Here's Why I Took Cash Out of The Bank

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You might be shocked to learn that “your” money in your bank account is not actually yours. When you place money in a checking, CD, or savings account at the bank, you are actually making an unsecured loan to the bank.

This is equally true in the U.S. as it is Canada, Australia, and Europe. The so-called “international community” implemented the so-called bail-in rule in response to the Great Financial Crisis.

As a reminder, here’s a pic of “the international community.”

If you happen to live in one of these places, and you have one or more bank accounts, this episode is for you.

Here, you will learn that your funds may be subject to bail-in rules, which are a bit vague and promise to not touch your account if it happens to hold less than $250,000 in the US, and 100,000 euros for Europeans. But that’s under the assumption the FDIC (or the European equivalent) will be there to pay it off. Which raises the question of how much the FDIC holds and how it might fare during a particularly bad banking episode.

The answer, with a 1.26% coverage ratio, is “not well.”

Even worse, the Dodd-Frank Act of 2010 elevated derivatives to a senior position in a bankruptcy or restructuring proceeding. Your lowly savings, checking or CD account is pretty much close to last in line for any dribs that might remain. After banks pay off their bets (i.e. “derivatives”) with each other. Because, you know, priorities.

All of which explains why I keep some cash out of the bank. And gold and silver. Also, land, and some cryptocurrency. In other words, hard assets and physical cash.

Because, after all, if you have to scour ever-changing, ultra-complicated rules and still cannot figure out how much of a risk you face, then it’s not a business deal, it’s a gamble. As they say in gambling circles, if you’ve been at the table for 30 minutes and you haven’t figured out who the patsy is, it’s you.

This is a companion discussion topic for the original entry at https://peakprosperity.com/heres-why-i-took-cash-out-of-the-bank/

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Unsecured Loan To The Bank

A while back I read a first person account of a man’s experience during the great depression. It included his savings account being wiped out but not his loan for his house (which he & his wife lost). Thanks for the heads up Chris.

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Murray M Rothbard covers this. It might be in the book What Has Government Done To Our Money.
What would happen is that Bank A, seeing that it was insolvent would close its doors. So you have the image of the depositors lined up outside pounding on the door.
Thing is the bank can still do business that way. So it sends a guy across the street to Bank B and they make a deal with B buys all of Bank A’s assets (the mortgage in your example) for pennies on the dollar.
Then Bank A explains to its depositors that their money is gone, but their loans were sold off and they have an obligation to repay them to Bank B.
THIS is why your grandparents/great grandparents thought bankers were nothing but well dressed thieves. Many of them went hungry because of shennanigans like this.

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Texas Ratio?

How reliable is the Texas Ratio as a general bank health indicator in today’s financial environment? In the 2008 crunch it seemed to be good at least at the “dashboard trouble light” level of detail. Is it still useful, or has it been gamed into uselessness?
FWIW, my current bank has a TR of about 2.5%, and never went above 20% in 2008-2009. However, a couple of FL banks where I had small accounts zipped up into the 120% range. They stumbled along for a little while there, I got my money out, moved on with life. Finally the FDIC stepped in and force-merged those two banks with a bigger, more solvent bank.

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How To ?

Isn’t there a max you can take out of bank at time ?

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Cash Out

If money is in a brokerage account what happens. If I take money out of brokerage account and deposit into bank account to pay bills what happens?

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That’s is largely a bank policy , if it is a larger amount simply contact the branch manager and make an appointment for the amount you are looking for. I’ve done it without incident many times mostly for buying vehicles , boats and other things people want cash for instead of this Venmo crap

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Gold The Only Monetary Asset With No Counterparty Risk? Not Quite.

Chris, your comment at 29.04 mins in the Part 1 video -: Bitcoin also satisfies this monetary asset quality. In addition, it’s far easier than gold to exchange or sell in times of crisis, and it can be moved instantly, anywhere in the world.

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Please Help.

If you’re in the UK right now. Besides Wood, what should I be doing? Should i dump all GBP into physical gold fund denominated in GBP at this point or simply convert to USD?

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Fix Your Mail Notifications

I got 3 notifications for this video.

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Chris…are Stock Market Accounts With Someone Like Td Ameritrade Safer Than With These Banks? Or, Do They Use These Same Rules?

