Can we trust the banks with our money? Fifty years ago, anyone raising such a question was considered a paranoid lunatic. One hundred years ago, the question had some legitimacy behind it, as lots of folks did not yet trust banks. Many people who lived through the great depression in the 1930’s in the U.S. understandably became mattress stuffers, having seen bank failures actually happen. Here we are in the year 2013, living in the digital money age where cash is a rapidly vanishing entity, and we once again must wonder about our money being safe in the bank. It appears we have come full circle.
The situation in Cyprus seems far enough removed to not cause many Americans to have sleepless nights. Of course, it really isn’t as far removed as it seems. Repercussions in Italy and Greece are likely. From there, who knows what could happen. We all know this, but we don’t let it upset us too much. In this day and age, we are just thankful our own highly questionable financial system is still somehow holding together. Better there than here.
Can’t you just picture Jimmy Stewart behind the counter of the Cyprus banks telling the people, “You’re thinking about this place all wrong! Your money isn’t here, it’s in Dimitris’ house and Christos’ house and Giorgos’ house!” Only, that’s not the way it works in modern banks. These days, home mortgages are sold to specific mortgage holding companies who service them. Your deposited money should be in the bank.
…just not in cash. Banks don’t have that much cash on hand. It’s not in gold, either. The money is all just digits in a computer database. You can get some cash, of course, but it’s best if you just keep using your cards and adjusting the balance of those numbers. Hey, you can always close your account and transfer it all to another bank and look at those same numbers on different letterhead - assuming, of course, you even bother to receive paper statements anymore.
So, when the mobs hoard the Cyprus banks upon their reopening, nobody can get more than 300 bucks per day. They cannot transfer more than five grand out of the country. They can, however, close their accounts and transfer it all to a different bank within the country of Cyprus - which will seem like an exercise in futility. All of this is to prevent a run on the banks. A bank run is a mob mentality that has the very real potential for igniting an unnecessary financial crisis.
Here is my take on the entire situation:
As usual, the problem does not lie in the mechanics of how things are operating, but in the reaction of the human mind. Our resistance to change and tendency to overreact to negative-seeming developments is what causes most of our problems. The Cyprus banks came up with a very reasonable solution to thwart off a massive financial crisis. They were going to take 10% of all deposited funds in the banks. Everybody kicks in 10% of whatever they have. Problem solved, and everyone gets to keep living their wonderful little life on a Mediterranean island. (This is especially reasonable considering that your 10% would be paid for in less than three years at the 5% interest rate Cyprus banks currently pay depositors. You are still better off there, after paying the bailout assessment, than you are having your money is USA banks.)
But noooooooooooo. They had to go get all up in arms about it. Now the banks are being forced to do something different, something much more conspicuous. They will be shamefully robbing the wealthy and upper-middle class instead. Instead of everyone paying their fair share, large depositors will now lose up to 40% of their balances to pay for the bailout. This is a much worse solution for many reasons, but the main one is the large depositors will be pulling all the rest of their funds out of that country just as soon as they are able. Count on it. This sets up a condition which could very well result in real bank failures in the near future. The bulk of the wealth will be removed.
Folks, if the choice is to pay 10% of your money or risk complete financial ruin, the correct answer is to pay the 10% and go back to your happy life where the currency is still good and a loaf of bread doesn’t cost a wheelbarrow full of cash. Whining and complaining your way to making those richer than you pay for it, and driving them all out of your economy as a result, leaves you on an island of only poor and destitute whiners and complainers.
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When you arrive at a stop sign at the same time as another vehicle, you know how to handle it, right? Or are you one of those knuckleheads that are inspiring this post? It’s supposed to be real simple. At least that’s how they make it sound on the DMV written test. Whoever gets there first goes first and if you get there at the same time the person on the right goes first. That should solve everything, right?
Not quite. The DMV left out a lot of interesting situations that happen in real life. No doubt some of them appear during the DMV driving portion of the test, exposing the written test inadequacies. Lets look at a few of them.
Situation 1: Both Drivers Wanting to Do the Same Thing
There was a movie (it might have been L.A. Story with Steve Martin, then again maybe not) where four cars all got to a stop-sign intersection at the same time. They all waited for somebody else to go then finally they all decided to go at the same time, which caused them all to stop again and wait, and then finally all decide to be the one to go again. This process repeated until they all collided in the middle. It was hilarious and it makes you wonder why you have never seen this in real life. We have all certainly experienced the beginning of this with at least one other driver occasionally.
