no third solution

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The FDIC Does Not Protect You

August 17th, 2009

You may hear more about recent bank failures, looming bank failures, and the FDIC in the coming days or weeks. I’ve seen predictions for “bank holidays” as early as Monday, August 24. Although I do not take such predictions seriously, I do not believe that everything is AOK. In my estimation, the best-case scenario is that the FDIC is dangerously overextended.

Excluding the stress-test list, banks with nonperformers above 5 percent had combined deposits of $193 billion, according to Bloomberg data. That’s almost 15 times the size of the FDIC’s deposit insurance fund at the end of the first quarter.

And a number of sources are reporting that the FDIC is bankrupt. But the spokesmouth for the FDIC, one Sheilar Bair, says there’s nothing to worry about.

The FDIC continues to stand by the nation’s insured deposits with the full faith and credit of the U.S. government. No depositor has ever lost a penny of their insured deposits

Although the plain facts may be in accord with Ms. Bair’s claim that “The FDIC continues to stand by the nation’s insured deposits with the full faith and credit of the U.S. government. No depositor has ever lost a penny of their insured deposits,” the truth of the matter is somewhat more complicated.

If losses exceed the amount of reserves held by the FDIC, the FDIC will simply ask the Treasury to print some new currency in order to satisfy insured depositors during a bank failure. Whatever amount of money is created out of thin air in order to satisfy the “insurance” obligations of the FDIC is “lawful money” according to legal tender laws which require private citizens to honor such fraudulent notes for “all debts, public and private.” A more accurate statement from Ms. Bair would say something like: “The FDIC ‘insures’ the nation’s deposits with the full force and violence of the U.S. government.”

And what else? Whatever new money is printed or digitized into existence does not add materially to the well-being of any individual in society. It merely devalues any existing currency and redistributes wealth in real terms. Whatever happens, those most responsible for the problem (the bankers, and to some much lesser extent, their customers) will not be punished for the financial collapse, while the rest of us will be. Although no physical diminution of deposit balances takes place, in real terms, the value of these deposits will be decimated.

So the government says “put your money in a bank and don’t ask any questions about where it goes or what it does, we will protect you.” This creates a moral hazard, virtually ensuring that the banks will misappropriate your money. The banks like this arrangement because most of the time they can get away with it, and when they can’t, the government bails them out on the backs of the taxpayers. Rest assured, some of these banks will fail, and the other well-connected banks (like Goldman Sachs) will get to acquire them with your money, for pennies on the dollar, and if they’re not able to turn a profit, they’ll simply unload the non-performing assets/divisions on the government.

Why would the government — your government — play along with this game? The obvious answer is that it’s not your government. Never was. But that fiction sounds nicer than the truth, so just go right on believing it, if it suits your fancy.

You need to understand that everything you’ve ever been told about government is a lie; it’s all a ruse. The FDIC isn’t there to protect you, it’s there to protect the fucking Ponzi scheme of a banking system by providing a shroud of legitimacy and credibility.

Comments

4 Comments

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  • The New Anarchist says on: August 18, 2009 at 3:12 pm

     

    "Change has come to America." HAHAHAHAHAHAHAHAHAHAHA!

    They're just changing the game or the face of it and hoping people will be appeased.

    • nothirdsolution says on: August 18, 2009 at 5:09 pm

       

      Yes… if any administration was honestly committed to "change" they would spend their first 100 days rapidly dismantling as many of the previous administrations blunders and usurpations as possible. That they do not do this – ever – is evidence that both major political parties are on each others' side; not yours or ours.

  • Don says on: August 19, 2009 at 1:20 am

     

    I agree with your comment above except for the last 2 word, …"or ours."
    I put the word *ours* in the same box with us, we and them.
    I ain't a part of any of that stuff, I am just me.
    You see when you use the word *ours* you are including people that may seem like you and me but they are more like the gov't in that they approve of what the gov't does by sanction or ignorance.
    Some of these people are votists and all of them are horribly deranged and the proof is that what they believe to be freedom is actually slavery and what you and I believe is freedom, to them seems like insanity. The fact of the matter is that as society has cheapened so have many of the members that reside there and their opinions and beliefs and their stupidity is dragging everyone down big time. If the US population was 100mil instead of 300mil much of this insanity you see today wouldn't be happening as 2/3 of the stupid people would not be here. Its not the smart people that make things good so much as the stupid people that make things bad. They simply don't know any better, but the smart people do, and they are the ones that will come out the otherside.
    Stay smart.

  • the only change is ACCELLERATED DICTATORSHIP AND FASCISM says on: August 31, 2009 at 2:11 am

     

    the only change is that we now have a government that is so totally, utterly corrupt to the core, that it is accelerating the march toward a DICTATORSHIP and MARTIAL LAW with it’s actions.

    it has purchased half a million plastic coffins to stick dead american’s in after it SLAUGHTERS THEM WITH SWINE FLU VACCINATIONS, or uses other biological agents against the population.

    the gig is up. the U.S. is in total, complete financial RUIN, and the FED is bleeding the last bits of wealth from the system and making the nation’s indebtedness so onerous, that a U.S. DEFAULT ON IT’S DEBT OBLIGATIONS will occur any day now.

    so what then? Either they pull another 9/11 style ‘false flag’ attack and blame it on another nation, and DECLARE MARTIAL LAW FORMALLY (as if we’re not already living under it) and then turn the internet off.

    this game is over, people.

    The United States is OVER WITH. Any illusions you all have that it is still a functioning republic, are completely unfounded by any facts to support that.

    it is time to LOCK AND LOAD. the fourth box is the ONLY OPTION LEFT.

no third solution

Blogging about liberty, anarchy, economics and politics