Monday, November 25, 2013

Pay To Deposit Your Money in Banks? It Could Happen!

The news in this morning's Financial Times was not too agreeable for safety-minded,  ordinary bank depositors. You know, those of us who look at the spiking DOW and see only a major meltdown about to happen since it is WAY out into massive bubble territory.  Recall the stat Guru Nate Silver, in his book, The Signal and the Noise- Why So Many Predictions Fail But Some Don’t  observed (p. 347):

"Of the eight times in which the S&P 500 has increased at a rate much faster than its historical average over a 5-year period , five cases were followed by a severe and notorious crash, such as the Great Depression and the Black Monday crash of 1987”.

So pardon us while we remain conservative with our money market accounts, bank deposits while the rest of the investor universe goes batshit nuts over the rising DOW. (We will want to see their faces when it crashed by 45%).

Anyway, The Financial Times piece noted the Fed (Federal Reserve) is considering reducing interest paid to banks on their reserves. This is to be an alternative to quickly cutting their $85 million a month juicing (via quantitative easing) which has kept stocks artificially high and banks sitting pretty too. 

After getting word of this change, the bank execs cited in the FT were not amused, and - after arguing that bank deposits weren't "free" - threatened to make up any money lost by charging bank depositors. If, for example, banks saw the interest on their reserves cut by 0,25 percent, then they'd make it up by charging customers making deposits fees to offset that loss. If say you have a deposit account of $10,000  balance on average held per year, then you'd be expected to cough up $25 a year in fees or about $2 a month.

To the conservative investor, of course, it appears the Fed is trying to have it's cake and eat it. Bernanke and his  QE 2 boys have clearly recognized that they can't go on indefinitely inflating the existing stock bubble with their cheap money policy - but also recognize if the Fed cuts it outright a disaster could ensue. Hence, their alternative, using the interest rate cut on bank reserves.

But at the same time, these guys need to understand that it's one thing to be getting a return on our money next to zero, it's quite another to be getting a negative return - which banks charging us for deposits would amount to. "Oh but you ought to then go into the market and get your yield!" Uh, how can I say this so it's clear: 'FUCK NO!'

What is the solution? Instead of seeing ordinary depositors gouged even more with fees, how about the Fed increase bank interest rates from their current absurd level to at least one percent? This would also reflect the real cost of goods, such as one can plainly see at the supermarket. (Again the existing cost of living index is totally bogus)

If the banksters really want to hear and see some outrage, let them even try to get away with imposing fees on ordinary bank deposits!

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