- Elon Musk likens the current bank crisis to the 1929 events that led to the Great Depression.
- Musk supported Cathie Wood’s opinion that regulators are focused on the wrong targets.
- According to Wood, regulators should have concentrated on the looming crisis in the banking system.
Twitter CEO Elon Musk tweeted that the current financial crisis faced in the United States is similar to what happened in 1929, which led to the stock market crash. Musk’s tweet was a reply to comments by Cathie Wood, founder, and CEO of ARK Invest, who analyzed the ongoing banking crisis, faulting regulators for ignoring the traditional banking systems and focusing on the decentralized financial sector.
According to Wood, Bitcoin, Ethereum, and other crypto networks have remained untroubled in the middle of the chaos while heightened uncertainty threatens their centralized counterparts. She noted that even the unsettled stablecoins were victims of the banking systems that regulators have failed to keep in check.
Wood faulted the regulators for missing the point by pursuing the wrong targets. She said:
Instead of blocking decentralized, transparent, auditable and well-functioning financial platforms with no central points of failure, regulators should have focused on the centralized and opaque points of failure looming in the traditional banking system.
Wood noted that the regulators should have concentrated on the looming crisis in the banking system, characterized by asset and liability duration mismatches, with short rates soaring 19-fold in less than one year. According to her, deposits in the banking system were falling on a year-on-year basis for the first time since the 1920s.
Musk tweeted in agreement with Wood’s analysis, likening the current situation to the infamous stock market crash of 1929 that paved the way for the Great Depression.
Ahead of the Great Depression, public utility holding companies were criticized for ‘unscrupulous’ actions, leading to congress passing an array of federal regulations aimed at stabilizing the markets. The Fed on its part overlooked the situation and did nothing to prevent the wave of bank failures, similar to Wood’s observation under the current dispensation.
This time around, the regulators are observed to be making efforts and trying to curb the situation. The Fed, Treasury Department, and the FDIC have all rolled out plans to safeguard depositors from the ongoing. However, there is no clarity as to how the situation will be resolved, as investors remain hopeful about the future of their assets.
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