Bank Bail-Out / Bail-In

by Simon 10 Replies latest social current

  • Simon

    Remember the last financial crisis, where there as a bail-out of the banks?

    Have you ever stopped to think what the "out" part of bail-out means? Normally you think of bailing water out of a boat, or maybe jumping out of a plane, but in financial terms the "out" means "outside money". When the governments bailed out the banks, it was wth non-bank money ... taxpayers funds.

    This was unpopular, so instead they passed legislation so that in future, any bank that ran into difficulty would instead use a bail-in mechanism.

    In? "inside" money. Specifically, the banks creditors.

    Newsflash: if you have money in a bank, then you are a creditor and they are allowed to take it and convert it into IOUs to help their own liquidity.

    It's worth checking exactly which of your account types could be vulnerable to this because there is an ever-increasing chance that the financial system is going to get indigestion from the non-stop money printing and may go tits-up.

  • Justaguy

    This is correct. A youtuber (and very smart financial guy) named George Gammon does a lot of videos covering this in very simple, basic terms.

  • pistolpete

    It's worth checking exactly which of your account types could be vulnerable to this because there is an ever-increasing chance that the financial system is going to get indigestion from the non-stop money printing and may go tits-up.

    In the USA, there are methods for protecting monies. A good experience financial advisor will help if you have more than what FDIC will insure. If you have over a million, it's good to spread your money into different venues.

    Last I heard, the Democrats want to gain access to Social Security and personal IRAs with a promise to pay it back-----------------someday.

  • hoser

    Apparently we have this in Canada as well. If the bank goes broke they take your deposits and give you some worthless bank shares.

    News flash! In a fiat currency economy you won’t save yourself to prosperity. You get paid less than 1% on your money that deflates by 5%.

  • truth_b_known

    Here is a phrase I learned when my wife and I started educating ourselves on investing our money -

    "Cash is trash."

    Due to COVID and just other lifestyle changes we saw our bank account/savings growing. That money just sat there not making more than 1% interest. We invested heavily in dividend stocks and crypto. We are doing well on crypto and the stocks are steady.

    As soon as there was talk of increasing capital gains taxes, those with a great deal of money dusted off an old play book - investing in precious metals and artwork became popular again.

    Fiat currency, like the U.S. dollar, is not a stable means of holding wealth. Not only does the value of the U.S. dollar fluctuate, but inflation takes a little bite off the biscuit every day. Money does not equal wealth.

  • FFGhost

    Seems like in the US, they would only be allowed to touch deposits in excess of $250,000.

    Seems quite likely that anyone with over $250,000 in a bank account would be savvy enough to have their other investments elsewhere. At the very least several bank accounts under the $250,000 threshold.

    How many people have, for example, $1 million in a single bank account and $0 in real estate, stocks, bonds, precious metals, etc.?

    If you're smart enough to accumulate $1 million, you're probably not dumb enough to put it all in one basket.

  • Simon

    Accumulating that much after doesn't involve being "smart", just being a boomer.

    However much it is, it isn't their money and is owned by someone else. This is fundamentally theft and people aren't recompensed by the banks for the risk they take having them manage their money. Interest rates for savers are already criminally low, at a time of sky-high inflation, so whether people realize it or not the power-that-be are already dipping their hand into their bank account.

    This just upgrades to them using a wheelbarrow so they can carry more at once.

  • pistolpete

    lately there has been a lot of reporting by customers that some banks will closed your account without any notice - HOLD YOUR FUNDS---and ban you for life from their bank.

    You have to hire a lawyer to get your funds, and pay thousands to a lawyer to get your funds back because you personally have been banned from entering their bank.

  • Simon

    And they'll wonder why people will turn to Crypto ...

    Distributed finance where you don't have to trust any central authority and you effectively become your own bank is an inevitability.

    It also destroys the political / banking cartels that keep some countries poor while enriching others.

  • waton

    In Canada you can get accounts that the government will guarantee against loss for up to 100 000.- the government will guarantee too, that you will lose 3% in value every year, by dishing out money to folks for not working, not producing, illegally immigrating.

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