Bankruptcy Would Be the Biggest Economic Crisis in 2023

Kosuke Fukuda, Staff

The U.S. economy, which had been revitalized by its restoration after the COVID-19 pandemic that restricted economic activities such as the distribution of people and goods, is now in danger again. 

According to The New York Times, on March 10, Silicon Valley Bank (SVB), which is located in San Francisco and has dealt with a number of Silicon Valley ventures, was marked the largest bank failure since the collapse of Washington Mutual in 2008 in the middle of the global financial crisis 

SVB was best known for its lending to startups in the technology and healthcare industries and was the 16th largest bank in the country at the end of 2022, with $209 billion in assets.

Companies and businesspeople are not the only ones affected by the collapse of these giant banks. The impact can be extended to ordinary individuals, including college students. 

Gen Sogabe, an international student at BVU and investor in the stock market, said “On March 10, major stocks, such as the S&P 500 and Dow Jones, dropped sharply and suddenly, so I struggled to handle and deal with my holdings.” 

His purpose of investment is learning about the economy and since it was only a small investment, he did not lose much of his money. 

BVU has many other students who participate in the stock market and the fluctuations in stock prices that accompany bank failures have a familiar impact on general citizens as well. Thus, even if you are not participating in the stock market, the effects of bank failures can be felt.

“Stock price movements reflect the economy,” said Dr. Fredi Arias Garcia, who teaches economics at BVU. “Decline in bank credibility and falling stock prices make managers hesitant to expand their business, which make companies slow down. This results in wage reductions and job cuts,” Arias added. 

In other words, the stock market crash following a bank failure is not just a problem for companies and people invested in stocks. It also could affect students at BVU and people in this community who are not involved in stock investments. 

When people see a significant financial crisis, such as a stock market crash or bank failure, on the news, it may seem like an incident that is happening in a different world from them. However, those events frequently have a significant impact on ordinary people as well.