Here's a pretty good explanation of the way things are...
jmski52
Posts: 22,862 ✭✭✭✭✭
A classical cost/benefit analysis.
Why This Harvard Economist is pulling all of his money out of BoA
And he doesn't even mention the trend towards depositor "bail-ins".
Why This Harvard Economist is pulling all of his money out of BoA
And he doesn't even mention the trend towards depositor "bail-ins".
Q: Are You Printing Money? Bernanke: Not Literally
I knew it would happen.
I knew it would happen.
0
Comments
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
I was glad to see that the author pointed out that expansionist monetary policy is not beneficial to many of the traditional liberal constituents. Many popular writers (eg. Mr. Krugman) seem oblivious to this fact.
By the way, do you know who the Harvard economist it? I guess Tyler Durden is a collective pen name!
tyler durden is a borg style collective
If he has $1 million in the bank and he is getting 0% interest then he is an idiot. My kids have $500 in the bank and get a better interest rate than that.
Is running a 1% chance of losing your money equal to a 30-50% loss of value? I do believe thats what many people thought 2-3 years ago.
Knowledge is the enemy of fear
<< <i>Why would anyone keep $1 million in a checking account, anyway? >>
Because they have much more elsewhere. It's spending money.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>Why would anyone keep $1 million in a checking account, anyway? >>
Because they have much more elsewhere. It's spending money. >>
Yeah, but if I had $100 million in assets, I wouldn't care much about the super remote possibility of Bank of America and the FDIC going under at the same time. He definitely has a hidden agenda here. Smaller banks are not safer. That's complete BS. Keep all your accounts under $250K each and the risk between BofA and a small bank is the exact same. If the FDIC fails, you know what's going to happen to the dollar? At that point, it won't really matter than your local credit union is still in business and you can take your money out at any time.
He is correct about the risk reward, the only reward for having a large
balance at Citi, Chase, B of A, Wells Fargo, is not having to chase around
(pun intended) to 50 different banks with $250,000 deposits.
(aside from that, Citi gave out $500 Apple gift cards for large deposits, Chase has
US Open tennis tickets, free safety deposit boxes, free museum passes, etc.)
Watch the stocks. There always are warning signs and the share prices decline like
Lehman and Bear Stearns.
However, the comments posted reveal excellent anecdotal evidence regarding the rapidly changing banking practices re:
"YOUR MONEY". your-lol.
It's their money, you lent it to them.
Next month, Chase will only allow you to deposit cash into someone elses account in person with ID.
After next month-nyet.
The $250,000 limit loophole by changing account names and using different accounts is in the process of being closed.
Mike Dueker also did research for the Federal Reserve Bank of St. Louis.
LINKY
<< <i>Yeah, but if I had $100 million in assets, I wouldn't care much about the super remote possibility of Bank of America and the FDIC going under at the same time.... >>
That's pretty much what would have happened in Sept/Oct 2008 if the FED hadn't stepped in to pump $Trillions into failing banks and entities around the world. It wasn't a remote possibility as it would have
already happened if the system were left to itself. Maybe things will work better the 2nd time it happens (that's a "when"....not an "if"). A freezing of the entire system of $1 QUAD in derivatives, $Trillions in
stock market funds, bank deposits, money market and retirement accounts, etc. will certainly be interesting to see be handled by the "FDIC" and other GSE's. How many years will take to sort everything out?
It will be a 1-off event that will take a record amount time to address. Remember, the banker's derivatives take priority over your checking and savings accounts. There may not be any money available to the FDIC
once the bankers are paid off.
The FDIC isn't intended to be able to pay out everyone's deposits at the same time. It's establishment is there simply to provide that INSURANCE that if your bank fails, you will be able to recover your money up to the limits stipulated.
It is unreasonable to suggest an expectation that the FDIC can cover all of the deposits immediately.
Steve
<< <i>Good read. The only thing I would say is that anyone smart enough to be investing should realize that if say, $100 billion in deposits are needed to be paid out by the FDIC, of course they won't have that on hand.
The FDIC isn't intended to be able to pay out everyone's deposits at the same time. It's establishment is there simply to provide that INSURANCE that if your bank fails, you will be able to recover your money up to the limits stipulated.
It is unreasonable to suggest an expectation that the FDIC can cover all of the deposits immediately.
Steve >>
great point! If everyone filed any kind of insurance claim all at the same time, of course it would freeze the system and obviously there is not enough reserves to cover all the claims at once, even with re-insurance against exactly that. Luckily for everyone, disasters are infrequent, the system compensates, and the federal government backstops national and mega-regional disasters like once-a-century storms, earthquakes, and banking crises.
Liberty: Parent of Science & Industry
Aren't insurance companies required to have the money available for their policies (well, except for AIG when they got bailed out by taxpayers so that Goldman Sachs could be made whole)?
