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

Excellent presentation as I am printing this out for the non-believers. This should be required reading. It will take a lot of courage and faith for one to recognize a lifetime of savings could be worthless in the near future. Next to guns and prepper supplies I expect a need for tools, livestock, and lots of sweat to be our successful movement forward.

Originally posted by PuterMan
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.

No the insurance is not worthless. The practical and political reality---the fact that the FDIC has claimed "full faith and credit" of deposited amounts are insured (and nobody has disputed this) means that if the FDIC fails to pay the consequences would be so much worse that every effort will be made to pay. JP Morgan might not be bailed out, but FDIC will be bailed out. In the recent crisis, even Fannie Mae and Freddie Mac insurance was backstopped 100% by the US Treasury (wrongly in my opinion) even though Fannie and Freddy explicitly said before time that the obligations were NOT backed by full-faith-and-credit guarantees. (In contrast to GNMA, which is.)

Cyprus depositors under deposit insurance limits were not imposed losses.

Also, the size of the Cyprus banking system relative to GDP was larger than that of the USA, and Cyprus cannot issue its own currency.

In reality, if there is another huge crisis, the US Treasury and Federal Reserve will bail out FDIC with as much money as necessary to pay insured depositors. There is no reason they wouldn't and every reason they would.

That would cause riots and may be why the DHS agencies are stockpiling weapons and ammo. Congress should expand the FDIC and guarantee depositors (at least to 250K) and not limited to the available FDIC funds (in other words; full backing of depositors on banks in the fed system - if they are insolvent then close them). Afterall if the Fed is going to print money then at least do it for something like this.

reply to post by mbkennel


The Fed Reserve controls inflation and bond markets and stocks fluctuation and well..everything...again, it is this simple.

Governments realized that they could collect and hold money. When they did, they could loan money(our money) and also gain interest of what is in reserves. Talk about double dip. 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.

In the early 1900's there was a meeting attended by the representatives of the 5 largest families of money inf the nation. These included J.P. Morgan, Rockefeller, and Kuhn, Loeb & Co. This led to the 'privately owned' Federal Reserve. Look up the Aldrich Plan.

There have been a few meetings and issues since then including 'the Accord' after WW2 in the early 50's. Then the Gold standard was removed in 1971. That made everything that we carry worthless as there is nothing to cash in...there is no money folks. If everyone called their markers right now the world would fart and be broke..everyone. So, what is needed to get out of this crisis. A war...

The major banks are still the same players. So, how does it feel to know you work for nothing?

I have successfully survived without a bank account for over 5 years. I used a prepaid cash card I actually have 2 one American express and one visa that accepts direct deposits and allows me to pay bills and also pull cash at the ATM. It can be done if you're willing to take a few extra steps.

I suggest people start looking into converting at least some of their savings into tangible goods. Food, water, prcious metals, everyday necessities like toilet paper! Should this disaster come to pass, and it looks like it may very well be likely, everyone should have enough supplies to ride it out for at least a few months if not longer. I would suggest useable goods first. Metals are nice but you can't eat them and there's no gaurantee you will be able to find someone with enough extra to barter them for food and supplies. Don't forget water! It is the most important supply!

If you fail to prepare these things now you could see a myriad of scenarios... Bread lines, hyper inflation, cleared shelves or all of the above. If nothing happens then hey, you can still put the stuff to good use. If it does happen then you can rest a lil easier knowing you have your family covered for awhile.

I also tell everyone to start stocking up on seeds and try to start growing a few things even if you're in an apartment buy some containers and grow as much as you can. Learn now so that you know what you're doing in the event that you have to rely on such methods to feed yourself, your family and your community.

Speaking of community... Get to know your neighbors and try to work together. This will be a huge asset to you in the long run!

Originally posted by PuterMan

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.

I understand this issue. My point is that the size of the FDIC deposit account is not relevant in a large crisis. If it is drained, the FDIC will not default on paying depositors, instead, it will borrow more from the Treasury or Federal Reserve. Treasury and Fed have an interest in not letting things get out of hand, and Fed can create as much money as it needs to.

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)

In fact I do--it's bookmarked on my ipad, and I think my characterization is reasonably accurate.

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.

Factual question: has any depositor in Iceland or Cyprus lost money in covered accounts under insured amounts? Has there been any default on official government deposit insurance? Did this insurance have the save status as government treasury obligations.

The drift of my post is not to believe what is told at face value (one example would be assuming the size of the FDIC account is the limit of bailouts) but to consider the practical reality.

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.

Here is my algorithm. It is based on thinking about naked human self-interest.

Q1: Consider a hypothetical default on FDIC full-faith-and-credit insurance:

What good would it do the US government, or the political careers of the people involved?
What harm would it do the US government, or the political careers of the people involved?
What good or harm would it do to wealthy and powerful people in the private sector?

A1: it would serve nobody's interest to default. Therefore all individual political interests point to a bailout.

Q2: Does the US have the tools and ability to bail out the FDIC in a crisis?
A2: Yes. If the Federal Reserve and US treasury can find a way to lend/give a huge amount of money to an insurance company (AIG) who wrote billions of stupid financial derivatives to investment banks and hedge funds, they will certainly find a way to lend/give/bailout a huge amount of money to a US institution authorized by Congress to provide insurance backed by full-faith-and-credit guarantees.

In such an event, to stop a massive panic the Fed would probably say something like "As the regulator of the US banking system charged with ensuring safety and soundness of the financial system, the Federal Reserve Board of Governors has authorized the FDIC to borrow from the Federal Reserve at the discount window without limitation and expects the FDIC to make whole all deposit guarantees as provided by law." In such an event the discount rate would probably be 0.25%.

