00:00Let's recap how we got here. Thanks to rising prices, aka inflation, the Fed has been making
00:05money more expensive to borrow by raising interest rates. But before that happened,
00:09a bunch of the smaller banks put our money into treasury bonds. Now that's also how banks make
00:15money. They lend money and they invest our money into safe assets like treasury bonds to collect
00:19an interest. But there was a problem. When the Fed started to increase interest rates to fight
00:24inflation, it negatively affected those bond values. And so the value of our deposits also went
00:31down. And that made people panic. They all wanted their money out of the bank at the same time. And
00:35that made those banks sell their assets at a loss, making some of them insolvent. That's a fancy way
00:41of saying out of money. And now you're all caught up.
Comments