America - depositors WILL lose everything! You will be Cyprus'ed

Looks like things will appear to get a bit better then comes the huge total crash and all hell breaking lose after that point .

reply to post by Mike.Ockizard

Why not invest it in something that will hold value like property that has running water and is farmable? (is that even a word?) Seriously, even gold will be worthless in the short run.

100% in agreement with that. In the long run land/property will have value. Not sure about gold and silver. I think they always will have value but it depends on the state of the world really. Only when there is still a luxury element perhaps as barter will be they way for the necessities.

reply to post by MagesticEsoteric

Well, what about smaller local banks?

Are they safer than the large mega financial institutions.

Not sure about that as we have no such thing as small local banks. To an extent I would imagine that they are somewhat akin to Credit Unions but don't quote me on that. Unfortunately they do have the propensity to be taken over by the bigger banks, and the shareholders are not necessarily the depositors.

Economy is the most simple material of life.

When some people explain it in a complex way , I assume that they want to fool me.

Looks like Cyprus is happening again, but now in Ireland. Irish pensioners are facing a 100% loss. silverdoctors.com...

I haven't been able to find much else on the web about this but it sounds like there will be big implications.

The day i saw Cyprus really go through with the haircuts i got my money, and ran I pay everything in cash now.
Except child support I use western union learned a valuable lesson paying that in cash.

A very valuable, very expensive lesson.

I have no savings living check to check but seem to pay all my bills monthly but tight everytime so if the banks collapse I guess they are free and clear so my bills should be as well. Or is it tent city for all? I would like to get my 401k before thats gone how would one be able to get that without quitting your job?

i think the most frightening thing about all of this is, what do you do? if something like this happens most likely the value of the dollar will also crash, so what good is it having your money in a credit union or even in cold hard cash under your mattress? worthless money is worthless no matter where you have it. So it comes back to, what do you do? how do you continue to live right now, where the dollar does have value and is what is needed, yet prepare for the potential collapse of it???? that's what i struggle with the most with reading about all these "potential" things that could, and have a high likely hood, of happening.

my wife and i are fortunate to have good jobs and while not rich do have a decent sized savings, plus 401k's, and some roth iras. plus with 2 young daughters it makes it hard to figure out how you would survive if SHTF as its something you don't want to think about.....

Originally posted by PuterMan
reply to post by Templeton

 

Try Credit Unions.

They are subject to regulation but are not likely to fail (we hope)

I guess I'm one step ahead.. well see if I get my hair cut.

Lets calm down and start denying ignorance. In particular, go to the original source and not hysterical fear-mongers looking for blog hits:

www.federalreserve.gov...

Governor Stein said:

Perhaps more to the point for TBTF, if a SIFI does fail I have little doubt that private investors will in fact bear the losses--even if this leads to an outcome that is messier and more costly to society than we would ideally like. Dodd-Frank is very clear in saying that the Federal Reserve and other regulators cannot use their emergency authorities to bail out an individual failing institution. And as a member of the Board, I am committed to following both the letter and the spirit of the law.

A private investor is a shareholder and bondholder of the bank, not a depositor. Depositors have primary claims in bankruptcy, then bondholders, then stockholders.

Amounts deposited under insured FDIC limits are considered backed by the "full faith and credit of the U.S. Treasury" which means they should be considered equivalent to Treasury bonds. This means that even if the FDIC insurance fund runs out, the U.S. Treasury is obligated to make whole depositors, up to insured limits.

If you deposit more than FDIC limits, then yes, you would probably lose some money. But that's not different from how it has always been.

Remember, before 2008, it wasn't expected that the U.S. Treasury would step in anyway, and this is supposed to be a return to that. No depositor under $250,000 was helped by the bailouts directly. It was the counterparties to AIG---Deutsche Bank and Goldman Sachs in particular---who really benefitted when Hank Paulson (former Goldman CEO) bailed out AIG, who promptly had to pay out a preposterous 100% of amounts owed on their synthetic securities back to DB and GS.

If you have less than $250,000 in your account you are OK. Everybody avoiding direct deposits and ordinary checking accounts out of some fear you read on a message board is silly.

What to do:

Use a credit union and stay under $250K. If you have more, use more unaffiliated credit unions.

Put money you don't need as immediate cash into investment accounts with a couple of different reputable brokerages not affiliated with large commercial or investment banks, e.g. Vanguard, Fidelity, Interactive Brokers.

Avoid Merrill Lynch, Morgan Stanley, JP Morgan, maybe UBS, etc, or anybody with a proprietary trading desk/structured product originator. You don't want a situation where losses from rogue traders (which in the case of MF Global was the CEO Corzine) give an incentive to filch customer deposits to cover corporate losses.

Originally posted by PuterMan
reply to post by Templeton

 

Try Credit Unions.

They are subject to regulation but are not likely to fail (we hope)

Sorry, but when this bubble pops, who really cares where your "money" is. It will be more viable as toilet paper then as a currency.

I recommend on buying things you NEED TO SURVIVE. Not saying go insane and blow all your money on preps, but just realize fiat currency one day soon may be worthless (I keep enough in the bank to pay the bills)

reply to post by mbkennel


The banks are so overleveraged when they go under, they are taking the entire system down with it. As to the FDIC, do you think they have enough cash to handle a banking collapse? I wouldn't count on that at all.

