Posted on 12/01/2013 7:34:16 AM PST by Kaslin
Are U.S. federal government policy makers planning for an economic meltdown? Fiscal and financial news isn’t a particularly sexy topic for broad audiences, even under normal circumstances. And over the Thanksgiving national holiday weekend, about the only news people care to consume are football scores.
But as we enjoyed turkey dinners, shopping, and hopefully some quality time with friends and family – and even in the recent days leading up to the holiday weekend – some major policy ideas and changes have emerged that could keep you away from your personal finances in the face of another meltdown. Americans are rightly angered right now by the disastrous impacts of the Obamacare implementation, but consider what else may lie ahead for our lives, our households, and our livelihoods.
For one, there was the November 25th report in the Financial Times indicating that the U.S. Federal Reserve is considering the possibility of arbitrarily cutting the amount of interest it pays on money that it borrows from private commercial banks. The interest that the government pays when it borrows money from private banks is, understandably, a big revenue stream for those banks. If the Federal Reserve makes this move, banks say they will in turn need to make up for the lost revenue by charging private individuals, households and businesses for depositing money in their accounts.
Let’s be clear about what is under consideration here. Customarily when an individual or an organization puts its money in a bank account, the bank will pay their customer at least some nominal level of interest in exchange for the privilege of possessing the customer’s money for a period of time. In the scenario that the Financial Times reported, some banks would completely reverse this historic bank-customer relationship and charge private individuals and businesses for the privilege of “parking” their money in an account for a time.
Could that create a bit of a backlash against banks? Recall that in March of this year, the dreadfully overspent government of Cyprus arbitrarily chose to impose a tax on all private bank deposits as a means of feeding the government’s never-ending hunger for money. This created a “run” on banks with private citizens rushing to clear out their accounts, which in turn led the government to force private banks to close for about ten days. When the banks re-opened, citizens were only permitted to withdrawal about $383 of their own money each day – a quick-fix that Nobel laureate economist Christopher Pissarides said was “extremely unfair to the little guy.”
The Cyprus crisis – as well as the meltdown of financial systems in Spain and Greece, among other places – may be what led one of President Obama’s appointees to the U.S. Federal Reserve’s board of Governors to propose a means of stopping “bank runs” here in America. According to a November report from Reuters news agency, Dan Tarullo, whose specialty is “financial regulation,” has proposed that banking regulators (like him) need to “supplement prudential banking regulation” with more “policy tools” – i.e., the ability to order banks closed. Tarullo and the other fed Governors are working on a new set of such “policy tools” to be unveiled in 2014.
Preppers’ PING!!
I’ve tried and tried to explain to those afraid to put money in the stock market that if the markets were ever to suffer another 1929 type crash, that their money in the bank would be worthless too.
I think I read somewhere that at the current value of gold, there is only about 12 trillion in gold in the entire world!
Unless the stock market goes to zero, it is still worth more than cash.
I highlighted the word "arbitrarily" above, since I'm not sure this would be accurate. The purpose of reducing the interest rate that the Fed pays banks on their reserves is to discourage banks from keeping excess reserves as a revenue stream (rather than lending the money to customers), isn't it?
If the stock market suffers another 1929-type crash and money in the bank is also worthless, then a lot of people would make out very well because the balances on their outstanding loans would effectively be $0, too.
“May the odds be ever in your favor.”
I don’t even trust keeping my money in dollars. I’m thinking Deutchmarks. Probably the most stable currency I can think of.
Needless to say, I am so screwed.
What money?
The PO box for payments will remain open, just the teller windows and ATMs will be closed. Old man Potter isn't going to just let the mortgages go unpaid.
The only cash you can count on is the cash in hand, and even that relies on the Fed not counterfeiting it into oblivion.
Those are called Euros now that the Germans have hitched themselves to anchors like Greece, Cyprus, Spain and Italy.
Are there enough Swiss francs to go around?
Those I’m talking about have little to no debt and money in the bank they could be investing.
I think those countries still have their old currencies.
The government knows this as well, and will run the printing presses 24/7 to churn out billions of dollars in cash to avoid such a debacle.
anyone that followed the bank lock down in Greece should now know to keep their money in a bank with locations outside of the country, because locations out of the country were not closed and people could pull all their funds out of those branches.
Lesson learned.
If something similar ever happens in the US, I am jumping in my car first thing and heading for the nearest border to withdraw all my money.
Anything they do will scare even more people staying in the stockmarket. I'd think that bubble has to burst sometime. If the stock market starts diving, I'm thinking getting some cash out of the bank account might make sense.
The US government has no control over banks located in foreign countries, and can’t stop someone in another country from withdrawing their money from a foreign bank.
I am not sure you would be successful. While that bank might have branches outside the US they would probably have to comply. It would be better to put your money in a bank that has no US branches.
The lessons of the Great Depression need to be relearned. And fast.
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