The US Federal Reserve can make as many dollars as it needs to. The central bank of Cyprus cannot do so with euros.

reply to post by PuterMan


I wonder if this is not the reason why the government is becoming increasingly militaristic toward its own citizens. Such treason!

In a strange way, I almost feel fortunate to be on the poorer end of the spectrum. No house or cars or assets of any kind to lose. I don't keep money in the bank. I don't have any credit cards. I don't owe any bills. Life is difficult sometimes, but I have a roof over my head, I have food, I can afford the internet so that I can communicate with communities like ATS, and I have at least basic phone service. Sure I don't have a cell phone or cable and I have to use mass transit, but I'm more than content materially. Any unhappiness I have stems from non-material concerns.

I used to think not having more in life meant my life would be harder and more filled with suffering. Not because I wanted more, but because we're always fed the idea that the more we have the easier life is. But the longer I live the more I realize the opposite seems to be true. Maybe I'm wrong but that's how it feels a lot of the time.

I hope this doesn't happen. And if it does, I hope people don't suffer.

Peace.

So if I get this right. having a loaf of bread will be more valuable than printed money soon?

I guess Revelations was right when it said a loaf of bread could buy a bag of gold (which was currency back then)

reply to post by mbkennel

The drift of my post is not to believe what is told at face value

Perhaps you should take note of your own words then.

Yes Iceland depositors did lose money. No so far Cyprus has not, but bear in mind the the Government had not rejected the first proposal they would have regardless of the worthless guarantees.

Remember also that what went before is not what is coming. Look to the legislation that is being prepared in countries around the world including the US. You can throw 'trust' out of the window where Governments are concerned.

reply to post by AceWombat04


It is good that you can be happy in a less material environment. Would that many more could be so inclined and we would have less of the problems that the world currently faces.

Fair play to you friend.

Disclaimer-I am no expert on the subject matter

Two points-
FDIC will pay you to the limit of insurance. The issue is not if,it is when. You may have to wait a long time to get your money.

On the face of this,it appears to me that the central banks of the world are and will do anything to protect the currency. Bank a has 10 b in deposits.Said bank is in the whole,and your deposits are tapped.
The gov is going out of its way to not hyper inflate. Just the opposite we will see deflationary pressure by having a lack of cash at the consumer level.


Then either big money comes up to buy assets at pennies on the dollar-because J6p is broke and needs cash,
or the price of everything in a mark to market world collapses-with that bank held assets.

In this scenario I would assume that cash is rare,and assets drop in dollar costs-namely PM,property etc.
Cash becomes king,and the holders of any of the above get screwed.

Is this an accurate assumption? Or am I missing something?

The paper price of silver is down but you just try buying any physical silver on ebay because little is being sold and the prices are much the same as they were a year ago.

Ireland looks like it will be the next on the list to me and you need to also keep an eye on the Isle of man banks too.

Originally posted by PuterMan
reply to post by mbkennel

 

The drift of my post is not to believe what is told at face value

Perhaps you should take note of your own words then.

Yes Iceland depositors did lose money.

Did they have government-guaranteed deposit insurance? Did they lose their insured amounts? Did Iceland (foolishly) guarantee non-icelandic currency?

Most of the losses in Iceland were foreign depositors looking for unusually high interest rates (meaning high risk banks).

No so far Cyprus has not, but bear in mind the the Government had not rejected the first proposal they would have regardless of the worthless guarantees.

Remember also that what went before is not what is coming. Look to the legislation that is being prepared in countries around the world including the US. You can throw 'trust' out of the window where Governments are concerned.

edit on 24/4/2013 by PuterMan because: dyslexia of a digital nature

What specific legislation is this? Is there something that's more than a paranoid rumor?

I don't trust the government, but I do expect it to act in the self-interest of the people involved. In the case of the USA, this means bailouts because the Fed can print dollars and virtually all insured deposits are dollars.

Originally posted by _BoneZ_

Originally posted by Templeton
This is ridiculous! It is nearly impossible to not use a bank. Even just to send checks to pay bills. I would not even know where to drive the cash to. They have us bent over a barrel. What options do we have? Perhaps an offshore account?

I'm in the process of moving from Wells Fargo to Ally Bank. Something to note, Ally is a totally online bank. They have no brick-and-mortar stores or people and equipment to spend money on. All that savings goes to you in the form of truly free checking accounts, no ATM fees, reimbursed ATM fees from other banks.

It doesn't even cost anything to open an account. It's completely free, so check it out.

...but still a bank. I don't think its the $2 monthly fee some accounts have that people are concerned about - its losing their deposits. Personally, I keep about 2 months' worth of mortgage, utilities, and insurance premium in the bank. Cash savings in an anchored, fire-proof safe, guarded by 3 dogs, an alarm system, weapons, and enough H2H skills between my wife and I to thwart any idiot who thinks the amount we have in there is worth the assault it would take to get through the first lines of defense (its not all THAT much, would-be thieves, you can stop tracing my IP address)

Originally posted by VirusGuard
The paper price of silver is down but you just try buying any physical silver on ebay because little is being sold and the prices are much the same as they were a year ago.

Ireland looks like it will be the next on the list to me and you need to also keep an eye on the Isle of man banks too.

Just an FYI on this, during a similar silver "shortage" back in, I believe 2008, I had no problem purchasing silver from online retailers (like Nothwest Territorial Mint.) I had a 1,000 oz order filled. It took longer than normal to get it (about 2 weeks.) eBay is and was then a different story. Lots of people looking to buy 1-10 oz and not enough sellers to fulfill. You can just as easily buy small quantity from the retailers as well. In fact - buying quantity from a retailer and selling individual ounces on eBay can be highly lucrative, if you have the time and will to deal with all those individuals, and can pull enough margin to overcome the oppressive eBay & paypal fees.