I have been writing for years about when the next financial crisis hits it is more than likely that, this time, you will likely see bail-ins rather than bail-outs like last time. A bail-in is simply a debt for equity swap. In this case the bank-according to the FDIC- when they take your deposit it becomes an asset of the bank and they owe it back to you. It is, at the same time an asset and a liability of the bank.
If the bank becomes insolvent a simple way to become solvent again is to write off some (or all) of the debt. According to a paper put out in 2010 by the FDIC and Bank of England the bail-in would be executed by setting up a “bad bank” to hold the troubled assets and the “good bank would open on Monday morning so their problems would not infect the rest of the banking system. Personally, I believe that if ANY major bank went down it would create a tsunami of defaults throughout the entire financial system. By the way, FDIC meeting minutes going back at least to 2014 show that they have been “practicing” this yearly.
I have been writing for years about when the next financial crisis hits it is more than likely that, this time, you will likely see bail-ins rather than bail-outs like last time. A bail-in is simply a debt for equity swap. In this case the bank-according to the FDIC- when they take your deposit it becomes an asset of the bank and they owe it back to you. It is, at the same time an asset and a liability of the bank.
If the bank becomes insolvent a simple way to become solvent again is to write off some (or all) of the debt. According to a paper put out in 2010 by the FDIC and Bank of England the bail-in would be executed by setting up a “bad bank” to hold the troubled assets and the “good bank would open on Monday morning so their problems would not infect the rest of the banking system. Personally, I believe that if ANY major bank went down it would create a tsunami of defaults throughout the entire financial system. By the way, FDIC meeting minutes going back at least to 2014 show that they have been “practicing” this yearly.
In addition, some (or all) of your deposits would be converted into shares of the bank. They never did- as far as I know ever say whether you would get shares in the “good” bank or the “bad” bank. In either case I am not sure that anyone would take your shares for the payment of your bills.
Many may be wondering why I am bringing this up again now. It could be that there are MANY worrying signs out there like FAR fewer loans and deals being made, stock and bond portfolios cratering and a lack of liquidity in the system overall. (The repos are telling that story loud and clear!)
The real reason I am bringing it up now, however, is that there was a leaked tape from an FDIC meeting put out by needtoknow.news where, in an FDIC meeting, they are discussing a bank run and how to prevent it. They also discussed an impending “market” collapse that would likely be the precursor. A main point was how to prepare for such a scenario WITHOUT alerting the public- which could start a bank run! They also say in the tape that there will be a bank run. Remember this- as everyone rushes for the door most people will get trampled. Act accordingly.
Of course, there have been many bail-ins in Europe already, but it is VERY likely that very few out there are aware of it because if you were aware of the bail-ins in Eastern Europe, Cypress, Italy and Spain you may want to take some action to protect your own assets. If enough people took that action, then they couldn’t force a bail-in because the money would already have been removed. No surprise they want to keep this quiet.
It is becoming increasingly obvious that central banks have to make a choice. Save the bond “market” or protect the currency. While they are paying lip service to protecting the currency with higher interest rates, I certainly believe that when push comes to shove the currency protection will be abandoned and the bond “market” will likely be bought with reckless abandon to SAVE THE GOVERNMENT- Not us!
This would likely lead to FAR higher inflation and gives us another MAJOR reason why keeping a lot of “money” in the bank is likely not a great idea- especially since there are MANY alternatives that can get a better yield and don’t put you in the crosshairs of a bail-in.
While I can’t discuss the myriad of options that exist in this article, I can make the point that hard assets have REAL, TANGIBLE value and usefulness. I can also say that gold (Real money that is NOT someone else’s liability) is an ASSET. You don’t have to count on someone else’s promise to repay. Many companies that produce goods that we need for daily life are also producing major profits and many are paying dividends FAR higher than any bank account. Even short-term US debt can get a decent rate of return and I don’t believe it can be stolen because those “in charge” already have the money. In addition, the day a default would take place is the day the government would likely cease to exist because it would lead to them not being able to issue any more debt- at least for a while. The way our government spends it would happen VERY quickly.
I really believe that we are nearing a point where if no action is taken on our parts that this scenario will play out VERY quickly and with likely NO or very little warning. In a situation like this I would rather be a year early rather than 15 seconds late.
Be Prepared!
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