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In 2025, economic analysts are raising alarms over growing signs of stagflation in the United States and its potential to trigger a renewed banking crisis similar to the collapse of Silicon Valley Bank (SVB) in 2023.

Unrealized Losses in U.S. Banks

As of early 2025, U.S. banks are grappling with $482.4 billion in unrealized losses from securities investments, according to the Federal Deposit Insurance Corporation (FDIC). This marks a 32.5% rise from the previous quarter. The figure is approaching the $515 billion mark observed during the SVB crisis and could rise to $600–700 billion if interest rates hit 5%.

These losses are primarily linked to long-term securities like government bonds, whose prices have fallen due to rising benchmark 10-year Treasury yields, now exceeding 4.5%.

What is Stagflation?

Stagflation is a rare and difficult economic condition marked by:

• High inflation
• Stagnant or negative economic growth
• High unemployment

It complicates policymaking because:

• Tightening monetary policy (raising interest rates) to control inflation can worsen unemployment and slow growth.
• Loosening policy to boost growth can further fuel inflation.

Causes of Stagflation in 2025:

1. Supply Shocks – Rising input costs (e.g., energy or tariffs).
2. Tariff Hikes – New U.S. tariffs on imports have raised production costs.
3. Policy Missteps – Uncoordinated fiscal and monetary measures.

Impacts on the Financial Sector

• Reduced Bond Values: High interest rates lower the market value of banks’ bond holdings.
• Risk of Bank Runs: Diminished asset values can trigger depositor panic.
• Credit Losses: Particularly in sectors like tech and venture capital where firms have weak earnings and poor debt coverage.
• Liquidity Crisis: A sudden negative news cycle could lead to another SVB-like collapse.

Experts warn that continued high interest rates could deepen banking stress and prolonged stagflation could amplify credit defaults.