Growing inequalities in the distribution of wealth and the rise of the digital economy could very well combine to undermine the entire financial system – and this looks like an interesting interaction that can potentially help make ends meet. global markets. Many investment strategists have for years considered the ebb and flow of global liquidity to be critical to the value of stocks and bonds. This phenomenon is mainly dictated by politics central banksincluding cash injections or cash withdrawals through the purchase and sale of assets.

Indeed, many believe that one of the reasons for the strange savings in the stock markets in the face of increasing interest rates and recession fears over the past two months are at least partly related to this, while the Federal Reserve USA was forced to strengthen its balance sheet again to contain the run on troubled banks in March. And since global liquidity matters, the cup remains full as the Bank of Japan continues to buy government bonds. However, the bigger picture regarding liquidity is presented in a longitudinal analysis by former U.S. Federal Reserve Chairman Ben Bernanke in 2005, who spoke of “global last 25 years. and pre-retirement cash savings in rich countries.

The bottom line is that this pool of global savings, in search of “safe” assets, has found its way into Western markets, driving down government bond yields and interest rates on loans, tightening credit spreads, and pushing up stock prices in general. However, a study examining the US banking shock that led to its dissolution Silicon Valley Bank and Signature Bank last month, as well as massive withdrawals from many regional banks countries suggests a different point of view, namely an “excessive concentration of deposits” from richer countries, which is becoming increasingly volatile. In an article published by the Center for Economic Policy Research, Guillaume Wilmet of the HEC University of Economics in Paris describes how U.S. banks at the local level are exposed to large savings “intangible” or digital companies, as well as relative household income inequality. where the wealthiest tend to keep large cash savings.

This combination of factors has resulted in an “unprecedented” deposit-to-GDP ratio by 2022 and deposits rising above their insurance limits of $250,000.

The paper shows that over the past 23 years, the ratio of deposits to total bank liabilities has risen from 55% to 75%, raising the total deposit-to-GDP ratio in the US to 75%. However, the share of uninsured deposits in total bank deposits and equity nearly doubled to over 35% over this period. An analysis of the impact of the banking shock on the market in March showed that the degree of reaction of the shares of other banks to it clearly correlated with the size of this risk on uninsured deposits.