Thursday, June 14, 2012

Time to reconsider banking

Two links for your consideration today.

The old establishment banks — the ones that have been bailed out this week in Spain, and in 2008 in America — are unnecessary middlemen. This is because of the ludicrous spreads from which they profit. They borrow from central banks and from depositors at absurdly low rates of interest (that’s what ZIRP is all about) and lend at vastly higher rates. What useful function does it serve? At one time, banks generated value by being wise lenders, lending to businesses that they determined would add value. Today they prefer to gamble up even bigger profits in the zero-sum derivatives casino and shadow banking whorehouse, requiring frequent bailouts when such schemes go awry. They are dinosaurs that offer no real value to their shareholders, their customers, or to society.
Second (and of more immediate importance to anyone with savings:
As Italian customers wake up to frozen bank accounts Europe officials are planning limited bank account and ATM withdrawals to deal with Greece exit. European officials have announced plans to implement bank capital controls as part of a contingency plan to deal with the worst case scenario of Greece leaving the Eurozone which include imposing border checks and limiting ATM withdrawals.
The announcement of plans to limit bank and ATM withdrawals comes as many Italians are just learning their accounts have been ‘temporarily frozen’ for the next month to deal with the ‘difficult situation’ in Europe.
So it is shown that banks are merely a government-protected game of "heads, we win; tails, you lose."  Lending is supposed to be based on the accumulation of savings, not on the magic ability of "Central Banks" to 'create' capital out of thin air (read: borrowing from the future via debt).  That whole model we were fed as kids, where people put their savings into a bank, and the bank prudently lends a fraction of it out for investment and dividends?  Those days are long gone, if they ever truly existed at all.  The interest drawn by savings accounts today is effectively negative -- you are losing purchasing power as your money sits "safely" in a bank.  The only real incentive to place it there is that stuffing your mattress invites home invasion.  But if banks can freeze accounts due to their own self-created liquidity problems, is it really "safe" to keep it there, either?  It's not really "yours" if you can't access it, now is it?  This is not 'just' a problem in Europe.  The financial interconnectivity of today's world means it's quite possible Americans might wake up one day to a "bank holiday."  Do you have enough assets in your personal possession to meet your family's basic needs during such a lockdown?

Business is already booming in firearms and ammo.  Same for personal safes.  This is what happens when the bonds of trust in a society are abused past the breaking point.  Are you prepared?

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