So you are fortunate enough to still have a paying job and a semblance of a nest egg. You do whatever you’ve been told is necessary to secure your financial future, for you and your loved ones. You save money in your bank account for recurring expenses, you have a rainy day stash, a retirement plan such as a 401K, IRA, perhaps a mortgage on your house and are diligently still finding ways to build your equity. These ways of building your equity and how to protect your money, were sold to you by your employer’s retirement advisor, a financial services professional, the Wall Street Journal etc…
Basically, you feel you still have better things to do than joining in the ‘Occupy Wall Street’ sit-ins currently taking place all over the nation, in what amounts to be a vague protest against corporate greed. You probably figure that if, or when, you lose your job, you should probably join in the activism, but right now, the system in place still smiles upon you and you will ride it while the getting is good. And so you walk past the protesters downtown, in the morning on your way to work, looking forward to a productive day at the office.
Part of the scenario above comes from my own personal situation. I’m still able to find work, I pass the protesters in the morning, cheering for them in spirit. However, the former banker in me sees the writing on the wall. I’ve seen, and read enough that has convinced me a major economic event is unfolding, and has been a long time coming. How much longer can it be put off, I don’t know. At some point the bill has to be settled.
For the past years now, the corporate super-entity familiarly referred to as “Wall Street” has been raiding your tax money, pawing your bank account and your retirement savings, and has willfully plundered real estate wealth from American families. With these funds, and thanks to the erosion of banking regulations, commercial depository institutions were allowed to take risks and play the markets, join forces with investment banks, and do all sorts of things that would send individuals straight to jail if they were to engage in similar activities. Consider Madoff was a sacrificial lamb, to keep the appearance that the law is on duty, and to distract us from the epic scumbaggery running rampant within our large financial institutions. Not that I blame the leadership of these firms for everything, since the entire Keynesian growth model we’ve been operating on is really one big ponzi, where wealth has been created out of thin air, by the incessant, unsustainable growth of credit. And it’s catching up to us now.
This ponzi wealth can be traced back to central banks issuing fiat money like the Federal Reserve. The Monopoly money has been used to prop up the markets for years. But recently, even the mainstream media has been posting warning signs that things are getting worse, between the credit crisis in Europe, and the connections to the US financial system. The entire house of cards is so frail, that all it can take is a failure somewhere (like a Greek default), to cause a systemic collapse. Three years ago, there was widespread denial of the seriousness of the situation, but after multiple rounds of bailouts, support programs, etc., and no end in sight to the plight, even the heads of banks are starting to change their tunes. Like Sir Mervyn King…
Writing a detailed expose about the state of the world’s financial systems would deviate too far from this article’s objective, which is, what can you do about it? Well, you can applaud the protesters and support them, but what you must consider, for your own welfare, is that these ailing banks and corrupt financial institutions are draining the last remnants of civilian wealth, with the help of legislators, in order to backstop their collapse. Take the recent announcement of asset transfers from Merrill to BoA, for example. Even the deposits of bank customers are essentially being sacrificed. This is outrageous and no one is reacting to it.
But you can fight back with what’s left of your wallet. You don’t need to run amok in the streets, just pull your money, boycott the firms, and finish them off before they take away what little is left. Here’s a list of things you can consider doing to protect yourself AND help fight the good fight for the interests of the little guy. Now I must preface this with the legal disclaimer that I’m no financial adviser, and that you should do your own research when making decisions with your money, especially when advice is given by a large financial firm, interested in its own bottom line.
This is the part where I tell you how to leave your bank. Don’t think for one second that the FDIC insurance that comes with your bank account will cover your ass if any of the big banks default. I recommend to head over to Curious Capitalist for a more detailed outlook on the state of the FDIC, but here’s my take. They have $10 billion on hand, and would have to go to the government to raise more funds to cover more. This means, that our government would have to issue debt for this, because it’s not in the budget. BofA alone has 1 TRILLION dollars in deposits. Actually, let’s focus on BofA, since a recent development clearly hints, in my opinion, that they are preparing for the eventuality of a collapse. So should you.
As mentioned earlier, about 50 trillion dollars in credit default swaps were transferred from Merrill Lynch to BofA. All kinds of conjecture has been coming up as to why this was done, but there seems to be a consensus that BofA’s deposits are going to be used to offset some of these derivatives going bad. Head over here to read Reggie Middleton’s take on it. If I was a Wall Street CEO without scruples, I would take advantage of the FDIC’s effort to cover the deposits, and plunder them a bit. Realize that if only 2 % of these derivatives go bad, it will wipe out the deposit base for BofA. And then they have Countrywide toxic assets on their balance sheet, a sagging economy to navigate, yikes.
If BofA goes under, it will happen when you’re not looking, over a weekend, Lehman style, and on Monday the branches will be closed. You won’t be able to take out your money, it will be too late by the time you know it is happening. Your money will go towards paying creditors, namely BofA’s buddies in Wall Street. They at least get a trillion, because they will be first in line, and leave you hoping for an FDIC bailout. And if BofA goes under, what might happen to other banks, who don’t get their debts paid out (because all banks lend to one another)? How much in deposits will the FDIC need to ask Uncle Sam for? Maybe 2 trillion when the dust settles? Will we vote to issue this much debt? Will any foreign nation in its right mind buy into this debt? Will we print this worthless money out? And this is just the tip of the iceberg. My point is that you won’t get anything in the way of cash back right away, if ever, from the FDIC. The FDIC is known to work when a small bank goes bust in an otherwise stable economic climate. It never had to step in during a financial Armageddon, and I doubt it will save the day for us. You’re better off finding a way to stash your money in a stable institution than to rely on this ‘insurance’.
