A Mile-High House of Cards… 3 Ways to Protect Yourself Before Your Bank Collapses

Guest Post by Nick Giambruno

It’s hard to think of a topic where following conventional wisdom is more dangerous than banking.

The general public and most financial experts accept as absolute truth that putting your money in a bank is safe and responsible. After all, the government insures your deposits, so if anything were to go wrong…

As a result, most people put more thought into the shoes they purchase than the bank they entrust with their life savings.

However, the banking system is a mile-high house of cards that could collapse anytime.

Here are three reasons why.

Reason #1: Government Deposit Insurance Is a False Sense of Security

The Federal Deposit Insurance Corporation (FDIC) insures bank deposits in the US.

When a bank fails, the FDIC pays depositors up to $250,000. The FDIC has a reserve of around $126 billion for this purpose.

Now, $126 billion is a lot of money. But, considering there are around $9.8 trillion in insured deposits in the US, $126 billion is just a drop in the bucket, around 1.3%, to be exact.

In other words, the FDIC’s reserve has around one penny for every dollar of deposits it insures.

It wouldn’t take much to wipe out the FDIC’s reserves. One large bank failure and the FDIC itself could go bust.

For example, the recently failed Silicon Valley Bank—the largest bank failure since the 2008 crisis—had around $210 billion in customer deposits. That’s $84 billion more than the FDIC’s entire reserve.

Reason #2: It’s Not Your Money

It’s essential to clarify you don’t actually own the money in your bank account.

Once you deposit money at the bank, it’s no longer your property. Instead, it belongs to the bank, and they can do whatever they want with it—like make stupid investments that would render them insolvent and unable to redeem deposits.

What you own with a bank deposit is a promise from the bank to repay you—an IOU. Technically, you’re an unsecured creditor of a potentially insolvent institution.

That’s why a bank deposit is very different from cash in hand. Yet the vast majority of people wrongly conflate the two.

Reason #3: The Money Is Not There

The money you think you have in the bank is not actually there.

During the Covid hysteria, the US government eliminated all bank reserve requirements. In other words, banks are not obliged to keep any money on reserve to meet withdrawals.

If only a tiny fraction of depositors demanded their money back, most banks would be in big trouble.

This slimy practice is known as fractional reserve banking—and it’s totally legal, though only in the banking industry. However, that doesn’t change the underlying fraudulent nature of the activity.

Imagine any other industry using a fractional reserve system, like a fractional reserve car dealership or jewelry store. The car salesman and jewelry store could then create more claims for cars and pieces of jewelry than what exists in their inventories. It would be clear such a practice would be fraudulent and similar to a Ponzi Scheme.

Fractional reserve banking only works—temporarily—because banks can go to the so-called “lender of last resort,” the Federal Reserve, in case they get into trouble. The Fed can then create new currency units out of thin air to bail out the banks.

For example, this doesn’t work in the car or jewelry industries because no “lender of last resort” can create cars and gold necklaces out of thin air to bail out fractional reserve car and jewelry businesses.

Let me translate it into plain English.

A “lender of last resort” means legalized counterfeiting of the currency to backstop a legalized Ponzi Scheme.

What Happens Next

In short, the whole house of cards could come down in the event of another Lehman-style financial shock.

The failure of Silicon Valley Bank could be the catalyst for such an event, which means the situation is urgent.

It could all spiral out of control in an instant.

Bank holidays, capital controls, bail-ins, deposit confiscations, and forced conversions to central bank digital currencies (CBDCs), are all on the menu… and sooner than most think.

These measures are like an ambush…

They’re only effective if it’s a surprise.

Whenever you hear a central banker or a politician say something won’t happen, you can almost be certain it will happen—and probably soon.

It’s like the old saying: “Believe nothing until it has been officially denied.”

These deceptions have a purpose: Politicians and central bankers must surprise the public to get the desired results.

It’s a pattern repeated in many countries during a crisis. I bet we’ll see it again soon.

So if you hear politicians denying they are considering imposing a bank holiday, capital controls, or a bail-in, take it as a big clue that they are actually imminent.

What You Can Do… Three Strategies

It behooves free and independent people to ensure that someone else isn’t in charge of their destiny. A big part of that is securing your money. No politician or constitution will do that for you. It’s something you have to take responsibility for.

The idea is to own some assets with as few counterparties as possible.

Ideally, you have some wealth you own outright, without a bank, a custodian, or some other 3rd party that can restrict access to or seize your assets.

So, taking your money out of the banks is a good start. How much to remove is a decision that each individual must make given their circumstances.

But then where do you put it?

As I see it, you have three options for your liquid assets.

Option #1—Cash: You could try to withdraw it as cash. However, it’s not guaranteed the bank will honor your request, and if they do, they probably won’t make it easy. Traveling with large amounts of cash is also unwise. It makes you a target for thieves and cash-sniffing dogs. Governments will also steal the purchasing power of your cash by debasing the currency.

Option #2—Physical Gold and Silver: Buying physical gold and silver bullion coins is a good choice. Owning physical gold and silver in your possession gives you access to money without counterparty risk.

I recommend avoiding numismatic or collectible coins. They are more complicated, can have significant premiums, and present an opportunity for you to get ripped off if you don’t know what you’re doing. Instead, keep it simple and stick to the widely recognized bullion coins like the American Eagle or the Krugerrand.

Unfortunately, physical gold and silver coins present a similar problem as cash. Traveling with many of them is not a good idea as they quickly show up in x-ray machines.

Option #3—Bitcoin: There’s never been a time when it’s been riskier not to own Bitcoin.

Bitcoin separates money from the state and offers regular people a haven. They can easily use it to hold, send, and receive wealth without the permission of any third party.

However, it is critically important to emphasize that you should only hold Bitcoin in a non-custodial wallet where only you control the private keys.

For example, if you own Bitcoin on Coinbase, Cash App, or some other custodial platform, you don’t own your Bitcoin but rather a “Bitcoin IOU,” which is very different. As a result, these custodians can easily freeze and seize your Bitcoin just like a bank can with its customer deposits.

Holding Bitcoin in a non-custodial wallet is like having a physical gold coin in your own possession. Nobody can take it from you or deny your ability to use it. Nor do you need to depend on any third party.

Here’s the bottom line.

The banking system is a mile-high house of cards that could collapse anytime.

Here are three reasons why:

Reason #1: Government Deposit Insurance Is a False Sense of Security

Reason #2: It’s Not Your Money

Reason #3: The Money Is Not There

It could all spiral out of control in an instant.

Bank holidays, capital controls, bail-ins, and CBDCs, are all on the menu… and sooner than most think.

Don’t be complacent, and take action to secure your money before it’s too late.

I suspect the banking system could have big problems soon… and it won’t be pretty for most people.

Few people are aware of what is really happening.

And even fewer know how to prepare.

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