Why Do You Keep Your Money in a Bank Knowing THIS?

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Keeping your money in a bank is a high-risk situation. Would you give your money to a hedge fund that is 9x leveraged? For every $100 you deposit in the bank $90 is subsequently loaned on.

Could zero/negative interest rates be the end of the fractional banking system and force deposit holders into gold and silver?

US Federal Reserve sets a Required Reserve Ratio of 10%, but applies this only to deposits by individuals! Banks have no reserve requirement at all for deposits by companies! Go figure

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The Required Reserve Ratio of 10% means that only a fraction or $10 of the $100 you have deposited at the bank is available for cash withdrawals.

A bank is basically a big 9x leveraged hedge fund. Excessive leverage by the banks was one of the main causes of the Great Depression and of the 2008 financial crisis. Under normal circumstance and normal debt levels the fractional banking system works though these are not ordinary times!

All Governments have silently built in the “bail in” template for when the roof comes down. Where is the accountability of the politicians and bankers?

The US, UK, EU, and Canada have recently all built the new “bail in” template into their laws in order to avoid imposing risk on “taxpayers” (and politicians and bankers of course).  All taxpayers have bank accounts and therefore the avoidance argument basically is only important to get the government officials and the bankers off the hook i.e. their accountability! 

Under the new “template” all lenders (including depositors) to the bank can be forced to “bail in” their respective banks.  Most depositors naively assume that their deposits are 100% safe in their banks and trust them to safeguard their savings. 

Your title “downgrades” from owner of your money to creditor of your money with millions of other creditors. You become an unsecured creditor with a claim against the bank.  In other words if the bank goes bankrupt you share at pari (equally at fault) with other similar creditor/deposit holders. Great deal for the bank and bankers!

Before the Federal Deposit Insurance Corporation (FDIC) was instituted in 1934, U.S. depositors routinely lost their money when banks went bankrupt.  These days your deposits are “protected” only up to the $250,000 insurance limit, and “only to the extent that the FDIC has the money to cover deposit claims or can come up with it”. 

The question then is how secure is the FDIC? The FDIC has only about $25 billion in its deposit insurance fund, which is mandated by law to keep a balance equivalent to only 1.15% of insured deposits.

See here, based on data reported on 2014-09-30, just the 5 largest US banks by total deposits amounting to roughly $4.8 trillion.

Rank    Total Deposits            Bank Name

1          $1,377,661,000,000    JPMorgan Chase Bank

2          $1,202,846,000,000    Bank of America

3          $1,171,956,000,000    Wells Fargo Bank

4          $947,975,000,000       Citibank

5          $284,226,575,000        U.S. Bank

Do you really think that the FDIC will have enough money to bail out all the deposit holders at $250,000 a pop? I don’t think so! Especially when you also take into account the $1,000 trillion derivatives exposure that is hanging over the markets. Subsequently people could argue that the Treasury will come to the rescue. I doubt it; I think at that stage it will be too late anyway to rescue the currency. 

In other words when the bigger banks threaten to fall over don’t believe the authorities when they say that everything is under control because it won’t be. And when the banks start to fall over also don’t put too much faith in the FDIC or Treasury. It will be a lost case anyway.

Why would you still have a bank account with all its pitfalls?

Nonetheless my point is as follows. Why would you still have a bank account considering their zero return, high fees and abysmal services? Next to that we don’t know what kind of black swans (or whales as in JP Morgan’s case) are hidden in the banks operations and we always are the last ones to find out what the exposure to the incredible amount of derivatives has been. So as a deposit holder you are always one or more steps behind.

Therefore the most logical step would be to…….

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