Why We All Should Be Wary of Banks

Evan Liberman Articles, Invest in Israel, Tips, Wise Investing 0 Comments

Once, your local bank was considered the bastion of security: the safest place to hold your assets. But things have changed.

Here's an article we found particularly interesting on the topic, reprinted from The Franklin Prosperity Report in September, 2013 by Sean Hyman, the Senior Financial Editor of the Ultimate Wealth Report.

I’ll admit I’ve probably never been a fan of banks, even though I have one that I use for my checking/debit and short-term savings.

Why do I not like them? When I was younger and needed money in the form of a loan, I couldn’t get it. These days, I own most everything outright and buy things with cash. So I’m able to circumvent the banks for the most part.

The funny thing is now that I hardly need them anymore, they come out of the woodwork to try to give me a loan.

I think many people have had this kind of disgust with a bank from time to time.

However, this year, banks have pulled some pretty wild stunts. To be fair, some of these stunts are imposed from their government or central bank. But here’s some of the “madness” that has happened in 2013.

The first one involved Cyprus’ government and banks overextending themselves and then needing a bailout. Who paid for it? Those with over 100,000 euros in their accounts had their assets frozen and 30 to 40 percent of their money was to be taken through a one-time tax (which I call legal robbery). It’s crazy. How can these people ever trust their banks again? Even those who didn’t lose any money this time around should think twice before putting more money in their banks.

Then there’s Russia. By 2015, Russian citizens won’t be able to pay cash for purchases that cost over 300,000 rubles (which equates to about $10,000). Of course, the excuse offered is that the government wants to bring a halt to the “shadow economy,” which dodges taxation. So they’re looking to bring more money into their treasury.

However, there are transaction fees to use with a debit or credit card, and there are 2 to 4 percent fees to transfer non-cash payments too. So once again, the citizens won’t have say over their own money. Their government will determine this through the banks.

Another instance of banks doing whatever the heck they decide to with your assets within the bank is this — Dutch bank ABN Amro has told its customers that they will no longer be able to take delivery of their gold that is held within the bank. So they can never get their physical gold back. They can simply choose to sell it and get the money for it.

Now how in the world is it right for them to be able to do this when you put your asset with them for “safe keeping?” It’s insane!

But that’s in other countries. We don’t have anything to worry about here about our money in U.S. banks, right?

Well, as of earlier this year, there was $25 billion in deposit insurance, which is supposed to preserve and protect our deposits. That sounds like a lot of money initially. But here’s the problem: There’s around $9.3 trillion in deposits that would need to be covered by a mere $25 billion. So there’s over 371 times more in deposits to be insured than there is in the deposit insurance fund.

Obviously, I know they don’t need to have anywhere near “dollar for dollar” held in reserves for what we have in deposits. But when the deposits are a whopping 371 times larger than the insurance, it does concern me if we were to have a huge round of major bank failures here in the United States. It happened in the last recession and it could be worse in the next recession.

What does this tell me? It tells me that even us Americans need to have a “Plan B” when it comes to our money.

What you decide is up to you. But you might need some money in a safe. You might want to hold some gold or silver coins in your possession somewhere (not at your bank). Additionally, you might want to hold some gold or silver somewhere offshore in a place that can be trusted, like the Perth Mint.

But whatever you decide to do, start thinking about what you need to do in order to protect yourself and your assets from not only a vicious government, but banks that overstep their bounds.

If you're looking for an alternative to the U.S. banking system, consider an Israeli investment account, held in Israel Securities Authority-regulated brokerages in shekels.

 

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