When resources contract and K-selection begins to appear imminent, people will grow competitive, and begin reflexively hoarding what resources they can control. That will further diminish the total amount of resources available and exacerbate the K-selection, meaning the initial widespread perception of resource shortage is a sort of tipping point. Once that occurs, history would indicate that simulating continuing free resource availability is impossible. Printing currency, government setting prices, even communism and socialism will all be doomed to failure.
Case in point. We are told FDIC insurance will guard savings in the event of a collapse, and prevent free resource r-selection from turning to limited resource K-selection. Zero Hedge says, “not so fast.”
In other words… any liability at the bank is in danger of being written-down should the bank fail. And guess what? Deposits are considered liabilities according to US Banking Law. In this legal framework, depositors are creditors…
Let’s run through this.
Let’s say ABC bank fails in the US. ABC bank is too big for the FDIC to make hold. So…
1) The FDIC takes over the bank.
2) The bank’s managers are forced out.
3) The bank’s debts and liabilities are converted into equity or the bank’s stock. And yes, your deposits are considered a “liability” for the bank.
4) Whatever happens to the bank’s stock, affects your wealth. If the bank’s stock falls at this point because everyone has figured out the bank is in major trouble… your wealth falls too.
This is precisely what has happened in Spain during the 2012 banking crisis over there. And it is perfectly legal in the US courtesy of a clause in the Dodd-Frank bill.
When ITZ happens, ITZ will not “break all the rules.” Rather ITZ will follow all the rules of nature, and in so doing it will break all the rules the eggheads have told us about, and reveal all the lies which are inherent to the system.
We’re going to find out we were told a lot of lies.
So one question this leaves me with is; Is there a difference between banks and credit unions in this regard?
I thought the same, not sure.
The credit Unions probably need to go by the old rule of having 10% in cash holdings. Still wouldn’t make you whole in a complete collapse but then money as in paper /folding money may be the least of your problems.
Some years ago, I think before 2008, I looked at the FDIC’s exposure and found that if *any one* of the six largest US banks suffered a 100% failure, meaning 100% of insured deposits would have to be paid out of the FDIC’s reserves…
… those reserves were insufficient. In the case of the largest bank, the FDIC could have covered something like 17 cents on the dollar.
Credit unions have a separate insurance fund (NCUSIF) administered by a different agency (NCUA). At the same point in time, if the nation’s largest credit union suffered a 100% failure, this fund would have fallen to slightly under its legal maximum and thus been permitted to collect premiums for the first time in years. But it would still have been easily large enough to cover the 100% failure of the next nine largest credit unions.
Now the big hazard is the fact that bank (or credit union) failures are not necessarily independent events – that many institutions might fail more or less simultaneously due to some outside event, such as the eventual collapse of a bad government-imposed policy. (Which in fact has been the cause of most instances of many institutions failing more or less simultaneously.) Obviously any insurance fund that is smaller than the total amount of insurance extended can, theoretically, be tapped out by a sufficiently widespread disaster – and where would a huge insurance fund be put that it could not be significantly damaged by the direct effects of the same event that causes the claims?
Please note: I had, and have, not investigated the finances of any of the banks or credit unions referred to. I do not in any way assert that they are, or are not, likely to fail.
Thank you for that post. Very interesting.
“………..This is precisely what has happened in Spain during the 2012 banking crisis over there. And it is perfectly legal in the US courtesy of a clause in the Dodd-Frank bill. ……”
here in Canada they produced the same language to allow banks to bail -in with depositor funds. by a supposedly conservative government. The group of 7 made it a requirement of their members.
Greece is about to find this out as well.
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