Saturday, 25 November 2017

Banking - This ain't no foolin' around..................from Rico

Once upon a time, you took your money to a bank for safekeeping and the bank paid you interest on the deposit of your money in their bank.
- The bank was accountable to you for your money.
 
Not any more.
 
We have gone from ZIRP (zero interest rate policy) where no interest was paid to depositors, to NIRP (negative interest rate policy) where depositors pay the bank for safekeeping their money.
 
But it has gotten even 'better' than that.
 
The laws have been changed once again, and when you deposit your money in a bank, it ceases to be your money and it belongs to the bank at the point of deposit.
- Depositors are now unsecured creditors to the bank that owns their depositor's money at the point of deposit. Yes, you read that right...my regulatory sleight of hand. By depositing your money into a bank, your money becomes the bank's money.
 
If the bank screws up, displays bad judgement, or conducts sloppy business and has a problem and/or fails, guess what? Aaaand it's gone. [think: Cyprus].
- Unsecured creditors get paid back last for pennies on the pound...if they get paid back at all.
 
Banking today.
- You can go 'broke' by running out of money [read: Argentina], or you can have plenty of money that's worthless [read: Venezuela, Zimbabwe]  and be 'broke.' Pick one.
 
To badly paraphrase the lyrics of the Talking Heads:
       "This ain't no party, this ain't no disco...this ain't  no foolin' around."





1 comment:

Mark Matis said...

Surely you understand that in Cyprus, the Right People did NOT lose their money. That only was done to the Mere Citizens. The Right People, especially in the EU, were told in advance, and given the opportunity to move their ill gotten moola to safer havens.

As it was in the beginning, is now, and ever shall be. Amen.