Is this a realistic scenario?

[EmeraldCityGrl]

We were talking the night about what the current economic bubble is. Most people
thought it would be precious metals. I'm wondering if it could be cash.

A couple years I go I started banking with a local Credit Union and a local community
bank. Two weeks ago within 2 days the small bank had changed hands, name changed,
everything. It was bought out by some private investors in another state. I don't have much
to lose but wondering about those that do. Could there ever be a scenario where the
investors of these banks pull out cash, file for insolvency in numbers great enough to bankrupt
FDIC ?

edited to read FDIC, not FICA.

[Blue Meany]

1. Deflation would cause investors to favor cash, since everything

else would be losing value.

[Demeter]

2. The question is: WIll the new owners commit fraud and break the bank

You need to ask: what do these investors know about banking, and what have they done, what do they intend to do?

Have they started collecting banks to shore up some big fraud, or are they true service-oriented bankers?

Your instinct to go small and local was a good one. The question is: will the new owners continue to do banking, or will they specialize in wheeling-dealing?

[EmeraldCityGrl]

3. Bingo! Thanks for rephrasing my question and

answering it at the same time. Since FDIC was established after the Depression to
instill trust in the banks and banks currently holding onto so much cash, they seem
ripe for the picking. FDIC has been under enormous pressure I don't think they could
survive both a run on banks by the depositors while investors defraud them at the same time.

[Demeter]

4. Banks are not really holding onto "cash"

They just aren't making loans. And for good reason. Their file cabinets are stuffed with non-performing loans, which they cannot foreclose upon because the assets will deflate like pieced balloons and never cover the losses they will experience.

Even little banks could have been roped into the bubbles in commercial real estate--usually the residential bubble was securitized and passed onto "investors" who are now holding waste paper, except perhaps the equity loans. I haven't heard of any of those being processed into investment opportunities for suckers.

[EmeraldCityGrl]

5. If more and more people go into saving mode

as they sell equities and buy CD'S and open money market accounts, would that not be
cash holdings?

I know very little about how banks operate, but either do most banks. :)

[Demeter]

6. Very few Americans today are in a position to save

There are of course the Hoarders, whom I call the Obscenely Wealthy. They have lots of Paper Assets, which are evaporating daily, and although Bernanke at the Federal Reserve keeps trying to pump up those assets, it is an illusion, not a fix.

The OW also have real assets: real estate, art, gold and silver, maybe a company that makes a profit, and some of that may be free and clear of debt.
But that's not cash, nor particularly liquid in this economy, except for the gold and silver...

Banking today isn't what you and I grew up with. It's more like a casino than a form of accounting, storage, and renting capital for interest. That's why many people are turning to credit unions, which are by nature and by law prevented from engaging in global roulette games.

You have to be your own doctor today, because medicine has changed and insurance companies run the show. You have to be your own lawyer to be sure you aren't getting screwed over by the one you pay $250/hour or more. And you have to be your own investment advisor/banker. Because the Rule of Law in this nation and around the world has been broken by Global Corporate Power and nobody, least of all Eric Holder and his boss, has any interest in fixing it. And Everybody without exception is taking advantage of it, or being taken advantage of.

buyer beware was never more important.

[oldhippie]

7. So, am I "Obscenely Wealthy" ?

I'm retired and live on Soc. Sec. and a gov't pension. My wife and I live frugally and well within our means. We still manage to put sometimes $1,000 most months into savings for future purchases or vacations. We also have assets in IRAs. Are we Obscenely Wealthy in your view?

[EmeraldCityGrl]

8. In my view you are not and are exactly the type of person

I'm referring to. In past decades retirees might have kept what they've saved in stocks and bonds,

but no longer trust the equity markets so have reverted to money markets and CDs.

[oldhippie]

9. I'm not so sure ....

Right now my retirement investment portfolio is about 52% equities, 46% bonds, and 2% cash. I also have real estate in the form of a paid off home, and even a few gold coins as an inflation hedge. I can't see getting into CDs and MM funds as there is just about zero return on them relative to inflation. The closest I can get is Insured tax free municipal bond funds, which at least pay a little return after tax. Yes, I know the economy is in a bad slump now, but I still think that bonds and equities are the way to go. I'm ahead of where I started, and I think (hope?)things will get better before I need the cash the assets will bring.

So I guess I'm not really one of your examples. It's just that the post I responded to seemed to deem me as one of the Obscenely Wealthy, just because I have stocks, bond, real estate and gold, and I sure don't feel that way.

[Demeter]

10. Of course not!

Obscenely wealthy own more than three houses, more than two cars, pay cash for heart transplants, set up grandchild trusts to skip a generation, etc. etc.

They own too much of everything, more than they can use in three lifetimes. They endow churches and university chairs or departments or buildings.

They hide money in foreign lands and funny securities.

You get the drift.

You, on the other hand, are one crisis from poverty. In that, you are better off than most of the not-OW. Hope it stays that way for you.

[Po_d Mainiac]

11. the best way to rob a bank..is to own one

http://www.portervillepost.com/pdf/The_Best_Way_To_Rob_A_Bank.pdf

http://www.sosotech.com/html-uncategorized/william-k--black-the-best-way-to-rob-a-bank-is-to-own-one-how-corporate-executives-and-politicians-looted-the-s-l-industry.html