Chris…are stock market accounts with someone like TD Ameritrade safer than with these banks? Or, do they use these same rules?

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I Ain’t Scared, Ain’t Got No Money Anyway

If you’re confident in derivative solvency, just buy credit default swaps on your financial institution. Leverage to roughly pay off the balance of they can bail in from your cash account.
Of course the derivatives aren’t going to get settled either, we played that game in 08. I don’t think the FDIC would default though under any circumstances. They’ll just destroy the dollar. It’s so much easier for everyone in a decision making position.
Anyway the only safe place for your capital come 2023 is gold coins in the cabin of your sunken boat. With a little crypto for a hedge on civilization persevering.
Cheers!

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It also doesn’t exist in real life, and can be deleted with a few key strokes, which bullion can’t be.

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Careful, I said similar things about Bitcoin here a few months ago when it was 30 or 40K. A small group jumped on me and started criticizing what they imagined my lifestyle was! Looking back that kind of emotional reaction should raise suspicion.

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Brokerages are entirely different beasts. They are protected by SIPC insurance, which is a private corporation…Here are a few details:

The stock market can be chaotic at times, causing portfolio balances to be volatile. But while you may be able to tolerate these periodic fluctuations, it would be catastrophic if your broker went under and you simply lost that money for good. Thankfully, that very situation is what the Securities Investor Protection Corporation (SIPC) serves to protect against.

The SIPC is a federally mandated, private nonprofit organization. It was created as part of the Securities Investor Protection Act (SIPA) of 1970, which looked to shield investors from brokerages becoming insolvent. Today, SIPC insurance covers investors for up to $500,000 in securities and up to $250,000 in uninvested cash.

(Source - Bankrate)
It actually gets quite complicated from there and there are exclusions for certain types of assets, it doesn't apply if your broker suffers losses due to being hacked, and so forth. I recommend reading the whole article I linked. So the basic advice is to not keep more than $500k in any one brokerage. But even here I'd have to dig further to find out just how many assets the SIPC actually holds, in what form, etc to determine the actual risk. I haven't done that in a very long while so I don't know.
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I think I’m up to 10 email notifications now.

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Lol. Maybe I was one of those “jumpers.”
Bitcoin cannot be deleted with a few key strokes. This is a persistent mistaken perception; so persistent I don’t take much time to offer all of the reasons why any longer. Seems to me anyone interested in understanding why a few of us keep saying what we do would have gone and done the research for themselves - if only to be able to refute our refutation of the claim. But no. So, so be it.
For the record, I use btc as my deep savings account, and as my primary investment vehicle (excluding home, land, tools - which I don’t consider investments). That’s a lot of commitment; a lot of personal confidence. But I also started down this road in 2014, and have a healthy net gain (unrealized, of course). That said, I don’t think bitcoin is a full and complete replacement for precious metals in hand. I think both are wise, and help tip the scales in the favor of the little people. Bitcoin is certainly going to outperform gold and silver when fiat collapses, and as long as there’s electricity somewhere in the world, it will continue to operate. It just might not be accessible everywhere all the time. And bitcoin is the easiest, safest way to take wealth with me wherever I go. Can’t be confiscated, and no one need know I have any.
Silver in particular is a good way to (as Chris puts it) jump start a local economy if/when that becomes necessary. So small-denomination coins and junk silver coins are good as part of plan B. IMO, gold is more for storing reserve wealth for longer periods or for future large purchases. No pm is valuable if it’s not in one’s sole personal control. (Goes for bitcoin, too.)
I also think some local fiat currency in hand is a good idea. It will be the first local currency to be used in collapse, before moving to silver.
More important than all of that, imo, is land and stores. And I’m a fan of that land being owned outright. Don’t want the risk of the mortgage holder foreclosing - which will be done; thieves have no honor and no heart, and bankers are thieves, whether individual employees want to be or not - a lesson from the Great Depression, and every small downturn since.

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Reoccuring Emails

Hi Chris. I received your most recent email for this article 8 times since yesterday. I responded to them a couple times but no response and I unsubscribed this morning until I know they won’t keep coming. I’m sure it’s just a script not working right. Otherwise keep up the good work, I always enjoy your content.

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I’ve also received a number of the same emails, approx. 10. I am assuming this is just some technical glitch that one of the hard-working folks at PP will repair shortly, as you said.

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TMI