funds, a chain reaction of withdrawals can lead to a crisis that undermines the stability of financial institutions. This article delves into the complex nature of bank runs, examines their underlying implications, and delves into the multifaceted factors that can trigger these unsettling events.

The Anatomy of Bank Runs

A bank run is a crisis fueled by a lack of confidence in a bank’s solvency. A rush to withdraw funds ensues as rumors or negative news circulate about a bank’s financial instability. This panic-driven withdrawal places immense pressure on the bank’s liquidity as it struggles to meet depositors’ demands. The scenario worsens as the run continues, depleting the bank’s reserves and increasing the risk of insolvency.

Signs of Systemic Weakness

Bank runs are often indicative of broader issues lurking beneath the surface:


  • Capital Adequacy: A bank’s inability to demonstrate sufficient capital reserves relative to its liabilities exposes its vulnerability to financial shocks, potentially triggering a run.


  • Depositor Confidence: The bedrock of banking is trust. A bank run signifies a severe breakdown in public confidence, often stemming from doubts about the bank’s solvency.


  • Systemic Risk: A bank run can escalate into a systemic crisis if it triggers a domino effect, causing runs on other banks and creating instability across the financial sector.

Factors Leading to Bank Runs

  • Economic Uncertainty: Economic downturns can undermine depositors’ faith in banks as fears of potential losses mount during financial instability.


  • Mismanagement and Fraud: Reports of mismanagement, fraud, or questionable practices can instigate concerns about a bank’s financial integrity and prompt depositors to act quickly.


  • Rumors and Herding Behavior: Rapid dissemination of unfounded rumors, often magnified by social media, can trigger panic withdrawals as depositors follow the herd.


  • Perceived Solvency Issues: The perception that a bank is on the brink of insolvency can trigger a race to withdraw funds before the bank’s potential collapse.


  • Political and Social Unrest: In regions experiencing political or social turmoil, depositors may fear government intervention or the seizure of funds, prompting them to seek safer havens.


  • Exposure to Risky Assets: Banks heavily invested in risky loans or investments can cause unease among depositors, who worry about potential losses and opt for safer alternatives.


  • Limited Deposit Insurance: In areas with insufficient or no deposit insurance, depositors face heightened risks and may be more inclined to participate in bank runs.


  • Interbank Contagion: A bank’s interconnectedness with other financial institutions can spread panic to other banks, amplifying the initial crisis.

Effects of a Bank Run

The Immediate Fallout

  • Liquidity Crisis: A bank run puts tremendous pressure on a bank’s liquidity as depositors withdraw funds en masse. This sudden outflow can deplete a bank’s cash reserves, leaving it struggling to meet its obligations.


  • Insolvency Risk: The continuous withdrawal of funds can push a bank closer to insolvency. When a bank’s liabilities exceed its assets, it risks collapsing, posing a severe threat to depositors and creditors.


  • Credit Crunch: As banks face liquidity challenges, they become reluctant to lend to individuals and businesses. This credit squeeze can hinder economic growth and stifle investments, exacerbating economic downturns.

Economic and Social Implications

  • Financial Instability: A single bank run can trigger a domino effect, leading to runs on other banks and destabilizing the entire financial system. This chain reaction amplifies the vulnerability of the economy.


  • Reduced Economic Activity: The credit freeze resulting from a bank run hampers borrowing, spending, and investment, leading to a slowdown in economic activity and potential job losses.


  • Wealth Erosion: The collapse of a bank can wipe out the savings of depositors, particularly those who cannot withdraw funds in time. This loss of wealth can have long-term repercussions on individuals’ financial security.


  • Confidence Erosion: A bank run erodes public trust in the banking system, creating a cycle of skepticism that impacts people’s willingness to save, invest, and engage in economic transactions.

Long-term Economic Consequences

  • Economic Recession: A widespread bank run can exacerbate an economic downturn, as reduced lending and spending contract economic activity.


  • Financial System Reform: Bank runs may prompt governments and regulatory bodies to institute systemic changes, such as restructuring or consolidating the financial sector.


  • Socioeconomic Disruptions: Bank runs can lead to social unrest, protests, and public outrage, further destabilizing a country’s social fabric.


Bank runs are more than spontaneous events; they are barometers of a financial system’s health. These crises stem from eroding trust, negative perceptions, and latent vulnerabilities, often exacerbated by external factors. The consequences of bank runs are severe and can include financial instability, institutional collapse, and worsening economic downturns. To curb and address the risk of bank runs, regulators and central banks must address core financial fragilities, enhance transparency, and establish robust mechanisms for crisis management and depositor protection. By doing so, the financial system can gain resilience against the contagion triggered by a single institution’s instability, ensuring a more stable and secure banking environment.


