Question about banks...is there ever a chance...?

[1babysmom]

Disclaimer- I'm probably putting myself out here to looks EXTREMELY stupid and naive, so excuse that, okay? I just stress about the dumbest things and figure that it can't hurt to ask...well, can't hurt anything other than my MDC reputation.

Okay, here we go. Is there ever a chance that the money we have in banks in the US would no longer be available to us? I mean, would that be if the gov't went broke or what? I know that they're FDIC insured but what would it take to hit rock bottom and the money American's have in banks no longer belongs to them and they can't get it out. Is that a possibility, and how likely is it??

*wipes forehead* Okay, I asked. I just don't really give our country a lot of credit these days regarding money for OBVIOUS reasons, and while we're trying to save up money (we live comfortably on a VERY low, tight income, but that's partly why I feel this way) I feel nervous about putting so much into our bank savings (both local and ING) with fear that one day things might change and everything we'd saved up would be gone. We have a small cash stash in our house but then I'm afraid of losing THAT in a house fire. LOL

My focus ISN'T all on money, I swear! I just want to be smart about things for the long run.

So laugh away! But answer my question while you're at it, if you can.

[Vypros]

I've wondered the same thing, so you are not dumb for asking this.

The way I see it, though, is that I don't believe you'll ever see it get to the point where you just LOSE your money. If they did that, they would have a SERIOUS revolt on their hands and just pure violence.

The only time I think that you would have a problem of running short and not getting your money would be if there was a situation where EVERYBODY pulled all of their money out of the banks. They just simply couldn't handle that I don't think.

And the odds of that happening are very rare.

[xekomaya]

It's not possible.. I mean not really.. I'm sure you could construct a possible scenerio where we also run out of the ability to print & make money ... but it is possible that the dollar could be devalued so badly it isn't worth anything in the world economy -- then we'd all be broke.

But really, despite poor fiscal management and the impending recession/depression, the American economy is still extremely productive, and still has enough safe-guards to allow business to thrive (domestically and internationally), and thats whats going to guarantee our money doesn't completely bottom out

So no, you're really not better off stashing it under the mattress

[TiredX2]

As the PP mentioned, the only scenario where the money in the bank would "disappear" would be one in which US currency just had no value anymore. So you might have been better off in gold or something, but money under the bed or money in the bank would be just as valueless.

[Piglet68]

...and if people tried a run on the banks they'd just shut them all down immediately and wait for people to calm down. So you wouldn't lose all your money in that scenario, either.

I will say, however, that your thread brings up an important point - diversify. The more money you have, the more you should spread your eggs around rather than put them all in one basket. Equity in a home is great, but if anything happens to that would you be completely broke? Around here earthquakes are a reality and it's almost impossible to get insurance against it. So, just as one example, I would not pay off my home if it meant I would have zero other money in savings, retirement funds, other assets....(or it would take a significant amount of time to replace those). I'm superstitious that way!

[ShaggyDaddy]

here is the thing. It is VERY possible that money will become worthless. It is impossible that money will "dissappear".

The way it is structured your savings is insured by the government. If you have $1 in the bank and the bank dissappears, the government will give you a dollar... BUT what will that dollar get you, that is the question. Storing money in your home has the same issue.

If the banks fail and the government has to "replace" all that money, we will be in a state of hyperinflation, meaning even if you have a mattress full of money instead of a bank account full of money, the effect is the same.

If the banks fail and you get your money back but a dozen eggs costs $10,000 then it won't matter WHERE you kept your money. If the banks fail and you have a dozen chickens, it won't matter to you that eggs cost $10,000.

You can't eat money, it does not shelter you from the rain, it does not keep you warm (for very long).

[cloudswinger]

The FDIC was created because that case did happen. Tons of banks failed after the stock market crashed in 1929. People tried to pull their money out and couldn't, so there were runs on banks and general mayhem, Many people lost all their money and so the Great Depression started. But there was also a time in the 80's where the FDIC system was tested. But this current bank crisis isn't covered by the FDIC. The FDIC only covers savings and checking accounts, while the bank problems are with mortgage accounts. And the FDIC only cover up to 100K, so if you have more than that, you could open an account in another bank for coverage up to another 100K. But honestly, if you had that much, you shouldn't be keeping it all in savings accounts anyway. You really need to diversify, and you could also keep money in a foreign currency, like the Euro. ING is a foreign based bank, so I'd be less likely to worry about it collapsing. I'd keep the minimum cash at home, more for local emergencies like hurricanes and earthquake type things, but in a fireproof lock box or safe. You won't be able to access your money when the power is out, those ATMs don't work well without it.

In many other countries, people still use jewelry as assets. It's easy to carry if you have to leave quickly. Nobody would want a piece of paper, but if it sparkles, someone will still want it.

All these scenarios are pretty real and there are countries that are having to deal with them right now. I forgot which country just changed its monetary system recently and swapped the people's money out for something like 1000 to 1. It's unfortunate the way things are structured that most people in the US are not allowed to have chickens. And I'm sure there are plenty who wouldn't know what to do with a live chicken. Or how to catch fish. Or have the seeds for their own garden.

It's not that big a deal, we'll just owe more money to China and various other countries.

[A&A]

Originally Posted by cloudswinger

The FDIC was created because that case did happen.

:

BUT the FDIC is only as strong as the gov't, which is currently trillions of dollars in debt.

[velochic]

Originally Posted by A&A

:

BUT the FDIC is only as strong as the gov't, which is currently trillions of dollars in debt.

Actually this isn't entirely accurate. They are an independent agency and receive no appropriations from congress. The premiums are paid by the banks that it insures. The deficit does not affect the FDIC. Check out the FDIC website to see how it operates.

Cloudswinger: Turkey recently (2 years ago) "shaved a few zeros" off of their currency. A simple trip to the grocery store would cost a few million lira before they readjusted the currency. It didn't mean that the currency was "worth" less, it just meant that they reprinted the money with fewer zeros. The money didn't have less buying power... the stores adjusted prices and the government adjusted the currency. It did come about due to hyperinflation during the 80's and 90's. People in Turkey did and still do invest in gold coins and real estate... those are about the only two real investments that are not negatively affected by the inflation of the country.