The Banksters Want Your Money

Here’s how you avoid them… [Morning Reckoning] February 09, 2023 [WEBSITE]( | [UNSUBSCRIBE]( The Banksters Want Your Money - What are bailouts? - What are bail-INS? - Don’t get trapped in a bail-in… Asti, Northern Italy February 9, 2023 [Sean Ring] SEAN RING Good morning Reader, Happy Thursday from lovely Northern Italy! I’m sure you’re wondering, “Why the hell is he writing about bailouts? Isn’t this an ancient topic?” I don’t blame you. Back in 2008 in the US, bailouts were the order of the day. And in 2011 in the European Union, depositors at Cypriot banks were bailed in. Allow me to set the stage… First, thank you for your generous feedback. I was nervous writing for the Morning Reckoning – if people would find my insight useful – and you’ve put my mind at ease. Second, the feedback has been of particularly high quality. Those who’ve written in have brought up all kinds of interesting subjects, from vaccines, to Russia, to central bank digital currencies (CBDCs). It’s been wonderful – and humbling – to read. So when I saw bailouts and bail-ins in the mailbag, it piqued my curiosity… [CUSTOMER SERVICE: We’re trying to reach you]( Your important customer care message can be [found here.]( You are by no means required to act on this opportunity. But I believe it’s in your best interest. This will be removed on Friday, February 10th at midnight. You have just days to act. [Please click here for more information.]( [LEARN MORE]( Here what one of you had to say: I’d love to see you cover the topic of “bail-ins” and how the banks can now bail-in our deposits during any financial crisis, to bail-out, once again the “BANKSTERs!” What options do we have to safeguard our cash, other than to deposit in a bank? Sure, own a little gold, bitcoin, etc.…. I don’t want to be bailed-in! -Mike M. Well, Mike, you’re correct. The government can bail depositors in. And it may be legal, but I personally think it’s a crime. But – and it’s a big “but” – there are specific rules as to how a bail-in occurs. So in this Morning Reckoning, I’m going to talk about the difference between bail-ins and bailouts. Then I’ll explain under what conditions a bail-in can occur. Finally, I’ll give you a couple of ways to make sure that never happens to you. Let’s get to it. What are bailouts? First, let’s go over the easy part and get it out of the way. A bank bailout is when the government provides financial assistance to a poorly managed bank to prevent its collapse and protect the depositors' money. Which depositors? We’ll answer that question further down... Former U.S. Treasury Secretary Paul O’Neill once said of bankruptcy that it’s the “genius of capitalism.” By speaking that fundamental truth, O’Neill was relieved of his job. Banks are companies and ought to be allowed to go bankrupt. I was against the bailouts in 2008 and my position has never wavered. Once poor banks go under, the space is cleared for new banks – or new methods for saving – to spring up. Sure, would bankruptcy hurt some depositors? Yes. But not those who have less than the maximum deposit insurance level. I’ll talk more about that later. Now… how does the government execute a bailout? This can be done by injecting capital into the bank, guaranteeing the bank’s debts or nationalizing the bank. Or, in the case of Bank of America and Merrill Lynch, the Federal Reserve Chairman can [force an acquisition](. Bank bailouts are controversial for good reason. They usually involve taxpayers' money to rescue financial institutions that are too big to fail. But even worse is that the central bank may print money to cover the losses. [From September 2008 to mid-November 2008, the Fed’s balance sheet doubled](. To quell public anger about bailouts, governments came up with a new method to save overextended banks: the bail-in. [Has World War III Just Begun?]( NATO sends tanks to Ukraine… Russia prepares for a winter offensive… [Is the beginning of World War III?]( [This Simple Chart]( I’ve just released an urgent message with my thoughts. But more importantly, I’m offering to send you an [exact playbook]( on what I see playing out in the world and what you need to do to prepare. [Simply click here now to watch my short message and to see how to claim a copy completely free of charge.]( [LEARN MORE]( What are bail-ins? A bank bail-in is when a troubled bank's creditors and depositors with large balances are forced to bear some of the losses instead of taxpayers. This is done by converting a portion of their debt into equity or by seizing their deposits to recapitalize the bank and restore its financial stability. A couple of things: creditors (bondholders) take this risk every day. It’s why fixed income traders are so miserable compared to equity traders. Equity traders ask, “How much money am I going to make today?” Fixed income traders ask, “How much am I going to lose today?” Regarding depositors with large balances, this is the key to the whole conundrum. It’s critical to remember the Federal Deposit Insurance Corporation (FDIC) in the United States insures your deposits up to $250,000 at each institution. And [that covers]( -Checking accounts -Negotiable Order of Withdrawal (NOW) accounts -Savings accounts -Money market deposit accounts (MMDA) -Time deposits such as certificates of deposit (CDs) -Cashier's checks, money orders, and other official items issued by a bank What’s more is that each ownership category is covered. That is, if you have two or more accounts in two or more different ownership categories, you’re insured up to $250,000 on each. Here are the different [ownership categories]( -Single Accounts -Certain Retirement Accounts -Joint Accounts -Revocable Trust Accounts -Irrevocable Trust Accounts -Employee Benefit Plan Accounts -Corporation/Partnership/Unincorporated Association Accounts -Government