This is not bs. The gold standard was removed in the early 70's. That was the last thing backing currency. You see, it started as barter. I give you a cow for you to build me a fence, etc. Then, governments realized that they could collect and hold money. and when they did, they could loan money and also gain interest of what is in reserves. Now, a bank at any time, can have no real money. Not anymore. It is all loaned out and they are hoping the people they loaned to will pay their notes because someone may want money. It is all ledgers and credit now. That is as simple as I can put it..2014 Tax time will be it for the US.

Originally posted by MidnightTide

reply to post by mbkennel

 

The banks are so overleveraged when they go under, they are taking the entire system down with it. As to the FDIC, do you think they have enough cash to handle a banking collapse? I wouldn't count on that at all.

edit on 23-4-2013 by MidnightTide because: (no reason given)

Not every bank will be so overleveraged that they will go under. You need two things: leverage and banks owning illiquid assets which plunge in value (mortgages in real estate).

How many depositors in insured credit unions (they use a different fund from FDIC) lost money in the last crisis? Zero. My stocks and mutual funds lost money from the panic as expected (value not insured!) but nobody in a credit union lost, and nobody in a FDIC insured bank with deposits under the limit lost.

Regarding FDIC: The FDIC fund is prepayment of insurance premiums from banks to the government. The point is that the deposits are backed regardless of the size of the FDIC fund.

www.fdic.gov...

it is the sense of the Congress that it should reaffirm that deposits up to the statutorily prescribed amount in federally insured depository institutions are backed by the full faith and credit of the United State

In practice, in a crisis the FDIC would borrow from the Treasury to cover whatever was necessary and this Congressional resolution gives the Treasury authorization to lend to the FDIC whatever is necessary.

If the Treasury did not do so, then the market consequences would be to call into question all "full faith and credit" obligations, namely the entirety of Treasury bonds, and that would truly be a catastrophic financial crisis. Treasury would lend first and then ask for permission from Congress afterwards if necessary.

Originally posted by blackangel13
i think the most frightening thing about all of this is, what do you do? if something like this happens most likely the value of the dollar will also crash, so what good is it having your money in a credit union or even in cold hard cash under your mattress?

Actually in the last crisis, the value of the US dollar went up as everybody dumped investment assets to get liquidity (US dollars) to pay back loans/margin. Treasury bonds were the only thing that made money, and they are US dollars with interest.

There is no useful alternative for money in the USA, so in a crisis cash is excellent.

The value of the dollar can be eroded with persistent high inflation over years---in this case, own real estate, and essential commodity producing equity and foreign currency.

By contrast, a sudden financial crisis is nearly always deflationary. Remember that when loans are made money is created (how fractional reserve banking works), and thus when loans are defaulted, money is destroyed. This is deflationary, meaning the value of the dollar goes up.

reply to post by PuterMan


Can you quote specifically where it says that in the original speech..can't find what zero hedge quoted...

reply to post by Anjola


Indeed it could be that they will face 100% loss, but at least it has not happened yet.

I don't understand the Irish. They kicked out the Brits and then bent over for Europe. The fighting spirit seems to have gone. (I am Welsh mostly with a bit of Irish and English although I live in Ireland)

Click here for more information.

reply to post by chrismarco


Indeed I can. It is in the second paragraph

First, and most obviously, one goal is to get to the point where all market participants understand with certainty that if a large SIFI were to fail, the losses would fall on its shareholders and creditors, and taxpayers would have no exposure.

This is precisely what happened in Cyprus.

You then need to couple that with the details of the FDIC on the infographic to understand that the insurance is worthless, and therefore a big bank failure would be a wipeout for depositors.

reply to post by MidnightTide

As to the FDIC, do you think they have enough cash to handle a banking collapse?

That was the whole point being made in the infographic.

They don't have enough to cover even a substantial fraction.

reply to post by mbkennel

A private investor is a shareholder and bondholder of the bank, not a depositor. Depositors have primary claims in bankruptcy, then bondholders, then stockholders.

I am afraid you are wrong there.

Depositors ARE indeed creditors of the bank and depositors do not have a primary claim in bankruptcy, they have a bank deposit guarantee which is NOT the same thing and is NOT administered by the bnak. The deposits are lost but are covered, or supposed to be, by the deposit guarantee scheme.

.....within a few days in Iceland, the Icelandic Depositors' and Investors' Guarantee Fund (Tryggingarsjóður) had already been drained from capital reserves, and had no money left to repay the legally required deposit guarantees to the foreign Landsbanki customers who had lost all their savings in the Icesave branch of the bank

Source

As you can see from that even the deposit guarantee schemes can run out of money and that is precisely what we are referring to here.

You might also like to take a look at this: On claims of depositors, subordinated and creditors and central banks in bank resolutions

The point is that whilst nominally the depositor has a modicum of protection, in reality there is little or none when guarantee structure are under financed, or a Government decides to haircut anyway.

Lets calm down and start denying ignorance. In particular, go to the original source and not hysterical fear-mongers looking for blog hits

There is a big difference between denying ignorance and wearing blinkers.

Quite apart from the fact that Zerohedge is not an hysterical fearmonger looking for blog hits (you obviously do not follow the site or you would realise that) the whole drift of your post is that of someone who believes everything that he/she is told at face value. Do not make the assumption that the treasury will bail you out. Did the Icelandic treasury bail out the depositors? No. Has the Cyprus treasury bailed out the depositors? No.

You can rest very assured that if push comes to shove Governments WILL steal your deposits. Open your eyes and look. It is happening already. Cyprus, soon Ireland, next probably Italy or Spain.....and then the US.