Is this the same type of confidence that Bernie Madoff exuded when he was gathering up people's investment money and paying out "profits" on earlier deposits to make it all look good? If the money isn't there, the insurance isn't there, is it? We all know the truth, don't we?
I knew it would happen.
The FDIC has an unlimited amount of available funds.
Knowledge is the enemy of fear
<< <i>Next month, Chase will only allow you to deposit cash into someone elses account in person with ID.
After next month-nyet.
The $250,000 limit loophole by changing account names and using different accounts is in the process of being closed. >>
Whuuuh? are you serious? Why would they care if you deposit cash into someone else's account? That makes no sense to me. If I want to deposit money into my sister's account, all I need is her account number and a deposit form. Why would they care?
Amat Colligendo Focum
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Yes, at least the people who are ultimately in charge have a blank check.
<< <i>$100 billion in deposits are needed to be paid out by the FDIC, of course they won't have that on hand. >>
<< <i>The FDIC has an unlimited amount of available funds. >>
Indirectly, and only because Bernanke, I mean Yellen, has a printing press. Printing themselves out of an FDIC insolvency would not be pretty. I believe bank losses that great would result in account holders taking the hit along with the banks.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
it will be something different and unexpected.
The US Treasury will fully back up every deposit in any of the "too big to fail" banks.
They will back up (via assisted merger) every other deposit. (Like Washington Mutual merger with Chase)
Derivatives are a side issue, nothing to do with deposits. They will be handled in a way which minimizes their effect on the
banking system. We already saw how that works with AIG. The US made a large profit on its
investment in AIG. TARP was profitable too.
Money market funds will be backed up. Nobody will lose money.
We already lived through the worst financial crisis since 1929-1933.
<< <i>We had the crisis in 2008 and 2009. Everyone is still replaying that. Whatever the next crisis is,
it will be something different and unexpected. >>
expect it to be a currency crisis
<< <i>The US Treasury will fully back up every deposit in any of the "too big to fail" banks.
They will back up (via assisted merger) every other deposit. (Like Washington Mutual merger with Chase) >>
All $9 Trillion? Odds are if one goes down they all follow. They're gonna need more presses, ink and paper.
<< <i>Derivatives are a side issue, nothing to do with deposits. They will be handled in a way which minimizes their effect on the
banking system. We already saw how that works with AIG. The US made a large profit on its
investment in AIG. TARP was profitable too. >>
derivatives, particularly IR swaps, will prove to be the primary issue. Derivative failure will take down the banks who have every thing to do with deposits.
<< <i>Money market funds will be backed up. Nobody will lose money. >>
again a lot more ink and paper needed. Even if MM fund holders are made whole, we're talking a very large amount of "new" money that goes directly to Main St. (more dollar value devaluation coupled with inflation)
<< <i>We already lived through the worst financial crisis since 1929-1933. >>
until the next one. The last was has not been resolved, only delayed.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
It's not the $100 BILL or even $1 TRILL that may be needed to bail out all the J6P FDIC accounts. It's the $10-$30 TRILL that's going to be needed again to bail out the financial system. There won't $1 TRILL for J6P when everyone else is in line ahead of him. The FED showered the system with $10-$20 TRILL last time around to cover all the derivative's losses. They spent nearly all their ammo. They don't have that $10-$30 TRILL for the next one. Whatever "plan" is devised to try and rescue the system on the next derivative's crash, it once again will not include J6P. History has shown that J6P loses on system resets. Derivative's have plenty to do with deposits. The laws have now been changed to give derivative's pay offs priority over J6P's bank accounts. Yes...the next time will be different as J6P's bank deposits are now slated to pay off bank derivative's losses.
allowed to fail.
The derivatives are meaningless because they will be fully backed up just like before.
The Fed and Treasury have learned in the last 5 years, that massive money creation
in an economy tipping towards deflation does not result in inflation.
Think of it this way, the asset value lost in residential real estate has been offset by the asset
value gain in the stock market. This was facilitated by the Fed and enabled the US to profit from
AIG and TARP. The only loser was the Auto bailout which was done to placate labor.
Worry about something else.
<< <i>Chase, Citi, BofA, Wells Fargo, Goldman, Morgan Stanley, and GE Capital cannot and will never be
allowed to fail.
The derivatives are meaningless because they will be fully backed up just like before.
The Fed and Treasury have learned in the last 5 years, that massive money creation
in an economy tipping towards deflation does not result in inflation.
Think of it this way, the asset value lost in residential real estate has been offset by the asset
value gain in the stock market. This was facilitated by the Fed and enabled the US to profit from
AIG and TARP. The only loser was the Auto bailout which was done to placate labor.
Worry about something else. >>
Massive money creation has not resulted in inflation because the FED is in the driver's seat of where that money goes (excess FED deposits). Don't think for a moment that bank account holders bailed out by an infusion of cash to the FDIC would choose to park their recovered money with the FED, especially after their "local" bank just screwed them. That money would be on the "street."
