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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…in California anyway. This is kind of a weird state. We legalize things that are illegal in the United States of America. Yet we are one of those United States. That is something I cannot understand. How can a state legalize something that is not legal in the country? President Obama recently made a plea for Federal drug enforcement agencies to stop “raiding” the California marijuana dispensaries. The ones that the state of California allows to be established and operate. The same ones that are illegal to exist anywhere in the United States of America. Seriously, civil wars start over this kind of stuff. Maybe that is what President Obama is wanting to avoid? Or is just a bone that he is throwing to the liberals who elected him?
Those of you who don’t live in California might wonder how these marijuana dispensaries work. You might have visions in your head of a drive-through window where Cheech and Chong pull up in their smoky van and hand a note from their mother in exchange for pot. Truth be told, the reality isn’t that much different.
I have had the unfortunate opportunity to learn all about it firsthand this week, as my father (in his late 60’s) decided he would see how difficult the process was in an attempt to help his insomnia. Let me tell you, when you go visit your parents and your Dad shows you his bong, nothing can surprise you anymore. That is the end of being shocked or dismayed in this life. A pink walrus could dance through my living room and pass out lollipops, and I wouldn’t think anything of it now.
The first thing he had to do was go to a marijuana-prescribing doctor. This is as simple as opening up the phone book or doing a quick internet search. You make an appointment and when you show up you say you have trouble sleeping and you are wondering if marijuana would help. The doctor tells you yes it might and scribbles you a note (known medically as a prescription) and off you go. The doctor visit might take 10 or 15 minutes.
Now comes the interesting part. You have to go to a marijuana dispensary. The doctor probably recommended one to you, and hopefully he gave you very precise directions – including the secret door knock. They are located in unmarked buildings, no signs, and usually no address numbers visible. New customers are given the color of the building, which donut shop it is across from, and which unmarked door to go through.
Assuming you can find the place, you get in line behind high school boys who better not ever show up asking for your daughter, toothless truck stop waitresses, and tattooed bikers. When it’s your turn you hand them the note, empty your wallet (the stuff is way more expensive than you remember from your misspent youth), and leave with a pill bottle stuffed with the choicest U.S. Government grade buds. Interesting that the same U.S. government which outlaws the dispensary is growing and processing the marijuana – and somehow allowing them to get a hold of it and distribute it before they raid them.
So, that’s it. Anybody can get it. Kids who get diagnosed with ADD or ADHD (the biggest sham in America) get subscriptions for it. The marijuana doctors are in the marijuana prescribing business and are not too picky about your particular health complaint. Cancer? Here you go. Have trouble sleeping sometimes? Here ya go. Elbow pain? Here ya go. We have lived to see the day and age where marijuana is legalized. I never would have guessed this as a teenager when the cops kept confiscating my pot.
A CEO for a company that posted record losses for a quarter was recently asked why he gave himself a large bonus in an interview. His reply was: Because I deserve it. This statement was a real eye-opener. It should have all of us suddenly waking up to the utter scam that business schools are pulling on publicly-owned companies. A recession is a good time to examine this stuff and attempt to put a stop to it. Why did the young CEO of think he deserved a large bonus after his company was putting up the worst numbers in it’s history? It has nothing to do with how good of a job he is doing. It’s because he dropped $150,000 on a long education and now has issues of entitlement.
The scary thing is, you can’t really blame him! This is what they taught him in business school. Finish school, graduate, find a struggling publicly-owned company to get a top executive job at, and siphon off a million dollar salary for yourself. Man, they must be sitting around laughing in business school at this prospect. All you need is a Harvard MBA and you have a license to legally embezzle ridiculous amounts of money with no accountability. This makes skimming the Tangiers casino (in the movie Casino) look like child’s play.
Remember the late 1980’s movie Wall Street? Think back to Gordon Gekko’s speech to the Teldar Paper stockholder meeting. His main beef was that there was no accountability to upper management because they had no stake in the company. They are just there to rape and pillage motivated purely by self-interest. Don’t you find it interesting that the failing big three auto company CEO’s all flew private jets to go ask the federal government for taxpayer bailout money a few month’s ago?
Sadly, this is the way corporate America works. Business owners who start and grow the company, whose passion fuels it’s initial success, are pretty much long gone by the time a company is actively traded in the stock market. Venture capital firms take an early partnership in the company, help it grow, and then when the IPO happens everybody gets out rich. The new stockholders elect of board of directors who hire new officers for the company and that’s where these bright-eyed kids graduating from business school come in. They walk out of school into contracts that most professional athletes would drool over, with zero experience in business and no passion for this particular business (oftentimes without having any industry knowledge whatsoever).
The lesson to be learned here is two-fold. If you are a college kid reading this, go get a business graduate-school education from a top university. The recession will be over by the time you graduate and you can get in on this scam. Otherwise, start a new business that will capture the interest of venture capitalists. Work it for a couple years, build it up and get out rich when the IPO goes live. So there are two ways to take advantage of the American dream by exploiting loopholes in our system. Or perhaps exploiting loopholes in our system is the American dream.