Historically, Americans move into hedge assets like gold when there are banking issues. It's typically international financial troubles that drive foreign investors into treasuries. However, you're thinking in the right direction, because people try to move into lower risk assets.

The magnitude of US debt dwarfs commercial deposits, so a move into US Treasuries won't significantly impact the amount of purchases by the Fed. This is even more clear when you consider the fact that if too many people try to withdraw their savings the other banks will fail, because they don't have the reserves to support large scale withdrawals.

What does seem plausible, is that depositors losing an enormous amount of money might be taken as an opportunity to launch the cbdc: issuing them to replace lost deposits. I could also imagine a similar dynamic playing out with unpayable maturing treasuries.

The issue and risk with banking is counter-party risk.

SVB was focused on early-stage tech companies and I think there is reduced counter-party risk there. There were two things that caught SVB off guard as money stopped flowing through the system:

Because the customers of SVB are mainly companies, not consumers, I don’t know how the FDIC insurance covers depositors. I think because of the highly localised nature of their banking/customers (tech companies who rely more on equity investment than debt) that there may not be significant counter-party risks which domino through the economy. What we may see is “just” some comparatively wealthy software engineers who lose their job. Maybe some banks who have mortgages to these engineers come under pressure?

The bigger issue that’s more likely to cause systemic risk is commercial real estate. Loans and mortgage-backed securities tied to CRE are coming under pressure as rates have risen while vacancy rates have stayed high post-covid. If you can’t rent your space the value of your building drops. The landlords end up being squeezed through higher holding costs (much higher interest as rates rise) and their Loan to Value Ratios reaching levels which may breach debt covenants.

This area of banking system is more debt-based so more likely to have greater systemic risk, more counter-party risk as debtors fall like dominos. There will be assets (office buildings) that have been financed by multiple lenders, there will be smaller specialised lenders in the space who have large CRE loan books who are likely to have large tranches of their own funding being borrowing from larger institutions. Probably also entities who have CREIT assets on their balance sheets which will need to be written-down which will cause havoc etc etc

I think it’s a stretch to say US consumers move to US debt when SHTF. It’s commercial and international entities who move to US government debt because it’s seen as a safe-haven. That’s what happened in March 2020, everything tanked because everyone wanted US cash and US debt.

US CBDCs are supposedly still in trial phases, I think we are a while off them being launched and think it’s tangential to this chaos. I don’t think they’ll be presented as the answer to the current mess that’s unfolding. The “answer” to this current mess is likely to be some new form of QE and the kicking of the can further down the road.

I know is not the answer to your question and I don't want the bounty. This is just a friendly warning for shitcoiners that possibly will jump here.

To answer your question:

TLDR - is a controlled demolition, well organized. In order to be able to bring to the masses the CBDCs, the fuckers need to organize some chaos. As I said just few days ago: what happen in Nigeria few weeks ago with the intent of forcing people into using their new CBDC, was just a testing ground to see how people react to such event.

What happen now in US is another testing ground. I am kinda happy that this happen. This is The Great Shitcoins Purge 2.0.

This is the beginning of a bigger, broader crisis. These things always cascade. It isnthe nature of the ponzi scheme that is fiat currency. Large and small companies and regular people will be harmed. There will be a flight to perceived quality. Cash, T-bills, -notes, -bonds, gold, and yes, bitcoin at some point. The run to quality will send many to the breast of the Nanny.

So many are sheep! We are in for a long struggle for true propriety!

Stay humble, stack sats.

This is the way!

People holding government bonds is a far cry from a CBDC.

Bonds are large denomination papers that are tradable on open exchanges. A CBDC would be small denomination fungible currency with compability to bank accounts or at least payment terminals at your local supermarket.

It would be really far fetched to transform bonds to a CBDC. There would be so much technological and buraucratic to implement this, this is not feasable.

If there would ever be such a thing as a CBDC in a western country it would begin as a more feature rich tax account with the IRS or equivalent and work its way into the mainstream from there. But def. not from your brokerage account.

Maybe large companies move into treasuries. Normal folks probably pull cash and stick it under their mattress.

The game is rigged.

2 of the 8 banks where most reserves USDC had (8.4B of 42B) went collapse....and to be continued... ![this is an image] (https://tenor.com/es/view/crazy-cat-weapon-rifle-shooting-gif-15286324)

fiat/usury

I agree that there will be a retail rush to treasuries, just like there was after 2008. It's a self regulating process, since yields will be driven down, and citizens would fairly quickly have to take on riskier debt and other risk assets to outpace inflation. The treasury will still have to buy its own bonds in enormous quantities to boost liquidity. I don't think there will be a rush to buy US bonds by foreign governments anymore.