Reasons Saving Money in the Bank Can Be Extremely Risky

At a cash flow game meeting earlier this week, a discussion about bank CDs surfaced. Some individuals were claiming that a bank CD is safer than different assets (in this case, gold and silver). Their justification was that those stores are insured by the FDIC (Federal Deposit Insurance Corporation). Be that as it may, a saving account or a CD in the bank is perhaps one of the most least secure moves right now because banks themselves are in an exceptionally unsafe position. We will examine the various reasons why investing in a bank CD is considered a sketchy move.payment cards

Above all else, the banks have various derivatives of European sovereign debt, also known as credit default swap (CDS). Discs is basically insurance. Like car insurance, the insured pays the charge to the insurance company. Consequently, the insurance company will insure the proprietor’s car and they will pay the insured should a car accident happen and click https://www.marketing2business.com/definitions/bank-run/. Banks (mainly the U.S. financial institutions) offer insurance to the European governments in the case of their default. Consequently, the insured nations will pay the premium to the U.S. financial institutions actually like the aforementioned car example. Notwithstanding, this represents an issue because the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) are all in profound financial difficulty.

¬†Once the greater European nations begin to default (Portugal’s interest rate is right now 14% and is in no position to repay the debt without defaulting), these will trigger the CDS to detonate. As such, the U.S. financial institutions need to pay the gigantic amount of money to these failing nations. Derivative markets are estimated to be a $1.5 quadrillion market which will contribute to the greatest financial collapse in the United States. If you are completely aware of what is really going on, then, at that point it is clear why the Feds are stepping up to bail out the Euro Zone with the U.S. taxpayers’ money and why Treasury Secretary Timothy Geithner and President Obama continue claims to assist the Europeans. The genuine agenda behind this is to serve the U.S. banks, not assist Europe. If they do not do this, all of the major banks will disintegrate to bankruptcy.

Secondly, the government has temporarily suspended the accounting rule called FASB 157 (Financial Accounting Standard Board). FASB 157 is also known as the mark-to-market rule. This basically states that all the corporations should adjust their asset values based on the market value each quarter so the financial statement mirrors their most updated and genuine financial condition. Subsequently, the corporations holding toxic assets have to realize the misfortune, and if the liability surpasses the value of the asset, then, at that point it has to fail. Notwithstanding, the Too Big To Fail banks are the exceptions.