A threat to the US economy biggest: experts name unexpected factor
The conflict between China and Taiwan is a threat to the U.S. economy largest and can deal a blow to the U.S. economy due to the U.S. dependence on the main supplier of microchips on the island and the high rate of development of semiconductor manufacturers in China, experts say.
Washington’s current policy on the island carries significant risks if the situation develops into an armed conflict, and affects semiconductor production in Taiwan, supplied to the American market. The island’s high-tech products are used in many U.S. goods, including computers, automobiles, medical equipment, artificial intelligence software, and communications equipment.
A threat to the U.S. economy is important. The U.S. lost $240 billion last year due to a shortage of microchips, and possible military action in Taiwan could hit the U.S. economy even harder because of its reliance on supplies from Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest.
U.S. President Joe Biden’s administration in the 2021 review of the supply chain has already recognized the country’s significant dependence on TSMC products, and, according to research group Capital Economics, it is TSMC that produces more than 90% of the most advanced microchips in the world.
Major US technology corporations, including Apple, Intel, Nvidia, Qualcomm, AMD and Broadcom, buy microchips from TSMC, while the US government depends on Taiwanese microchips to produce some of its most important and sophisticated systems, including weapons.
Representatives of Taiwan`s authorities also pointed to threats related to a possible escalation of the situation around the island. For example, Taiwan’s official representative to France, Francois Chin-Chun Wu, said on BFM Business that escalating tensions in the Taiwan Strait could lead to complications in the global semiconductor market.
In July, Zach Nunn, former director of cybersecurity at the White House National Security Council, called the shortage of semiconductors and the lack of capacity for their production a “direct threat” to the U.S. economy and national security.
In addition to military action, the threat to the production and additional exports of microchips from Taiwan is a high dependence of the island on raw materials from China. In response to a visit to Taiwan by U.S. House Speaker Nancy Pelosi, Beijing has taken steps to curb the supply to the island of silica sand, which is used in developing semiconductors.
Earlier we reported that U.S. Congress agrees to allocate $430 billion for climate and inflation.
Startups under threat worldwide after Silicon Valley Bank collapse
High-tech startups have been hit. Companies around the world are facing a fight for survival after the collapse of a major US investment bank, Silicon Valley Bank (SVB). There was a “huge disruption” in the industry globally, Bloomberg reported, citing market participants. The entire stock market, and the S&P 500 in particular, plummeted.
Startups under threat
The bankruptcy of the lending institution, in particular, affected the co-founder of startup Birdly Inc. Quang Hoang. The entrepreneur invested about $10 million in SVB and is still unable to repay the money four days after the bank was shut down by the California Department of Financial Protection and Innovation. However, the entrepreneur is far from the only one who has faced similar problems, the article specifies.
“Hoang was one of thousands of founders around the world this week trying to track down their money after days of chaos and who are completely rethinking the way they run their own businesses. Startups from Silicon Valley to London to Tel Aviv to tech hubs across Africa have depended on SVB as a one-stop store for everything from storing their fortunes to personal mortgages,” the story says.
Now investors and technology companies are predicting a complicated financial future for themselves, even if the bankrupt bank begins to attract deposits from customers under a new name. Many market participants faced a “financial payback” for their overreliance on the credit institution’s risky investment assets, the memo said.
On March 11, the California Department of Financial Protection and Innovation closed Silicon Valley Bank, a large investment bank based in Santa Clara County. All insured deposits from SVB were transferred to Deposit Insurance National Bank of Santa Clara. Depositors were expected to have access to their accounts by March 13.
Earlier we reported that the U.S. Department of Justice has begun an investigation into the circumstances of the collapse of Silicon Valley Bank.
U.S. Justice Department Opens Investigation into Silicon Valley Bank Collapse
The U.S. Justice Department is set to investigate the circumstances surrounding the bankruptcy of Silicon Valley Bank (SVB), which was the largest since the global crisis in 2008. The entire stock market collapsed, in particular the S&P 500. This was reported by The New York Times (NYT), citing two people familiar with the situation.
The sources of the newspaper noted that the investigation is at a very early stage, and it is not yet very clear what the focus of federal investigators and prosecutors will be.
Lawyers believe that the main point that may attract investigators is that a few weeks before the crash of SVB, several top managers sold their shares. The sale of securities brought the sellers millions of dollars.
Market experts pointed out that some top managers sold their shares by previously announced plans, so that such sales would not seem illegal. For this purpose, the date of sale of securities and their volume are chosen in advance. However, some politicians have already said that all of the bank’s top managers should return the money received from the sale of shares.
Earlier on Wednesday, the Wall Street Journal, citing its sources, wrote that creditors of the bankrupt bank SVB joined to make profits after the collapse of the financial institution.
Earlier, we reported that an American billionaire declared the collapse of American capitalism.
U.S. Billionaire Says ‘Collapse of American Capitalism’
Is the collapse of the U.S. economy coming? The Silicon Valley Bank (SVB) bailout package released by American regulators shows that American capitalism is “crumbling before our eyes”. Ken Griffin, founder of the hedge fund Citadel, told The Financial Times.
“There has been a loss of financial discipline because the government bailed out depositors completely. It would have been a great lesson in moral hazard. The loss to depositors would have been insignificant, and it would have increased the importance of risk management,” he said.
In Griffin’s view, the U.S. government should not have taken such drastic action. Griffin’s position contrasts with that of another senior hedge fund manager, Bill Eckman, who on March 13 urged the Federal Deposit Insurance Corporation to “clearly guarantee all deposits now,” warning that “hours matter.”
Eckman wrote on Twitter that “our economy will not function effectively without our community and regional banking system.”
The situation is already affecting the Euro / U.S. Dollar exchange rate.
We previously reported that The Fed announced an emergency bailout of the U.S. banking sector.
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