By Richie Lin.    Photo : Mariia Shalabaieva

On March 10th, Silicon Valley Bank (SVB) announced their bankruptcy and said they are taken over by the Federal Deposit Insurance Corp. (FDIC). They guarantee that each depositor in SVB can withdraw maximum USD 250,000. But if your money is over that number in your account, you need to wait until subsequent planning can be carried out after the assets of SVB are auctioned or other banks are willing to take over. Market expects the bankruptcy of SVB will jeopardize the daily operations of silicon-valley startups and venture capitals because SVB also participate several investments. Since the news was out during the weekend, so there are no clear outcomes to evaluate. But it will definitely cause bank runs in other banks because ordinary people will become more conservative when facing the uncertainty. There are might be several reasons to cause SVB file bankruptcy but one crucial reason is surely the high interest rate determined by FED to suppress inflation. Within just one year, the Effective Federal Funds Rate has increased from 0.5% in April 2022 to 4.57% in March 2023. This means the cost of money has increased four times within one year. Those startups and the venture capital funds in the silicon-valley can no longer use their future explosive profits to lure money into their pockets. They are facing more and more pressures to provide actual profits within months or the investors will have to withdraw the money out in order to settle the loans with banks under the high interest rate situation. Someone’s meat may be another one’s poison and vice versa. The bankruptcy of SVB is for sure the final curtain call of party feast for those startups and venture capital funds. Even though no one can be certain of the scale of this catastrophe, but this will definitely cause the scenarios of cutting operational budgets and layoffs. This is a good sign for fighting against inflations. Inflations might be also caused by outside factors such as oil price and transportation costs during pandemic, one major factor to push up inflation is the salary increase of service industry such as restaurants, rents, accountants, lawyers. When the interest rate was only 0.5%, there were lots of money in the market because any small profits can cover the cost of loans. And those high-tech and fintech startups were the major beneficiaries of the money party because people want to bet up their future explosions and huge returns. But tide is also change for the startup companies from how big is your dream to how you are going to survive during this disaster. Layoffs will be normal procedure to cut the operational costs to avoid bankruptcy. When the so-called rich people start to reduce their consumptions, those service industries around them will be also push to reduce the consumptions and will eventually help to reduce the inflation. It is obviously when we see the increase the unemployment rate and decrease of CPI, FED would change their hawkish attitude for the interest rate. Therefore, the bankruptcy of SVB might be a positive signal to make things get better.

FCL market rate reference in week 11:

• Asia main ports to USAWC USD 1250~1500 per 40GP; 
• Asia main ports to USAEC and Gulf USD 2500~3000 per 40GP; 
• Asia main ports for IPI points of USA is USD 3800~4500 per 40GP. 
• Asia main ports to Europe base ports and West Mediterranean: USD 2000~3500 per 40GP.

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