How safe is your money in the bank during economic depression and deflation? Are there any alternatives? Is any sort of diversification possible?
Special correspondent
Feb. 11, 2007

The banks are most likely going to suffer very big losses risks undertaken in real estate and corporate Mergers and Acquisitions. A Banking cycle has topped out signaling a severe correction if not a massive bear market in banking stocks.

Many Banks in the next ten years will go belly up. The Saving and Loan (S&L) fiasco will repeat in a much larger scale. How safe is your deposits in the bank? It sounds great but it may not be that great actually. According to John Schroder, of Ascot Advisory Services, FDIC in reality holds only 1.38% is in reserve for the entire insured number of banking deposits. This means it only takes 3 out of these 77 very large banks to fail, and the FDIC insurance fund is wiped out. Please visit: http://www.ascotadvisory.com/Incorporations_Directory/Bank_Insurance_FDIC.html for details.

What is the remedy then? Use many banks and divide your money into small batches. It sounds funny but that is how one use to travel when scared of bandits in old days. If you have your money saved in ten different banks, most likely all of them will not go belly up. And because your deposits are relatively small, FDIC will cover you for the banks that will fail. Remember, FDIC Bank Insurance Fund (BIF) was broke in 1991, to the tune of negative US$ 7 Billion Dollars and also broke in 1992 to the tune of US$ 100 Million Dollars.

The best is to buy one year Tbills using a futures broker or any bank and keep the security in hand. Government is only source of guarantee. It will be last to default. The Government guarantees the Tbills.

During deflation gold prices will collapse and there fore that may not be a great idea.

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How safe is your money in the bank during economic depression and deflation? Are there any alternatives? Is any sort of diversification possible?
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