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View Full Version : FDIC is bankrupt. Should I run to the bank?



gasull
08-15-09, 08:32 PM
As of Friday August 14, 2009, FDIC is Bankrupt (http://globaleconomicanalysis.blogspot.com/2009/08/as-of-friday-august-14-2009-fdic-is.html)

[...]
Taxpayers Bailout FDIC

If indeed $641 million was all that remained of the DIF, the FDIC is now bankrupt. Of the $641 million left, Community bank used up 781.5 million and Colonial Bank $2.8 billion
[...]
I have a few thousand bucks in the bank for paying my rent, groceries, eating out, etc. Should I run to the bank? Seriously.

Can something like the Argentinian corralito happen here?

http://en.wikipedia.org/wiki/Corralito

Will this be inflationary or deflationary?

ThePythonicCow
08-15-09, 08:58 PM
I have a few thousand bucks in the bank for paying my rent, groceries, eating out, etc. Should I run to the bank? Seriously.
Mish is hyperventilating on this one. There is no reason to be alarmed, yet anyway. As stated in Mish's article, the FDIC already has "pre-approved funding signed by the Congress in May 2009, including $100 billion from the U.S Treasury Department."


Can something like the Argentinian corralito happen here?
That is possible, though not likely and not immediately and not in the same specific form.


Will this be inflationary or deflationary?As I can see you realize from some of your earlier posts, the terms "inflation" and "deflation" are key terms of art in the iTulip analysis. The quick answer would be that it's inflationary ... almost all inflationary almost all the time now that the none of the major currencies of the world have been on a solid gold standing since the 1930's.

gasull
08-15-09, 09:09 PM
PythonicCow, thanks for your answers.

FRED
08-15-09, 10:45 PM
Mish expected a deflation spiral starting in 2008. Didn't happen.

He does not believe in double entry bookkeeping, apparently. The Federal Reserve and Treasury use double entry bookkeeping to expand the money supply and cope with bad debts.

Turns out that our forecast was correct, that adding a trillion or two to the Fed's and Treasury's books, both to expand the money supply and buy so-called "toxic assets," required a few hours of legal haggling to reclassify the assets, such as asset backed securities, to allow the Fed to buy them, then a few key strokes for data entry.

By the same token, Mish also does not appear to understand that the FDIC is, for all practical purposes, an account of the Treasury Department. Getting legal authority to transfer money from one account to another within the Treasury Dept. is even easier than arranging with the Fed to monetize all manner of private debts.

The question is, at what point do the markets start to worry that the Fed and Treasury are over-extended? Even the USA has its credit limit. If it is surpassed, the effect is anything but deflationary. Just ask the Argentinians.

We recommend the following to Mish.

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ThePythonicCow
08-16-09, 12:15 AM
Turns out that our forecast was correct, that adding a trillion or two to the Fed's and Treasury's books, both to expand the money supply and buy so-called "toxic assets," required a few hours of legal haggling to reclassify the assets, such as asset backed securities, to allow the Fed to buy them, then a few key strokes for data entry.
"Stroke of the pen. Legal Tender of the land. Kinda cool."

don
08-16-09, 12:12 PM
And as far as an adult male running around near a bank.

Not recommended ;)

ST
08-17-09, 09:15 AM
<script type="text/javascript" src="http://ah.pricegrabber.com/js/login.js.php"></script>
Mish expected a deflation spiral starting in 2008. <!-- dialogue bubble that appears above the overlay --> <!-- <div style="filter:alpha(opacity=0);-moz-opacity: 0.0; opacity: 0.0;"> --> <script type="text/javascript"> var loginframe_src = 'https://www.pricegrabber.com/secure.php?cur=http%3A%2F%2Fabout.pricegrabber.com %2Fsearch_getprod.php%2Fisbn%3D9780061374340%2Fsea rch%3Daccounting+for+dummies%26mode%3Dabout_financ ialsoft%26&iframe_cobrand_id=485&iframe_cobrand_domain=http%3A%2F%2Fabout.pricegrab ber.com'; </script> <iframe name="loginframe" id="loginframe" src="javascript%3Cb%3E%3C/b%3E:%27%27" border="0" allowtransparency="true" style="border: 0px none ; position: absolute; z-index: 10001; display: none;" scrolling="no" frameborder="0" height="580" width="520"></iframe> <!--END PRODUCT IMAGE-->

Lies! :D He has been spewing the same nonsense AT LEAST since early 2002:

http://boards.fool.com/message.asp?mid=16752085

Sing it long enough and of course you'll be right at some point, but like I have told him that means little in the world of investing.

ST
08-17-09, 09:31 AM
The question is, at what point do the markets start to worry that the Fed and Treasury are over-extended? Even the USA has its credit limit. If it is surpassed, the effect is anything but deflationary. Just ask the Argentinians.<script type="text/javascript" src="http://ah.pricegrabber.com/js/login.js.php"></script><!-- gray overlay for the whole screen --> <!-- dialogue bubble that appears above the overlay --> <!-- <div style="filter:alpha(opacity=0);-moz-opacity: 0.0; opacity: 0.0;"> --> <script type="text/javascript"> var loginframe_src = 'https://www.pricegrabber.com/secure.php?cur=http%3A%2F%2Fabout.pricegrabber.com %2Fsearch_getprod.php%2Fisbn%3D9780061374340%2Fsea rch%3Daccounting+for+dummies%26mode%3Dabout_financ ialsoft%26&iframe_cobrand_id=485&iframe_cobrand_domain=http%3A%2F%2Fabout.pricegrab ber.com'; </script> <iframe name="loginframe" id="loginframe" src="javascript%3Cb%3E%3C/b%3E:%27%27" border="0" allowtransparency="true" style="border: 0px none ; position: absolute; z-index: 10001; display: none;" scrolling="no" frameborder="0" height="580" width="520"></iframe> <!--END PRODUCT IMAGE-->

If asset deflation in stock markets around the world coincides with the Fed and Treasury 'extending', this would seem to diminish the risk of the perception of US over extension. Still a relative beauty contest, no? I think we have time, especially if all equity assets rise and fall in tandem. Other than Euro where will capital seek refuge? And how it? How about the health of the European banking system?

"European banks have ‘assets’ of about 330% of their country’s GDP, compared to US banking assets, which are about 50%. " (http://www.nowpublic.com/world/europe-s-banks-next-global-worry)

zoog
08-17-09, 01:26 PM
I have a few thousand bucks in the bank for paying my rent, groceries, eating out, etc. Should I run to the bank? Seriously.

Can something like the Argentinian corralito happen here?

http://en.wikipedia.org/wiki/Corralito

Will this be inflationary or deflationary?

For those with access to the Select area, this Ask EJ post from last fall is worth reviewing:

Is it time to panic? Should we expect bank runs? (http://www.itulip.com/forums/showthread.php?t=5462)

Personally I encourage friends to not panic about losing whatever money they have in the bank (as long as it falls within FDIC coverage limits). The FDIC will be backstopped by the federal government if need be. You will get your money back... but it might take a while. Use a tool like bankrate.com (http://www.bankrate.com/rates/safe-sound/bank-ratings-search.aspx) to find higher-rated local banks and credit unions to reduce the risk.

Of course there's always cash under the mattress...;)