> don't disagree with most of what you said, but...you sure about this part?
Yes. I am sure. I have far, far, far less than 0.000001% of the total money in the bank. If they could not produce this much money when I wanted it, there would be other serious problems.
> Or if you want a more practical example, keep watching Greece
If I was in Greece, I would not have my money in one of their banks.
> Yes. I am sure. I have far, far, far less than 0.000001% of the total money in the bank. If they could not produce this much money when I wanted it, there would be other serious problems.
Last year, a branch office of a large bank in Finland was barely able to produce 10 000 euros in cash when I wanted to withdraw it.
The clerk just didn't realize he shouldn't mention it.
Why in the world should a single branch be expected to hold that kind of cash for withdrawn without notice? There is a* huge* difference between "having the money" and "having the money in cash form on location".
They're not autonomous though - individual branches don't hold the value of all their customers' accounts as cash. You're subject to a daily limit (though you can take more if you give them notice).
Now we're just being pedantic. My point was that each branch should have enough cash to act as a "proper bank", whatever amount of money you'd reasonably expect one to have in its vault.
If they barely had 10k in their vault, then it logically follows that they almost never need that much (otherwise they would obviously make it a point to keep more). If they rarely need that much, then it logically follows that somewhere at or less than 10k is a reasonable amount to have. There is no sense in taking the increased liability of having more if they don't need to.
Furthermore, acting as a "proper bank" means they do a lot more than just acting as your personal piggy-bank/mattress. If they have all their money tied up in cash, it means they can't actually be preforming real bank activities (investment).
I thought we were talking within the context of "serious problems". As for greece, well..it happened to Washington Mutual in 2008 - the largest savings in loan institution in the US. Of course, this is only one of many US banks which were not able to produce money when it was wanted in 2008.
There's a reason banks have a legal right to refuse a withdrawal, specifically because they may not have enough funds. That reason is: because it has and will happen.
There are stories (see consumerist.com) of cash withdrawals not being possible.
I admit I got a little off track though. My parent specifically stated withdraw money when he wants. There's plenty of evidence that at the peak of the crisis, some people had problems. But I agree, it seemed to have been few, and in the context of Mt Gox, it isn't really relevant.
I don't know of a single person unable to withdraw their money from WaMu as it went under. All of WaMu's accounts were then passed on to chase, and chase honord them. If WaMu went under, the savings accounts would have been FDIC insured. None of that will happen if Mt Gox is compromised in some catastrophic way.
I understand that. I am curious how effective insurance deposite works in the face of a country-wide breakdown. I know Greece has a deposit fund, I'm curious to see how effective it'll be (does it actually cover 100% of the deposited money (up to the maxium per account)?)
It doesn't. The FDIC doesn't have a fraction of the money needed to insure a fraction of the money that is supposedly FDIC-insured. More over, the United States likely lacks the gold to back our current currency, let alone the currency needed to prop up those who lose money in the situation of the decreasing number of banks failing.
The FDIC doesn't have a fraction of the money needed to insure a fraction of the money...
Sure it does. The FDIC makes an annual assessment on financial institutions ranging from 2.5 to 45 basis points to keep the insurance fund solvent. In 2009 there were many special assessments to replenish the fund.
Insurance is always leveraged. Those skilled in the art are actuaries.
I was more referring to the fact that we fail to produce proof of the limited amount of gold that we claim to have and every attempt to audit it is rebuked magically.
In terms of the question, how would it be handled from an FDIC perspective if it came to a worst case scenario... it'd be a shit-show.
I was more referring to the fact that we fail to produce proof of the limited amount of gold that we claim to have and every attempt to audit it is rebuked magically.
I think you're just rambling. Our currency isn't gold backed -- who cares how much the US govt. has in gold repositories and why does it need to be checked?
No he isn't.
If ( just for the sake of the argument ) RMB replaces USD as the international currency base, US has absolutely nothing to back dollar value and prevent it from dropping.
Pretty much every useful currency these days is "backed" by absolutely not one single atom of metal.
Which, it turns out, works just fine -- the belief that gold has value is roughly as magical as the belief that saying some words can turn wine into blood (and a prime sign of religious dogma in both cases).
The problem is that in ditching gold they went straight to faith-based currency. Even if gold was ugly and useless it'd still be a better base for currency than nothing because of its scarcity. It's too easy to create more money. We don't even print it anymore.
Of course it does - the strength of the US economy.
The US economy may be fucked up in many ways, and may face some harsh transitions if it can no longer rely on the strength of the dollar as an international currency, but it is still a large economy. The loss of that strength will not magically result in the dollar having "no backing".
Certainly, if the dollar was replaced by the RMB internationally, the dollar would start to drop against other currencies - until it reached a realistic equilibrium point.
Yes, of course, and everybody knows that. The gold standard was abandoned across the world in the 20th century because it's unsustainable and inflexible. Please stop promoting this conspiracy-theory nonsense.
The "conspiracy" theory goes that this gold has either been loaned (that's why Ron Paul phrased his question to also check if they're "obligated") or sold to drive down gold price thereby making dollars are more attractive investment than gold. Hence the call for an audit. The "conspiracy" theory further suggests that all the world's central banks are doing this.
I don't really see it. FDIC insurance promises to give you dollars. Worst case, they just start the presses.
A precipitous drop in the value of the dollar would be unpleasant (including for for Americans with savings), but I don't see what FDIC has to do with it.
They would just call up the federal reserve and have them print money. When accounts close down it's money that disappear from the money supply that the fed would replace.
OK we are taking about vastly different scales here, but there is no absolutely trusted scheme in the world. The US has been printing money since 2008 to cover the losses of the Crisis, so the real world has an advantage here.
I would know that I could still withdraw my money because they have enough cash on hand for me to do so.
http://en.wikipedia.org/wiki/Fractional-reserve_banking
Or if you want a more practical example, keep watching Greece (or look at what happened to Argentina 10 years ago).