If you have deposits at a big bank such as Chase, BofA, Wells, etc…, you can open an account with a credit union, link the accounts, and transfer as much of the money into the credit union account as possible. The same goes with CD’s. If you want to keep the convenience of your big bank for some reason, you don’t have to close your account, just keep enough balance to minimize fees and pay your bills, and transfer money from your credit union whenever you need to, electronically. This said, I’d drop the big banks altogether. There is a concerted effort to raise fees by all of them, because they are going to need all the money they can get. In a way, these fees are paying for their poor management and greed. Do you want to support this behavior? If you want to effect a change, do not let them get away with this. I, for one, am preparing to leave my bank. I’ve already signed up with a credit union.
If you’re wondering what a credit union is, it’s basically a cooperative, customer owned ‘bank’. Most are chartered as non profits, though it isn’t a legal requirement. The main advantage these credit unions offer is that funds are generated by the depository community, and used for said community in lending, etc… It’s more ‘grassroots’, forgive the cliché. As far as I know, credit unions don’t engage in the risky behaviors that the big multinational banks have, and you are not exposing your own money to these risks. Thus, theoretically, your deposits won’t vanish overnight because there should be no reason for a credit union to fall insolvent or to have a run on it. To find out more about them, and to locate one for you in the US, you can check out the National Credit Union Administration.
I was surprised to find my credit union to be lean, mean, and robust! For instance, credit unions form cooperative networks, so you can use the branch offices of other credit unions to conduct business, draw money, etc… There is even a co-op that lets you take money out of 7 Eleven ATM’s at no charge, nation wide. It’s basically a nation wide persistent network that isn’t run by only your bank. I see strength in this.
Sad to say, but the very firms that have used a veneer of seriousness to sell you into entrusting your nest egg, are actually gambling with it. They have better odds than you would have by taking your savings to Vegas, but right now the outlook is pretty bad. The recent stock market rally was fueled by our bailouts. What comes next? If I knew for sure I’d be rich. But anyways, do you dislike what a certain firm is doing? Well by all means, don’t do business with it. Pull your money, transfer it to another institution. Taking your retirement accounts, for instance, look at owning equity in companies that are doing very well even in this economy. If my portfolio had any debt based assets, I would convert those to physical precious metals, especially gold or silver. I have faith that metals will keep most of their intrinsic value during the hardest of times (as with wheat and rice), and so it’s a good store of value. Much better than a bond portfolio in these times. But again, I’m no expert. Plan to store this somewhere other than a big bank…
Please for the love of God, keep doing your own research. You can find more helpful resources on this site, like links to Catherine Austin Fitts’ own site. Also, I would encourage you to read ZeroHedge. They provide some great, unmitigated information. Don’t listen to what the mainstream press is telling you. The final point is, put your money where your mouth is. If you are starting to resent big banks for their corrupt and greedy ways and all the damage caused, then pull the rug from under their feet. Protesting downtown will make for good stories, but meanwhile the boys on the Street are still jingling your coins in their pockets, laughing at you from their high rise windows. Hit them in the wallet. That is all they understand in life.
Easier said than done, and it will take quite a bit of research. The idea here is to find investment opportunities for your nest egg that are outside of the traditional avenues, which all end up feeding the Wall Street tapeworm. This means circumventing big financial firms and being your own investor. You may not want to spend the time to do this, but consider the result of our complacency. We let this mess happen. Fortunately, the internet is a great resource for research and opportunity finding. I will introduce you to some concepts here, that will hopefully inspire you follow the trail and do your own exploration.
– Grassroots financing: Basically, small to medium investments pulled together to finance local businesses that have been slowly abandoned by large banking institutions in favor of corporate chains.
There has been a gap in the financing needs of small business in recent years, all the while we the people have been generously recapitalizing big banks and supporting their bad management with our tax dollars, because they promised to send some credit our way. Right… Now we know it didn’t happen. Instead, however, here’s a great site that talks of successful grassroots financing endeavors all across the country. You should also read Catherine Austin Fitts’ newsletter, found at Solari.com. She is a fighter for the cause of conscious finance, and knows Wall Street and DC inside out.
–Micro Finance: Micro Finance is another aspect of ‘socially responsible investing’. Think of fair trade finance. If you put your money in a commodities index fund, for instance, some financial institution will leverage your money to play the commodities markets, or buy derivatives, or something else with possible sad consequences somewhere on earth. Consider that, when the prices of wheat skyrocketed a couple years ago, a study concluded that the market price of wheat had been unduly inflated by speculation on commodities markets, and that this inflation resulted in 150 million people unable to buy bread for a while. Starvation caused by greed.
If you don’t want to facilitate this, pull your money from large institutions. Micro finance is the general activity of providing small scale financing to individuals or small businesses, usually in the developing world. For instance, you might be willing to lend $300 so that a seamstress in India can buy a new sewing machine for her expanding activity. To you, $300 dollars is a small investment to afford someone an opportunity for greater income and a better living, and less dependence on aid. I can’t think of a better cause to lend money to. The lending mechanism is usually in the form of an intermediary/non profit organization who acts as a facilitator, market maker, escrow… There are many resources and micro lending entities you can find by searching for ‘micro finance’ online. One resource I liked is Socialfunds.com.
The possibilities are not limited to what I outlined here, but by your own creativity and enterprise. If you find any of this business a bit too risky to put your money into, it’s probably because Wall Street has lulled you into a false sense of security. Look at what has happened to your portfolio of late. You’re most likely down, and not happy with it’s performance. But there are alternatives. I recall reading that the average payback of micro-finance loans in third world countries was 85% and rising. This isn’t too shabby, and is more attractive when you consider the higher rates of return on these loans. Next time you have some money to invest, you could buy T Bills and help Uncle Sam build more drones, you could help Wall Street gamble retirement funds away, or you could fund a family farm halfway across the world. The choice has always been yours.