April 8, 2013 by Liberty
When you hand your money over to a bank, how safe do you feel? Are banks safe? The vast majority of people are completely comfortable handing their money over to a bank teller. They assume that they’re going to get their money back when requested. Heck, they might even get a few fractions of a penny a year in return for storing it there. The accounts are even FDIC insured. That’s got to mean something… right?
The sad fact is that most people don’t understand the risks that a bank account comes with. Banks are not too risky to use but they’re definitely too risky to trust your whole life savings with. There are a number of major risks that come with every bank account that you use. While your money may be 99% safe (at best these days), there is a small chance that you’re going to lose everything in the account. You need to treat your savings with diversification. What are the dangers the come with banking?
Based on the banking crisis a few years back, you might recognize that the banking system has some underlying flaws. Our money was damaged significantly by that crash. While it might not appear so, the debt has reduced the value of everything that America produces. It’s an invisible increase in all the costs that we’re paying day to day. How bad was the crash?
The crash lost more money than banking has ever made. That’s ever, as in, the whole history of banking’s profits were eliminated in a year. The government may have been willing to steal the taxes to “fix” this problem, but it’s not something that we can always count on. Banking was not even fundamentally changed after the crash.
It’s built over a fractional reserve system that allows banks to take ridiculous risks without having to face the consequences. The banks get to suck up the profits while the taxpayers pay for all of the losses. This is a system that will not last. The more these companies learn the power they have over the government, the more these bailouts are going to happen but eventually, whether the bailouts are there or not, the consumers will be the ones that suffer. Are banks safe for the people using them? There is some serious doubt to be had.
Cyprus has done something that every other country in the world has been doing for years. Cyprus stole money from its people. It’s blocked people’s access to bank accounts and took every penny that they wanted to. This might sound like a dirty government, it’s something that’s been happening around the world for hundreds of years through less blatant means. (Inflation for example.)
The saddest part is that Cyprus got away with it. There was no major crushing end for the politicians that did it. There was a backlash but it barely did a thing. The people of Cyprus got royally screwed and did absolutely nothing worthwhile to fight it. Every government around the world has seen this. Every government has seen what they can get away with. This is definitely not the end.
Even even the government keeps it’s grubby hands off of your money, they won’t stop the inflation. Every second that your money sits in a bank account, it’s being slowly devalued. That means, while you may have a higher number from the interest, your money will buy you less when you take it out of the account. This is the challenge with having cash anywhere. This is the argument for holding onto a few precious metals that will keep up with inflation.
Are Banks Safe? No? Where Do You Put Your Money?
This is the boring advice that any financial adviser would give you:
Diversify your money.
If you have your money in a hundred different places then it’s that much more safe. I firmly follow that advice. While I may have doubt in the banks, I’m not afraid to keep a percentage of my money in them. Money should be spread between stocks, cash, banks, metals, food, and income producers like (businesses, skills, education.) There are hundreds of ways you can spread your money. The only real need is that it’s spread out.
Are banks safe enough for a large amount of money?
If we’re talking a few thousand dollars then you probably have nothing to worry about with your money. There is not too much that you can do about the government stealing it from you anyway. The banks also get very little benefit and a whole lot of risks with preventing small accounts from withdrawing.
The people with the most risk are the ones that worry about bank FDIC insurance limits. If you have hundreds of thousands of dollars loaded up in banks then you need to get it moving to someplace safer. If anyone is likely to get tortured through government, it’s going to be the rich that aren’t currently invested completely in the system. Those that don’t provide value for the politicians are the ones with the most risk.
One of the other dangers of banks are identity theft. Which is more likely for your life… someone robbing your home or someone stealing your identity? 7% of US households report identity theft every year. This usually means that you can get your money back but in most cases, it can take a very long time. While I don’t recommend storing your money under your mattress, identity theft damage should be minimized with multiple accounts, passwords, and keeping your information private.
Next time you drop your money off at the bank, you might want to think twice. Are banks safe? Most of the time they are but when they’re not… they can cost you everything fast.