Contagion refers to the spread of emotions, behaviors, and ideas from one person to another—and it happens to be an apt description of what contributed to the current moment.
There’s no equating last week’s Silicon Valley Bank crisis and subsequent fallout with any moment in history. But that doesn’t mean we aren’t facing down the barrel of a potential contagious banking crisis like we did in 2008 or 1930.
Rescuing uninsured depositors is absolutely imperative to stem a market-wide impact. However, immediate actions taken by regulators fall short of solving the root problems here: crumbling, opaque infrastructure that fails startups, small business owners employing nearly 50% of America’s workers, and retail again and again—and a nagging sense of panic that spread like wildfire across social media and group chats.
Contagion refers to the spread of emotions, behaviors, and ideas from one person to another—and it happens to be an apt description of what contributed to the current moment. In the context of banking, it’s important to understand—from history and from the present—that contagion spreads when conditions enable it. And we should take this time to wrap our heads around what’s actually happening to distance reality from panic.
Specifically, it’s beneficial to explore the impact of contagion on the bank run that led to Silicon Valley Bank’s shuttering and how the same psychological effect impacted the banking system in the past.
