June 28, 2009

Update: Should You Pull Your Money Out?

Last September, shortly after the FDIC Chairwoman's press conference announcing 117 banks were on the FDIC Watch list, I wrote about whether or not we should feel comfortable with our money in the bank - especially as we become more and more a cashless society, using debit cards and credit cards for even the smallest purchases. That article had lots of details that I'm not going to repeat here, but it's worth a re-read if you're interested in this sort of thing.

That post got lots of traffic, I got lots of emails, and it also appeared in several publications. And, today, when I read the news that last Friday, five more banks were closed across the country (bringing the total to 45 closures so far this year), I thought I'd look into this issue a bit more. And here's what I've found.

1. The Coming Depression has links to sources relaying the following info: Panasonic is ordering its employees back to Japan by September 2009, and US Embassies are being told to gather enough local currency to cover their operations for a full year.

2. The FDIC has an online list of banks which have failed since October 1, 2000. By my count from this list, as of today, this totals:

Oct to Dec 2000 - 2
2001 - 4
2002 -11
2003 - 3
2004 - 4
2005 - 0
2006 - 0
2007 - 3
2008 -24
Jan - June 28 - 45

That's right. Forty-five banks so far this year, and we're only half-done with 2009.

3. Back in March, the Senate Banking Committee Chairman was moving to get the FDIC a line of credit totalling $500 billion for its DIF. DIF, meaning the Depositors' Insurance Fund, which covers depositors when banks go belly up - insuring accounts up to a certain amount ($100K, $250K in some instances). If the FDIC doesn't have the money to cover its insurance protection promise, that's a cause for concern and obviously it didn't appear to be on solid ground back in March.

4. This week, we come into the end of the second quarter of June, and banks will have to file quarterly reports with the feds. The FDIC is getting an emergency "assessment" from banks to boost its DIF based upon numbers showing in these quarterly reports. Banks have until September to pay the FDIC this assessment.

5. What's the most stable currency in the world? Yep, someone studies that - in fact, they have turned it into a reputable business. EWI, or Elliot Wave International, is the largest market forecasting company in the world and it issues its determinations of the most stable currencies worldwide, using eight (8) factors. So far, EWI is finding these as the top four:

Swiss Franc

Singapore Dollar

New Zealand Dollar

US Dollar.

5. Of course, there's lots and lots of talk (and TV commercials) about gold as the safest currency. I think I saw G. Gordon Liddy as the spokesman for one of these gold vendors recently ....

6. And, then there's the recognition that a dollar is only a method of exchange. If things were to get so bad that banks didn't have cash to hand out, would it mean that your sawbucks were worth more because cash could not be had (depends upon the government printing press, now doesn't it) or would it mean that your buck was worth less because there were so many dollars on the books?

For many people, the answer to this is to stockpile goods that in a crisis would be practical for exchange. Everything from food items, to batteries, to ammo.

So, bottom line, should you pull your money out? I don't have a clear answer on that one, but I'll keep looking. Meanwhile, what does your gut tell you to do?


DeeAnn said...

I would be up a royal creek if my bank closed. The first thing I did was too see if it was going to happen. Luckily, not so. We moved our investments to our bank right before the market crashed. This is before we knew the market was going to crash so badly. Every day we count our blessings that we did the right thing.

I am afraid my Mom got treated very badly by her bank and they are on the list to close. They actually took money from her account. I did research to find out she was not the only one. It showed me how desperate the banks are.

Yes, the banks closing will always worry me. Some banks are doing very well. I hope it continues so.

Anonymous said...

Keep things in perspective. 745 institutions were shut down during the "Savings and Loan" crisis in the late 80's and 90's. We survived it then and we will survive it now.

Thorne said...

RE: That post got lots of traffic, I got lots of emails, and it also appeared in several publications.

Which publications?

Unknown said...

Hi Thorne,
I wrote that sentence from memory, and would have to check 2008 archives for a detailed publication list, but I'm routinely picked up by Reuters etc. and it goes from there. FYI, this update piece has already been picked up by Fisher and published in two different Oregon news sites.
Hope this answers your question, thanks for writing!

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