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Silver is exceptionally popular today. Part of the reason for this is the belief that it’s potential for upside value increase is even greater than the same belief in gold. In fact, there is a very good book on this subject entitled: “ Why Silver Will Outperform Gold by 400% in the coming years”. It’s a very scholarly book and quite convincing. Give it a read if you have the time.

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Mind you, one need not look as far as that book to find evidence of the common belief that silver has great potential for growth in the near future. All one has to do is go to the web or even Youtube and there are advocates of this thought at every turn.

At Durham Precious Metals we believe that silver is an easy choice because it gives a sense of substance due to its lower cost per ounce than gold.

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Probably 90% of our business is silver sales so this sentiment is fairly unanimous throughout the public. 10oz bars seem to be the most popular. Generic rounds and Silver Maples seem to be the next most popular and 1oz bars a close 4th place. It is our opinion that 10 oz bars and 1oz rounds are your best value as their premium over spot is very reasonable. However, there is no wrong choice when it comes to our silver product line because we try to concentrate on product lines with low premiums anyway.

Silver has always been a form of money. There are those that will argue that silver has been demonetized but we beg to differ. All one has to do is refer to the (CCRA) definition for 999 bullion. It is deemed by Rev Can to be a “ financial instrument”. Enough said on that subject!

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From a utility standpoint, silver has somewhere in the neighbourhood of 60,000 industrial uses including painting the backs of mirrors to create the reflective surface to collecting radiation in solar panels. If nothing else, the lack of an above ground supply of silver ( which is relatively new historically) will keep the demand for this metal strong since for most applications there is no viable substitute.

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Can you imagine the mayhem that would ensue if all the major electronic manufacturers came grinding to a halt due to a silver shortage? It would be catastrophic to the economy. We believe that this fact alone will be a major driver of support for the silver price when the powers that be run out of tricks in their attempt to suppress the price of silver. And yes, we agree that this practice goes on in plain sight and that the regulators turn a blind eye. Let’s hope justice prevails and that the historic silver/gold ratio returns to its traditional level.

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In the meantime…keep stacking!

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Great choice! Let’s talk about gold then, shall we?

Gold is, and always has been, a favorite of collectors of precious metals. Its 6000-year history of sustaining wealth is unprecedented. The yellow metal has launched wars, bought fortunes and has been a form of money throughout that history. It is one of the densest metals and also one of the densest elements on the periodic table. It weighs in at a density of 19.32 grams per cubic centimeter. Water, by contrast, has a density of 1 gram per cubic centimeter.

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Platinum is the densest of the common 4 precious metals at 21.45 grams per cubic centimeter.

People will often ask when gold is the right choice to buy as opposed to other metals such as silver. This is a very common question. There is no easy answer that anyone can give to someone so we always boil it down to practical applications.

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Consider how much of an investment you are planning to make over-all throughout the course of your precious metals buying.  If you are planning on purchasing, for example, $10,000 worth of metals and then cap your spending then it really doesn’t matter which metals you buy. The volume of the purchase will be relatively small in terms of weight and size. Our main concern and Durham Precious Metals comes down to simple things like , cost of storage, cost of shipping and bulk. We are always trying to help our customers have the best experience as metals collectors.

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For example, if you were to tell us that you are considering selling a piece of real estate and use the proceeds to buy metals then gold would be our suggestion. The reason comes down to volume and weight at this point. Several hundred thousand dollars of silver would be an incredible amount of bulk at this spend level. Hundreds of pounds of silver would be hard to store practically and would be more expensive to store as well. If you are the DIY type it would also be harder to hide than a comparable dollar amount of gold.

Keep in mind that at the time of this writing gold is about 75 times more expensive in dollar terms as the same weight of silver. That equates to 75 times less bulk per dollar spend. This will make it much easier to hide or store if you are looking at large purchase amounts.

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If you are only considering a small total purchase amount either of the metals is perfectly fine. The one consideration we always emphasize for small purchase amounts really comes down to personal perception. Here is what we mean. Silver is 75 times more bulky per dollar spend. Obviously, it is going to feel a lot more substantial if you buy $5000 worth of silver and have several hundred ounces to admire than only about 3 ounces. It’s a perception thing at this point but perception matters to people since perception can make us feel a particular way about what we spend our money on.

In closing, gold and silver are both great choices and neither is wrong in terms of their value of utility. They have both had a long history as a store of wealth and that isn’t likely to change any time soon.

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We often carry pieces that we don’t list on site so feel free to call us for an up-to-date list.

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When you consider silver value and gold value, the wise choice is to stock up today. At Durham Precious Metals we make it easy and convenient to buy silver and buy gold online.

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Many people want to know where to buy gold and do not realize they can avoid the traffic hassle of driving into the city and visit us at DPM located in Oshawa, Ontario. See our Retail Store page for directions. Our customers are delighted with our competitive silver price. We carry mint direct silver bars, silver coins, gold bars and gold coins.

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Consider a Gold IRA as well