In the past couple of weeks, I've been seeing article after article about, "bail-in's". I mean tons of them. A bail-in is when one of the Too Big To Fail (TBTF) banks fails, and instead of the FDIC and federal government riding to the rescue, the bank's depositors are held responsible for any losses. Poland recently extended the concept to retirement accounts as well.
Yeah, they take YOUR money that you've entrusted with the bank, to cover any losses.
Now, back in April I wrote an article titled, "Get Some, If Ya Can" [link].
What? You didn't know that when you make a deposit in your bank, you are an investor (creditor) of that bank? Yep. Your deposit amount is an asset on your personal balance sheet, and it's a liability on the bank's balance sheet. An unsecured liability, by the way.Secured creditors get paid first. And that ain't you.
But that's not what's got me concerned. I want to know WHY everyone and their brother is talking about this right now, at this time.
My gut says that this is, "Big blogger Bob is talking about bail-in's, so I will, too." Or is there more to this? I can't find anything that would indicate the TBTF banks are any more insolvent than they were when I first wrote the article.
There IS some chatter about the Foreign Account Tax Compliance Act (FATCA). This is a law that requires foreign banks to report the accounts they've got that are held by US citizens and companies. The IRS just extended some deadlines [link to non-IRS website] with regards to this legislation.
A large and sudden out-flow of cash to foreign banks would indeed hurt - potentially cripple - TBTF banks. I don't see anything indicating this is about to happen. There was much recent discussion about JP Morgan Chase restricting international wires, but that was just hyperbole. You can still send international wires, they're just charging certain account types for the privilege.
If you want to get some money offshore, there are sites out there that will help you get your money out of Dodge, and which are not signatories to FATCA. Yeah, Google it.
There is also a lot of discussion about the dollar losing its place as the world's reserve currency. This is a real threat to the stability of the US dollar, and is something outside of the direct control of the federal government.
While there's been much discussion about China, Russia, India and Iran all getting into bed together, nothing is imminent. The dollar - as much as it has been devalued - is still the most trusted currency in the world. I think it will eventually be replaced, or others will gain peer status as trusted reserve currencies. But not in the next few weeks or months.
Accept The Challenge
I get nervous when lots of people are suddenly all saying the same thing. I get more nervous when what they're saying dovetails with what I believe will (eventually) happen.
I feel like I'm being played, or led by the nose.
To me, this looks like people trying to connect dots that don't really connect. The Preponderance of Evidence approach. If it looks like a duck, quacks like a duck.... Well, sometimes it's a swan.
I just don't see evidence that this is imminent. One of the Big Boys will eventually take a hit, just not right now.
That being said, I have moved virtually every dime that I've got in banks, out of TBTF banks, and into smaller, local banks and credit unions. There is no reason not to. Much of my reserves are in actual greenbacks and precious metals, so I'm not that worried if we have some bank failures.
Maybe I should be looking more closely at getting some money offshore. I dunno. If I've got money hidden in some foreign account, how do I get it? If everything has gone sideways, the feds will likely clamp down on foreign travel, so I couldn't get to it anyways.
Take-aways:
>>Question everything, especially when it supports your current beliefs
>>Diversify - don't keep all of your assets in one place. Money, food, water, weapons, protection from elements.
>>Learn - if you don't understand how something works, or what likely outcomes might be with a given set of data, take the time to figure it out. Don't be a victim. Ever.
>>Trust your gut. It's usually right.
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Copyright 2013 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates. www.BisonRMA.com
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