kanethenotorious
Phoron
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Once more, as if to mimic the eerie gloom of the House of Usher, a banking crisis looms over us, threatening to overshadow its predecessors. The sinister nature of capitalism follows a pattern not unlike the cyclical deterioration of the Usher bloodline, with crises growing more intense and the intervals between them growing shorter. Akin to the mysterious maladies afflicting Roderick and Madeline Usher, the crises of subprime mortgages, the Lehman collapse, and financial turmoil paved the way for a series of global economic, currency, and debt crises.
As I approach the crumbling financial landscape, much like the protagonist’s journey towards the decaying House of Usher, a sense of dread envelopes me. The latest crisis emerged from the very heart of globalized, finance-driven capitalism — the Californian Silicon Valley Bank (SVB) — thus striking first a financier of the digital economy. The distress in the digital economy had been brewing for months, with declining profits and mass layoffs at corporations such as Meta, Twitter, Amazon, and Microsoft. Stagnating user numbers, decreasing advertising revenue, and uncertainties surrounding the progress of digitalization have troubled Big Tech, much like the unsettling atmosphere that pervades the Usher estate.
The overheated digital economy bears a striking resemblance to the decaying House of Usher, plagued with an air of imminent collapse. Not only do large digital corporations struggle, but the realm of tech startups is also excessively overheated. Small companies are propelled to “unicorn” status with colossal debt leverage; billions are poured into new technologies with uncertain futures to secure promising markets, and one hype follows another. Investors are enticed from all corners by the promise of high returns, but this very dynamic also leads to massive failures, insolvencies, and unprecedented losses, all of which put immense pressure on investors, not unlike the psychological strain weighing upon Roderick Usher.
The SVB, as a tech financier, was particularly vulnerable to shocks. The protagonist’s visit to the House of Usher, intended to provide solace to his ailing friend Roderick, unwittingly catalyzes the tragic events leading to the demise of the Usher lineage. In the same vein, the political sphere’s inability to manage the situation surrounding Ukraine led to an economic war against Russia, ultimately triggering a series of events that would shake the foundations of the financial sector. As interest rates rise to curb inflation, the tech startup boom largely relies on anticipated future profits and cheap credit in the present.
If investors become hesitant due to increasing interest rates, if initial funding rounds for seemingly promising startups fail, if banks begin to sell older government bonds at a loss, and if the equity ratio is too low to absorb losses — panic ensues. In the blink of an eye, a bank once considered solid faces the same fate as the House of Usher, crumbling into oblivion.
Capital knows no borders, much like the pervasive gloom that transcends the confines of the House of Usher. The United States, as the hegemon of the Western world, controller of vast portions of digital infrastructure, and issuer of the dollar, has some capacity for state intervention. It possesses the means to temporarily calm the situation, just as the protagonist’s presence in the Usher mansion provides momentary respite for Roderick. However, the extent of the shockwaves in the tightly interwoven financial sector remains to be seen. A study by the Social Science Research Network suggests that 186 other banks in the United States alone may face a similar fate as the SVB.
The Usher bloodline’s doom is not confined to the walls of its ancestral mansion, and, likewise, the United States’ borders do not mark the limits of globalized financial capitalism. The Swiss banking giant Credit Suisse, notorious for its scandal-ridden past, was recently absorbed by its rival UBS. Credit Suisse, much like the ill-fated Madeline Usher, appeared to possess a superficially robust equity ratio of 14.1 percent last year. However, other calculations suggest a more accurate figure of around six percent. Just as Madeline’s entombment in the family crypt merely masked her true fate, the bank’s investors exhibited a penchant for high-risk, unscrupulous ventures. High risk and meager reserves to cushion against failed investments form a toxic combination that mirrors the Usher siblings’ interdependence, each contributing to the other’s downfall.
As uncertainty grew over the months, more and more deposits were withdrawn, foreshadowing the eventual collapse of the House of Usher. The sense of catastrophe is palpable, much like the atmosphere in the Usher mansion, where the protagonist has felt a sense of dread from the moment he arrived. The house itself, decaying and decrepit, is a reflection of the Usher family’s declining fortunes. Just as the protagonist notices the fissure in the mansion’s walls, a sign of its imminent collapse, the banking system shows signs of instability.
Much like the stormy night that envelops the mansion as the protagonist reads a story to his friend Roderick, a spark from the United States ignited a tinder-dry haystack in Zurich, setting off a chain reaction of events. The collapse of the SVB was just the beginning. It is as if the Usher family’s long history of illness and mental instability has finally caught up with them as the financial system teeters on the brink of collapse.
Switzerland, a haven for financial capital, possesses the resources to alleviate the situation temporarily. Its central bankers quickly injected 50 billion francs into the economy, attempting to stabilize it. However, they were unable to overcome the onslaught of short-sellers. Now, the acquisition by UBS is expected to restore calm. The purchase price of a mere three billion francs is a bargain, considering the Swiss government and central bank will soften the deal with liquidity assistance in the hundreds of billions range.
The progression of the banking crisis remains uncertain, much like the final moments within the House of Usher, where the atmosphere of gloom and desolation increasingly deepens. The actions taken by Swiss institutions evoke the futile efforts of the protagonist to comfort his friend Roderick as they attempt to mitigate the damage from ever-intensifying crises. As the protagonist seeks solace in reading the tale of Ethelred to Roderick, the Swiss government and central bank provide temporary relief through liquidity assistance, though the underlying issues persist.
With the merger of Credit Suisse and UBS, a new mega-bank is born, akin to the dark, imposing structure of the House of Usher itself. Boasting a balance sheet of 1.6 trillion euros, approximately two and a half times the annual GDP of Switzerland, the financial behemoth’s sheer magnitude echoes the overwhelming presence of the Usher mansion. Just as the fissure that split the facade of the ancestral home foreshadows its destruction, the potential vulnerability of this colossal bank may portend an impending financial cataclysm.
Should this financial giant stumble, much like the fall of Roderick and Madeline Usher, we may witness an apocalyptic collapse akin to that of the House of Usher. In the same way that the mansion crumbles into the dark and tumultuous tarn, the potential failure of this banking juggernaut could drag the global financial system into a chasm of despair and chaos, leaving a lasting impact on the world as unforgettable as the haunting tale of the House of Usher.