Why didn’t we get into an accident? Because at some point one driver insisted on stopping until the other went. However it’s possible for both drivers to get this resolve and frantically keep waving at the other until they both concede at the same time. I’m sure this scenario has resulted in at least some accidents, but the odds are way against it. Too many possible other variables which involve one person conceding first.
Situation 2: Three or More Cars Arrive at the Same Time
When three or more cars get to the intersection all at once, the rules of the road change slightly. Whichever car goes gives the green light to any car going the exact opposite way from the other side, regardless of when they arrived. This is because you are not impending anyone and everyone expects you to go. If you sit there like a dolt insisting on waiting your turn, you screw things up.
Situation 3: Pedestrians
Pedestrians really throw a kink in the works. It’s normal for at least one driver not to see them at first, and therefore not understand why another car is not acting in turn. This is another time when you can go out of turn - when the car whose real turn it is happens to be is stuck waiting for pedestrians. If the pedestrians do not affect your route, you can and should go. Not doing so makes you an idiot who messes things up.
It can be difficult being a pedestrian in these situations as well. I have this issue when jogging sometimes. I generally try and start getting across when nobody is at the stop signs. The problem I have with some idiots is that if they get the notion that I want across, they will stop and insist on waiting for me (when I just want them to go and get out of the way). This is really awkward when other drivers come up who do not want to wait for me and it puts me in a bad position. So my plan is usually to fake out all drivers and show no signs of my actual intentions - as it just works better for me.
As a matter of fact this is often something you have to do while driving as well, but that is a topic for another day. Suffice it for now to say that you often have to disguise your intended actions in traffic situations. This is because if the idiots get wind of it they will do things to make it difficult for you, whether they intend to or not. Driving is the ultimate game of avoiding and outsmarting idiots.
The media is very fond of telling us about the bad economy every time we turn around. How does that make you feel? Like going out and buying new furniture and then going out to dinner? Or like withdrawing all your money from the bank and hiding it in a cracker box? For most people it’s the latter. And you know why, right? You got it - because most people are mindless drones who don’t think for themselves and allow everything they hear and see to program their behavior. In short, most people are idiots. (I know you aren’t one of them or you wouldn’t be here reading my blog.)
It just so happens that Mama Riah and I went out a couple weeks ago and bought a new couch before going out to dinner. The furniture store was packed. They were selling stuff left and right. The nightly news would have me think that these places are nailing boards over the entrance as all the employees get into a 27-mile long unemployment line. But that’s not what is happening if you get off your butt and go look around for yourself.
However that doesn’t mean that a bad economy isn’t right around the corner. A real bad economy. One where credit dries up completely and people actually do stop spending. What you have seen so far ain’t nothing folks. Things could get bad. Real bad. And you know how that could happen, right? The media keeps pounding and pounding the idea of how bad things are until it resonates inside everyone’s brains and then people become scared. In other words, we all get brainwashed into a bad economy.
For some people this has already happened. In our local news last week there was a story about an elderly lady who heard the news about possible bank failures so she promptly withdrew all her money in cash. She stashed an envelope containing $10,000 in a cracker box. For some inexplicable reason she then decided that she didn’t want the crackers and would rather have the $2.63 cents back that she spent for them, no doubt because of the scary bad economy news stories.
You can guess the rest. She glued to top back together and returned the cracker box to the market and got back her $2.63. After a couple days she realized her mistake and went to the store to ask for her crackers back, explaining the situation. They told her that returned food boxes go back to the manufacturer and that she likely had lost her money.
By some miracle the cracker box got put back on the shelf and purchased by an extremely honest family who returned the box to the store and reported the found money. So the crazy old cracker lady got her money back (and didn’t bother offering a reward), but that isn’t the point of this story.
It is this: If you hear that the economy is bad and that information alters your behavior, you will be responsible for helping to create a worse economy than the present situation (whatever that may be). In my opinion the present situation isn’t bad at all, based upon what I observe around me. Take it from an out-of-work sub-prime mortgage lender! However if we allow ourselves to be brainwashed into a bleak picture of things, it will become our reality. Just ask the crazy cracker lady.