Accounts So this begs the question: if the FDIC insures all this, how can you possibly get bailed in? How can you get trapped in a bail-in? Let’s say you only have one single account at one bank. You’ve got $300,000 in that single account. Your bank is about to go under, but the government has ordered a bail-in. In a plain vanilla bail-in scenario, $250,000 of your deposit will be perfectly safe. The $50,000 you’ve got over the deposit insurance limit will be “bailed in.” That means the $50,000 will likely be exchanged for stock in the bank that’s worth nowhere near $50,000. You’ll probably feel like you’ve lost $50,000, even if you didn’t lose the whole amount. So how do you make sure this doesn’t happen? What can you do to avoid getting bailed in? There is no guaranteed way to avoid a bail-in, but depositors can take steps to reduce their risk: -Don’t keep one large deposit at a single bank: Keep smaller deposits in multiple banks. That reduces the risk of losing a large amount in case of a bail-in. Also, ask your accountant to help you make sure separate amounts are in different ownership categories if you must, for some reason, stay at one bank. -Spread your deposits across different banks: Keep amounts less than $250,000 at multiple banks within the U.S. That’s easy. -Bonus tip: Since I’ve lived in a few countries, I never closed those foreign bank accounts and I use them as cash protection vehicles. If you’re American, keep in mind that you must declare your foreign bank accounts to the IRS (FBAR) with your tax returns [if those accounts exceed $10,000 at any point in the year](. -Know the bank's financial situation: Forgive me for being so obvious… but you definitely want to avoid banks that are in financial distress. -Consider different investments: The easiest thing in the world to do is to buy [US Treasury bills and bonds](. They’re liquid cash substitutes the USG guarantees. And thanks to Chairman Pow, you even get a bit of yield nowadays. Remember, these ideas only reduce the risk of a bail-in, they don’t guarantee that outcome. Ultimately, governments decide and they’re unpredictable. Wrap Up Not only do you now know how to reduce your chances of getting bailed in, but you also know why governments invented them. Think about it. Only people with amounts over $250,000 would be affected by a bank going down. So yes, your instinct was correct. In 2008, the government only bailed out their rich friends. It didn’t “save the world economy.” And since the public figured this out pretty quickly, the Europeans invented the bail-in to require those rich folks to participate in the losses. America later adopted bail-ins as a legal measure which will probably only be used for banks that aren’t too big to fail. A big thank you to Mike M. for the stimulating question. I try and read all the emails you all send me… it helps me get down to what really matters to the people I’m writing for. If you have any feedback or topics you want covered, be sure to click [here](mailto:feedback@dailyreckoning.com) and drop me a line. Otherwise, I hope you take measures to protect yourself if you haven’t already. Once you do, stop worrying about it. There are far bigger fish to fry nowadays. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com [Biden’s “Hush-Hush” Plot Uncovered]( [This Simple Chart]( Right now, Joe Biden – along with 9 of the world’s largest banks – have initiated [a disturbing new experiment with YOUR cash](. It’s called “Project Cedar” – and up to now it’s been kept fairly “hush-hush”… But in [this urgent new exposé]( you’ll discover critical details behind Project Cedar and what Biden’s master plan really is. [Click here to learn the critical details before it impacts your money](. [LEARN MORE]( In Case You Missed It… An Idiot’s Guide to Bitcoin (Part 2) Greg Guenthner, Contributing Editor [Greg Guenthner] GREG GUENTHNER Good Morning Reader, Idiots, rejoice! Crypto isn’t just for math geeks, tax evaders and anarchists. Even a normie stock trader can figure it out. You might even make a buck or two along the way… If you’re going to survive the post-bubble crypto hellscape, you need to think differently from the social media pumpers and whatever’s left of the HODLer crew, desperately clinging to their worthless alt-coins. Fortunately, there’s hope for us all – and we don’t need any technical expertise to trade our way out of this mess. In fact, I believe these alluring crypto narratives will cause more harm than good to your portfolio. If you want to actually make money playing cryptocurrencies and their respective trends, you have to ditch the pipe dreams and nutty NFT pitches and tune into how buyers and sellers are actually behaving in the marketplace. Last week, I explained how a responsible luddite should approach the crypto-sphere. Today, I’m going to expand on these ideas. I’ll also dive into the charts to determine where we are in the crypto cycle – and where the sector could go from here. [Warning: Will “Bidenflation” Destroy Your Retirement?]( [This Simple Chart]( If you’re like most Americans, you’ve worked hard for decades to build your financial legacy. And now, as a result of Biden’s disastrous money printing policies, that’s all at risk. According to one top retirement expert, “Bidenflation” threatens to destroy your retirement and make your hard-earned savings worthless. That’s why you must take action right away to protect yourself… [Click here now to get the simple, step-by-step actions to survive “Bidenflation.”]