Move your Money

Today is a half day trading day in the U.S. and unlike some shills for Wall Street I can’t imagine why you’d want to be long in stocks after Wednesday’s ‘irrational exuberance’.  Sell high, buy low is after all- basic.

Retail investors (it’s hard to call people who own stocks ‘normal’ because they’re a tiny minority) may still hold a majority of corporate equity but they have been leaving the market in droves because after the great financial meltdown of 2008, the Flash Crash, and the recent revelations of systemic Title Fraud and Insider Trading.

As I mentioned, most people don’t own stocks, they invest in mutual funds (Republicans and Blue Dogs like to call them ‘stocks’ to inflate the numbers of the ‘investor class’, but they’re really not), bonds, certificates of deposit, annuities, and other ‘safe’ investments.  Many people just keep their money in a bank because they live paycheck to paycheck and don’t have any surplus to spare.  What savings they have is in the equity of the house they’re living in and in today’s depressed market it’s not what it used to be.

But most people have bank accounts and a lot of them are really, really angry at the banksters.

It’s the same in Europe where ex-soccer star Eric Cantona is urging people to do something about it-

Join a World-Wide Bank Run in December — Move Your Money

Robert E. Prasch, The Huffington Post

November 24, 2010 04:03 PM

(O)rganizers are calling for the use of a new weapon, one available to any of us with a bank account. It is the simple act of removing all of our money from the banks, and doing so en masse on the same day — December 7th.

…

Of late, the famously mercurial temper that Cantona exhibited on and off the soccer pitch has been redirected from rivals and unruly fans. A prominent target is French President Nicolas Sarkozy’s proposal to create a ministry, museum, and mass public debate on “national identity,” all of which Cantona publically ridiculed as “idiotic.” His sights are now trained on the banking and financial system that he — correctly — holds responsible for France’s current economic problems. This is important because Sarkozy and the EU leadership is using this crisis to erode welfare state protections even as ostensibly scarce public monies are deployed to shore up the banks most responsible for the problem.

Which brings us to the economics of a mass withdrawal of deposits from the banks. Will it bring about an actual bank run or financial crash? Certainly not. For one thing, an organized and deliberate action such as Cantona proposes lacks the element of panic so characteristic of bank runs. Additionally, the banks and the central banks overseeing them will have time to prepare for the event, and should be able to reallocate their holdings of cash, reserves, and other assets in advance. If necessary, banks can always borrow short-term funds on the inter-bank market or even directly from the central bank. A mass withdrawal should, however, shrink the profitability of banks, as retail deposits are normally considered cheap and stable sources of funds with which to finance loans. Large European banks, relative to their American peers, are more dependent on retail deposits, so they will especially miss these funds when the time comes to calculate profits and bonuses.

But what of the politics? Here in the United States it is now overwhelmingly clear that a dozen or so of the largest financial institutions responsible for the crash and ensuing recession have gained, not lost, by their irresponsible decisions. They repeatedly tell us that they have “learned lessons.” This is true, they have: Learned that their past decisions have enriched senior management beyond belief. Learned that their market share is now substantially larger than before the crash. And learned that the government has deemed them Too Big To Fail (this latter designation lowers their cost of funds and enhances their profitability). Showing admirable “bi-partisanship,” Republican and Democratic administrations have worked hard and seamlessly to bring about these “lessons.” This summer, the Dodd-Frank Financial Reform and Consumer Protection Act enshrined the perspective of financial elites that reform should be primarily symbolic. In a sentence, over $12,000,000,000 of stock market, real estate, and other asset values disappeared, while rates of home foreclosures and unemployment soared, with virtually NO political or legal consequences. I might be a cynic, but I hope to never be as cynical as those who engineered these outcomes.

Now Prasch may not be aware of it, but this is an idea I’ve heard circulated among the blogs since at least early this year.  There’s nothing new about it.

But I would like to encourage my readers to consider it if they haven’t already.  There’s really no reason to keep your money in a major bank unless it’s more than the $250,000 the FDIC will insure, and at that you may be exposed to more risk than you realize.  If your money is in a Credit Union or a Savings and Loan or a Local or Regional Bank your checks still get cashed and your credit and debit cards still work and most of them will change your pennies to folding money without charging you 10% for the privilege.