Monday's Markets Update (March 20, 2023)
On Monday, after the ironic expression "It would be like UBS and Credit Suisse merging" took on an entirely new meaning, traders' lack of directionality led to both NASDAQ (open: 11614, close: 11675) and BTC (open: 28188, close: 28126) staying pretty much at the same levels reached during Thursday and Friday's run.
It is difficult to overestimate the significance of the fact that UBS, which was one of the most affected European banks back in 2008 and was bailed out by the Swiss National (Central) Bank for the sum of $60 billion, is now taking over and providing USD 104B in liquidity to Credit Suisse. CS was one of the least affected banks during the global mortgage debacle. The recent take-over was a result of one-day 'negotiations' between the Swiss government and CS key stakeholders, which some analysts called a "shotgun wedding.
Credit Suisse's assets size exceeds USD 500B (more than one and a half percent of the European banking sector - USD 38 trillion), and its list of major shareholders includes the Saudi National Bank (9.88%), the Qatar Investment Authority (5%), and BlackRock (5%). However, it was purchased by UBS for only USD 3.2B in an all-stock deal with a blatant disregard for shareholders' voting power.
It might be argued, of course, that the refusal of the head of the Saudi National Bank to invest in CS was a major cause of the bank's stocks dropping almost 300 percent in a day and the subsequent daily withdrawals of demand deposits totaling over 10 billion. However, more realistically, this episode must be viewed as an illustration of the total inability of the current authoritarian financial system in the world to cope with new technologies that allow for instantaneous exchange of information and money.
As a result, governments are starting to "override" existing legal statutes and impose their voluntary, bureaucratic rule over investors' and public assets. This type of "financial governance" brings us several centuries back into the era of Middle Age crowned despots playing with the destiny of their slaves as pawns on a chessboard. The only viable alternative to such a dystopian financial "order" is a completely decentralized financial system (DeFi) based on a great variety and multiplicity of open, 24/7 auditable, widely distributed blockchains.