( [LEARN MORE]( And just in case you missed it, [here’s]( where you can find the first part of my crypto guide. Here are the key facts you’ll need to digest before moving forward: First, you need to recalibrate your brain and start to think like a crypto outsider. Ultimately, price matters more than any convoluted crypto narrative. I’m not asking you to plug your ears and ignore everything you hear. Just don’t get sucked into the compelling storylines that might cloud your investing judgment. It’s all too easy to convince yourself to hang onto a bad investment when you’ve bought into the story. Next important point: crypto and tech growth are two sides of the same coin. Cathie Wood was spouting some nonsense last week about how ARKK is the new Nasdaq. Sounds like something the brainwashed crypto masses would have latched onto during the Covid Bubble. Crypto is the new Nasdaq! Crypto will topple Wall Street and usher in a new era of world peace! It’s no surprise crypto and the tech-growth trade captured the attention of the wildest speculators during the bubble times. They traded together on the way up and the way down. Crypto even led the stock market higher during the bear market’s extended relief rally last summer. Therefore, it’s important to link crypto’s trends and prospects with the tech-growth trade until the market proves otherwise. Watch how the beaten-down tech stocks behave and compare these moves to the action in the cryptosphere. Pay special attention to any divergences. I’ll lay out my price analysis in just a moment. But before we get to the charts, I need to explain why the Bitcoin narrative began to fall apart during the wild bubble times, and how the sector can heal in the aftermath of its latest bear market. Anatomy of a Bubble Early adopters and investors in any new idea are going to be the true believers. In this case, we’re talking about the folks who understand the tech and longer-term prospects of crypto. But the market became much more complicated as crypto assets began to rapidly appreciate, creating bubbly conditions. This frothy action attracts a new class of investor: the greedy speculator. Speculators and profit-chasers ultimately don’t care about the longer-term uses and prospects of cryptocurrencies. Sure, they might perform some due diligence and recite talking points about inflation or decentralization. But their primary concern is making fast money off rapidly rising asset prices. Bubbles are bubbles. It doesn’t matter if we’re talking about tulips, dot-coms, or monkey JPEGs. You could have an asset with the noblest intentions in the history of markets. Bitcoin has been sold as an alternative to global fiat currencies, an inflation hedge, and the key to a decentralized future. That’s fine. The jury’s still out! What’s important to understand is that none of this matters once the speculator class takes over. The prospect of infinite riches twists the entire marketplace into a raucous cash grab. Nothing matters except making as much money as possible in the shortest amount of time. Bubble conditions also poison the minds of the true believers and early adopters. They feel vindicated! After all, their predictions came true and the market is rewarding their foresight. The rapid price appreciation eventually turns these “rational” investors into raving speculators. By this point, everyone involved in the bubble is cheerleading the daily action. This is when a top begins to form. When it comes to crypto’s most recent bubble, the bull’s last gasp came in late 2021. In the following year, Bitcoin lost more than 75% of its value. Many other crypto investments fared much worse. [Crazy “Back Door” Way Into Alt Coins]( Virtually hundreds of tiny cryptocurrencies have shot up 1,000’s of percent over the last year.. [This Simple Chart]( And our crypto expert James Altucher has found a weird ["back door"]( way into these types of fast moving cryptos completely free. One that requires NO monetary investment on your end... (just a few minutes of your time) I know that sounds crazy, but it’s 100% true.. Just [click this link]( and James will explain everything in less than 2 minutes. [LEARN MORE]( A Post-Boom Cleanse Bitcoin bottomed out just below $16,000 in November. The flagship crypto has since posted an impressive pop to begin 2023, gaining 40% on the back of a strong January rally. The big question: Was 2022’s drawdown enough to chase out a majority of the bubble-era speculators and “reset” the market? My main concern with this crypto rally is that it’s happened too soon. Yes, we’ve witnessed bankruptcies and scandals throughout the crypto world. The NFT market completely collapsed. The worst of the froth has evaporated. But was it enough? Does crypto need more time to lick its wounds? We could get this answer sooner rather than later. For Bitcoin, $25,000 is the pivot I’m watching: [chart] Bitcoin (and Ethereum, for that matter) is constructively consolidating its January rally. If it can hold a move above $25K, it could very well break free from a nasty bear market and build a new, sustainable uptrend. This move could take time to materialize. In fact, Bitcoin might need more time to churn in a wide range between $20K - $25K before making an honest attempt at a breakout. We won’t know how it will react until we see the price action close to the breakout zone. We also need to watch tech-growth closely – as well as broader market conditions. Will Bitcoin diverge from tech and blaze its own path? Or are these trades going to continue to push and pull each other in the weeks and months ahead? Any change in this relationship will offer valuable trading information to anyone paying close attention. No matter what, we should brace for volatility. Crypto is notorious for late night and weekend rallies and breakdowns. Just don’t jump the gun. We don’t need to make any grandiose predictions to play the next move. Watch for the reaction at $25K and act accordingly. Barring some quick whipsaws, we should gain some valuable insight into crypto’s ultimate direction in the weeks ahead. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. 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