Those of us with "insurance" and not depending on a healthy bank aren't worried.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Chase, Citi, BofA, Wells Fargo, Goldman, Morgan Stanley, and GE Capital cannot and will never be
allowed to fail.
The derivatives are meaningless because they will be fully backed up just like before.
The Fed and Treasury have learned in the last 5 years, that massive money creation
in an economy tipping towards deflation does not result in inflation.
Think of it this way, the asset value lost in residential real estate has been offset by the asset
value gain in the stock market. This was facilitated by the Fed and enabled the US to profit from
AIG and TARP. The only loser was the Auto bailout which was done to placate labor.
Worry about something else. >>
J6P lost $Trillions in the AIG/BSC/Lehman busts. TARP "profits" don't even come close paying off those losses. The FED spread that money around the world...actually much of that money went overseas to shore up foreign
banks and corporations. Do you think we'll ever get that money back? The value lost in J6P's real estate investments was funneled back into big bank and corporate profits in the stock market. Those that lost their homes
didn't profit in the stock market gains. Everyone was a loser except the gang of 535 and the biggest banks and corporations. The FED and Treasury have learned nothing in the past 5 years except how to kick the dented
2008 can further down the road. The massive money creation of the past 5 years is still out there....as well as all the inflation the US exported from 1983-2013. Eventually it all comes back to roost. Massive money creation
is never a long term solution to anything. Though in the short term it's great for re-election campaigns.
There was nothing painless about the loss in home values.
Knowledge is the enemy of fear
value gain in the stock market. This was facilitated by the Fed and enabled the US to profit from
AIG and TARP. The only loser was the Auto bailout which was done to placate labor.
Sounds like a "transfer of wealth" to me.
Chase, Citi, BofA, Wells Fargo, Goldman, Morgan Stanley, and GE Capital cannot and will never be
allowed to fail.
The derivatives are meaningless because they will be fully backed up just like before.
The derivatives aren't meaningless because they are the mechanism for enriching bankers at the expense of taxpayers. "Banks" like those deserve not only to fail, but to be prosecuted to the fullest extent of the law, if there were any laws being enforced, and there aren't many of those left.
I knew it would happen.
<< <i>Property taxes are local, not federal. How much are your taxes as a percentage of the value if your house? >>
Right now the residential rate is $15.60 . My point is the mortgage backed securities peddlers ran up my property value to 475 k then back down to 275 k not the town . In nearly every town around me the local governments didn't lower the assessed values or if they did they raised the rates so you are paying more than you were in 2007. I have a small mortgage left and the tax bill adds up to more than the monthly mortgage payments.
Way back in 1982 we got a law passed called prop 2 1/2 that capped the increase in property taxes to 2.5% year over year . Unfortunately , there was a loophole big enough to drive a truck through though in the 2 or 3 bubbles since 1980 it didn't address property values going up and taxes rising . On the decline the law didnt say the taxes had to come down. Every time there is a bubble the towns get drunk on all the excess money and they don't want to tighten their belts . We have town meetings but they are hopeless , it's all you can do to hold the line at the current level of taxes let alone roll them back.
All the liar loans and mortgage lenders scurrying to write junk mortgages and then dumping them as fast as they could caused this. The booms and busts in the building market are caused by the financial industry and government. I wasn't out working 80 hour weeks in 2004 purely by choice . I also didn't work 0 hours last week on my own initiative either. Governments made out like a bandit and so did the bankers and Joe six pack lost out as usual.
We had nice weather last week we could have started a job but the whole week went to waste because of a local wiring inspector of all things. There is a new code that says all houses have to have a ground cable embedded in the foundation and the wiring inspector was on vacation so the foundation guys set up a footing and couldn't pour it . It just sat there and idled a form crew , that idled the digger , it pushed back the framers , which pushed back the sidewallers , the list goes on. One idiot blows up the schedule of about 10 subs. The wire was there in the footing but they want to "SEE" it before the crete goes in. If you are halfway through a 80 house development its easier to lose a week than PO an inspector.
The vig just keeps getting harder to pay to all these parasites.
Knowledge is the enemy of fear
<< <i>So how much are your taxes in percentage terms on the value of your house? If your house is values at 300k and you pay 6000 then thats about 2%. What is your %? >>
It was 4500 for 2013 . so if you go by zillow its around 1.6% .
I can't find a rate history on the town website so I went one town over and was shocked to find their rate was $18.67
Relativity again....your high taxes are another persons bargain.
Knowledge is the enemy of fear
1% of 475k or 1.6% of 275k is the same amount out of pocket , it just illustrates the point, my town did what the one next door did with the rate. They raised their per thousand rate 60% from 2005 to 2013 , so they responded to a drop in values by squeezing harder as people were seeing wages decline . They maintained their funding levels from 2005 while my wages got hammered over the same span.
Not to mention that as work dried up ,at the seat of the pants level property taxes as a portion of my after tax income probably doubled.
Liberty: Parent of Science & Industry