September 20, 2013
Santiago, Chile
One of those generally
accepted truths that most people believe is that banks are safe.
We seem to be told this
for our entire lives... that banks, in their grandiose buildings and marble
floors, are veritable rivers of money.
We're also told that
bankers are conservative fiduciary stewards, unflappably restrained in
managing other people's money. And even in the infinitesimally unlikely
event of an anomaly, the government is standing behind the banks to ensure
that depositors don't lose.
With such a strong
propaganda machine behind the banks, you can't really blame people for not
giving a second thought to where they park their cash.
But this is actually a
huge decision. A bank is like a silent financial partner. And when the
going gets tough, choosing the wrong financial partner can be as
destructive as a bad marriage. Just ask anyone in Cyprus.
In the Land of the
Free, the Godfather of the banking industry is the Federal Depository
Insurance Corporation (FDIC), the primary entity that is charged with
regulating and insuring the banking industry.
Given such a prodigious
task, particularly in these tumultuous times, you'd think the FDIC would
have a vast treasure trove of reserve funds to guarantee the entirety of
the US banking system.
Again, though, this is
another case of reality being far, far from the sentiment and propaganda.
Based on the FDIC's
recently published numbers, their reserve fund holds a mere $37.9 billion.
This sounds like a lot. Except when you compare it to the $5.25 trillion of
'insurable deposits' held in the US banking system.
In other words, the
FDIC's reserve fund constitutes just 0.7% of the bank deposits they're
obliged to guarantee. This is hardly a resilient figure. Especially when
the FDIC's own report names 553 'problem' banks which control nearly $200
billion in assets, about 5 times the size of their reserve fund.
These decisions matter.
It matters where we hold our savings. And how. We cannot simply assume away
that our home country's banking system is in good financial condition. Or
that our funds are safe.
It's important to take
a look at the hard numbers, and then make a rational, informed decision
about the best place to hold your hard-earned savings.
The world is a big
place, and there are plenty of attractive alternatives.
Norway, for example,
presents some of the best capitalized banks in the world. They're backed up
by a government that has zero debt and is awash with cash. And the
Norwegian krone is mathematically the safest currency in the West.
There are many other
great options to choose from. But it's important to make a real choice, as
opposed to going with the default option of the bank across the street.
The Internet and modern
communications makes geography irrelevant. The only things that matter
are-- where is your money safest? And where can you generate the best
risk-adjusted rate of return.
When you think about
it, most people right now are probably earning 0.1% within an insolvent
banking system that's backed by a fledgling insurance fund that's backed by
an insolvent government.
It doesn't take much
effort to do better than this. And given what's at stake, it's important to
do so.
As a closing note, I
also wanted to mention the FDIC's reported employment statistics.
The agency closely
tracks employment in the banking sector, and their figures show that the
number of full-time employees working in the US banking system actually
been on a downward trend.
It seems that even
banks are letting people go in the United States, despite the central bank
printing $1 trillion annually to prop up the labor force.
It turns out that the
Fed's quantitative easing measures are so ineffective, they can't even
'create jobs' in their own industry!
Where is the best place to bank in the world?
This is the most common question
that Sovereign
Man: Confidential members have. Followed by "Where should I establish
residency and move to?" The answers of course depend
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would suit just about anybody.
This month's seminal issue of
SMC includes:
- A detailed analysis of respective banking systems
of selected jurisdictions. We
look at things like central bank capitalization, central government
debt levels, commercial bank capitalization, and commercial bank
liquidity.
- All this is broken down to identify which is the safest bank and the
safest currency in the world, which jurisdictions are best for corporate banking,
where the risk and reward ratios are favorable etc. Everything
summarized for you in
a user-friendly cheat sheet.
- The best residency and immigration options in the
world. Find out which are the two
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passport-- without the need of actually moving there.
- What are the best and easiest passports to acquire
if you actually want to uproot your life and move to a new place. All
in a systematic overview, designed
to give you a direction immediately.
- A boots
on the ground account from Iceland. The country was
the first victim of the financial collapse of 2008. It's still in a
very poor state, with a default and a significant restructuring
inevitable.
- But it also has a lot going for it. That's why I'm so excited about its
potential once it's forced to pull out all the stops
and attract foreign capital. The
opportunities for those prepared will be immense. It
should definitely be on your radar.
- An extended set of questions, ranging from what to
look for when setting up an offshore
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To get immediate access to the knowledge contained
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