Comments on: FDIC Fosters Moral Hazard Among Banks

By: RCNLE

RCNLE — Tue, 14 Jul 2009 20:57:20 +0000

I think many people are sick of what is going on. I think there are even more that either have their head burried in the sand or believe the crap they hear which is designed to keep the sheeple content. This is going to get real ugly before it’s all over in my opinion so we better take heed. I just wish there was some sort of way we could all get together and rally against all this crooked dealing. Why are the American people just putting up with this…I’ll tell you why…they are somewhat content. Once they become discontent en-mass like being out of food then you’ll hear them cry. God help us.

RCNLE

By: rob

rob — Sun, 12 Jul 2009 23:34:07 +0000

you still need cash/money to pay local property taxes…

lazlo birinyni said…worst is over…banks are slowing coming back….see lazlo articles/interviews
on internet

By: Tex Norton

Tex Norton — Sun, 12 Jul 2009 22:22:16 +0000

Responding to Joel, we haven’t actually “pumped” money into the economy. We’ve pumped money into the Zombie banks who, in turn, have simply put the excess funds on deposit with the Feds as excess reserves. That means they haven’t applied the fractional banking to these extra reserves; hence the bailouts and the stimulus measures really haven’t hit the market – YET. Watch out when this fiat does hit the market. That’s where and when the monetary inflation rubber hits the road.

Rick is correct, too, in that there are many forms of inflation: Price, monetary, wage, asset, etc. They don’t all have to happen in a given time frame; hence the term Stagflation that was first coined as such during the Carter malaise.

And thanks to Rancherlady for the kind words. It hasn’t been published yet and may not be published, but I wrote about this quite some time ago. I was concerned that a bank holiday would be suddenly imposed and the ATMs would be empty. I still advise having sufficient cash on hand to cover needs. How much cash is a personal decision and varies from person to person. As observed, the nominal fraction of a percent interest currently being paid on deposits is a very modest insurance premium in exchange for cash in hand.

Cheers, Tex

By: Steve

Steve — Sun, 12 Jul 2009 21:57:44 +0000

It is not the “nanny state” a.k.a government that would prevent you for viewing the real balance sheet of the “free market” banks that you dream about. It would be the bankers themselves. Unfettered by any oversite, their marketing departments would work overtime spinning themselvers into these great protectors of your funds, when in fact they could be just as overleveraged or risky as anything today. The would show you fake balance sheets concocted to suit the moment and nobody would stop them. So if you believe for one second that your money would be any safer without the FDIC as with the FDIC you are a fool. Regulation or no regulations doesn’t make a bit of difference to lying crooks a.k.a bankers, you will still lose your money because crooks always find a way to game the system when their is one or game it when there is a lack of oversite. Blaming governent for all problems is weak thinking.

By: High stock market » Blog Archive » FDIC Fosters Moral Hazard Among Banks

Sun, 12 Jul 2009 05:08:51 +0000

[...] FDIC Fosters Moral Hazard Among Banks [...]

By: Rick

Rick — Sat, 11 Jul 2009 22:20:10 +0000

The terms ‘inflation’ and ‘deflation’ have been so abused, that I now only use them in phrases such as ‘money supply deflation’ and ‘price inflation’. The ’stagflation’ of the 70s, which we are now about to see rise again, is ‘money supply deflation’ and ‘price inflation’ together. It will be led by huge increases in fuel and food costs.

We as consumers cannot select a bank in any way conservative or non-conservative. We are not allowed to see the information necessary to do so by our ‘nanny state’.

As for ‘why is it ok’, you can blame it on the voters who put a single party in control. ‘Gridlock’ is another word for ‘balance of power’. With a single party in control, their powers have no limits. Why, the other party is not even allowed to debate in Congress. Neither party is any good, the whole system is a lie and a sham.

By: rancherlady

rancherlady — Sat, 11 Jul 2009 06:10:00 +0000

Dear Curmudgeon:

What a terrific article! I enjoyed it thoroughly.

I am prone to warning people to empty their safety deposit boxes. Maybe their bankers won’t tell them the truth, but mine does and he says flatly that there is absolutely no guarantee that renters will ever see the inside of the boxes again. One report warns that the contents of boxes will be confiscated and the owners given receipts. In the case of an extended “bank ‘holiday’” one can’t help wondering if just perhaps the stray bank employee here and there might not help him- or herself. Call me a cynic.

As for having MONEY in the bank, I don’t think that anything more than sufficient to cover simple known monthly expenses such as Internet and the ‘phone bills is wise any more. Too many bizarre ideas have been floated, including a horror that would limit daily withdrawals to $300. What good would it do to be FDIC “insured” if you were trying to rescue $90,000? That would take a while! MY local bank is open seven days a week, at least a present, but most people would be allowed only $1500/week except during numerous bank holiday weeks. It would not be pleasant to have a quarter of a million locked up in digits when the situation became bad enough to warrant–if any conditions could be said to do so–shutdowns.

The interest rate is so low that it seems to me to be more sensible to regard that 1.25%, or whatever it is at the moment, as a really useful insurance premium. I think our money will be safer in the West Bank of the Brazos, buried under a rock, and far safer turned into commodities and metal.

I loved Joel’s question, too: just what DID the Fed do with the missing ten trillion?!

LBT

By: Joel

Joel — Sat, 11 Jul 2009 03:38:12 +0000

I agree with you that we are in a depression.
What’s weird to me is that if we are pumping so much money into the economy, why are we losing so many jobs. Where is all the money going that the Federal Reserve is pumping into the banking system? M3 went up and now it seems to be back down. Where did it go? No change in the economy regardless.

Either the monetary system is being manipulated or we’re all waiting for the rest of the almost $600 trillion in derivatives to collapse. I suspect the latter is worse. Who will benefit?

Baffled.

By: Erik

Erik — Fri, 10 Jul 2009 19:40:25 +0000

Tex, the only thing I can see missing – and I readily agree it’s not a sure thing in the face of a near-term deflation – is that the Dow may not reach 3000 simply because of the massive influx of money and credit from the Fed and Treasury. The Dow may in fact remain near 8K or even 10K, but the underlying dollar in which equities are denominated will be dropping in value. This has already occurred in the last decade – even with a Dow around 13K the underlying dollar was devalued almost 50% in the same time period. Expect much more and much worse as we continue this depression (I think we’re already there, not simply in a recession any more).

Thanks for a great article.

Erik