Deposit insurance is a fraud, too. When you lend your money to a bank [and that's what you are doing], there is a risk involved. The government has tried really, really hard since FDR to convince us that saving money in a bank is a riskless endeavor.
They tried the same thing in Cyprus, too. But since Cyprus can't print money, it must skim part of the bail-out from the depositors. It's really as it should be. Otherwise, the taxpayers of other countries must foot the bill.
In the US, of course, we'd all pay for the bailout through dollars that buy less.
And we're fixin' to get a lot more "less."
Have The Russians Already Quietly Withdrawn All Their Cash From Cyprus?
http://www.zerohedge.com/news/2013-03-25/have-russians-already-quietly-withdrawn-all-their-cash-cyprus
The “Wealth Tax” Contagion Is Rapidly Spreading: Switzerland, Cyprus And Now ....(Lichtenstein!)
http://www.zerohedge.com/news/2013-03-25/wealth-tax-contagion-rapidly-spreading-switzerland-cyprus-and-now
I hate banks. I’ve always hated banks. I will always hate banks.
What, then, is the magic potion of the federal government? Why does everyone trust the FDIC and FSLIC even though their reserve ratios are lower than private agencies, and though they too have only a very small fraction of total insured deposits in cash to stem any bank run? The answer is really quite simple: because everyone realizes, and realizes correctly, that only the federal government—and not the states or private firms—can print legal tender dollars. Everyone knows that, in case of a bank run, the U.S. Treasury would simply order the Fed to print enough cash to bail out any depositors who want it. The Fed has the unlimited power to print dollars, and it is this unlimited power to inflate that stands behind the current fractional reserve banking system.
This is correct up to a certain point.
Eventually there will come a time when no other nation wants our dollar and at that point, even though the fed prints enough money to pay off bank depositors, it will do the depositor no good because no one will want his money either.
So tell me, when you go to purchase food or oil to heat your house, which is worse...to have no money at all or to have a pickup truck load of green paper that no one wants?
In either case, the financial system is ruined and barter is the only way out.
That is my theory.
You are welcome to proceed on the basis of yours.
It was a small bank owned by a small family, employed nearly 300 people and was closed for no good reason. Every employee laid off and indentured for the next 90 days.
Armed U.S. Marshals, State Police, etc. showed up on a Friday afternoon the 3rd week of January, 2010.
The armament was not to deter the run, but to detain and retain the employees.
The ones not escorted out of the buildings wound up being indentured servants of the FDIC until 4/30/10.
After all was said and done, the bank turned a $30 million profit in 2009, but was collapsed and sold off piecemeal over the next year or so.
I was given a 20-minute warning, told my boss I didn't want to be a part of that and left. He called me back 20 minutes later and asked me to return. Worst decision I ever made was to go back in there. Of course, if I had not, I would to this day be hunted and haunted.
Worst 90 days of my life, all for no good reason.
Why do Keynesians operate under the assumption that people are stupid?
Look.
If I know that next Thursday the government is going to confiscate 10% of my saving’s deposit, I’m going to start taking as much money I can out of the bank.
And the economist are always shocked that people behave this way.
One of their last sentences is intriguing, but unfinished:
“Putting an end to inflation requires not only the abolition of the Fed but also the abolition of the FDIC and FSLIC. At long last, banks would be treated like any firm in any other industry.”
The the question becomes, “and then what happens?”
I think I have an answer for that, based on how Weimar Germany (with advice from the US), got out from its horrible hyperinflation of its fiat currency, the Papiermark.
The first thing they did was to create a new, gold backed, “bank and government currency”, that did not circulate, but because it was very stable, did not inflate either. It was called the Rentenmark, as normalized the German economy, while erasing “bubble debts” and taking possession of forfeited assets.
It got the Papiermark back under control, at least enough so that when a third currency, a circulating currency, also gold backed, the Reichsmark, was introduced, it was also very stable. So stable that it even survived World War II.
Unfortunately, there is not enough gold (and silver, combined) in the world today to back a major currency. But this problem can be alleviated by including other non-renewable commodities: aluminum, copper, iron, other metals and mined chemicals, and even processed steel.
The US most certainly could create a “bank and government”, non-circulating currency, that officially would be “specie backed”, but unofficially would be “specie plus”.
Maryland Savings and Loan “Freak State” PING!