November 19, 2008
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A New Look at Exit Strategies
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Running Time: 90 Minutes
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Classic Indicators - Back to the Future
Author: Linda Raschke
Running Time: 90 minutes
Charismatic professional trader Linda Raschke employs classic methods handed down by the forefathers of technical analysis. Join in and let Linda guide you in a first rate keynote address given at a recent international trading conference. Get back to the basics and refine your skills by seeking the wisdom of a proven market wizard. Class Indicators is for everyone. Whether you are s short term trader in the S&P 500, enjoying trading stocks or just a student of the markets, you’ll love this exclusive DVD. Recognized in Jack Schwager’s own classic, “The New Market Wizards”, Linda shares her favorite trading techniques in a 75-minute DVD presentation you’ll watch over and over again. Learn valuable techniques, how to stay disciplined and what it takes to keep you running at full speed!
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I Am A Turtle
Author: Russell Sands
Running Time: 93 minutes
Russell trades the same way that he always has, following trends the way Richard Dennis taught the Turtles to do fifteen years ago. Russell shows you the exact criteria that the turtles were taught to use in order to get a handle on which breakouts or types of breakouts have a higher probability of succeeding - which have the potential to become the kind of monster trend the Turtles are famous for riding to enormous profits. In this seminar, Russell itemizes a list of approximately twenty different criteria and/or conditions that the Turtles examine every time they look to initiate a trade. He explains each item carefully and demonstrate the effectiveness of each by looking at current charts of various markets.
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Running Time: 85 minutes
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November 19, 2008
As the financial sector continues its tailspin despite efforts to bail out Wall Street, among the few gainers in recent stock trading have been those companies looking for a new “shot in the arm” with government funding from the next administration.
With its strident rhetoric toward reestablishing the so called “pro-choice” agenda, the incoming administration has threatened a whole host of policies that would not only reduce restrictions on abortion, but would actually force people who wish to avoid participating in the procedure to support it.
As a physician who has delivered over 4,000 babies I am very disturbed by the continued efforts of those on the left to establish absolute rights to abortion. However, even more distressing is the notion that taxpayers should be forced to subsidize life-ending procedures such as abortion and embryonic stem cell research.
In addition to the news that those who will benefit from federally-funded stem cell research have seen an uptick in their financial position as a result of the election, comes news from the United States Conference of Catholic Bishops that many health care facilities under the auspices of the Roman Catholic Church may be shut down as a result of the so-called “Freedom of Choice Act” for refusal to perform abortions.
Not only does this Act seem to have growing support in Congress, the President-elect and his Administration have indicated support for this legislation. Since many people cast their votes in a way that they believed would help to improve and increase availability of health care, this is an ironic twist.
Of course, the government takeover of health care began a long time ago, but we should be wary of how far that takeover will go if more private providers are forced out of the marketplace. If enacted, The Freedom of Choice Act and the potential for increased federal funding of embryonic stem cell research will go to show that the incoming Congress and Administration are far more dedicated to a government takeover than they are to affordable and available health care. Moreover, these approaches show no real concern at all for the free choices of taxpayers and health care providers who wish to be free from giving assistance to immoral activities.
These facts should also serve to remind social conservatives that they are better to leave the legislative remedies for important social issues at the level where they constitutionally belong, namely at the discretion of state and local officials. The centralization of power that seemed so attractive to many conservatives just a few years ago no longer seems pleasant at all in light of a more liberal-minded majority in both Houses of Congress and the White House.
This should be a good lesson for future conservative majorities, namely that the centralization of power never results in anything more than the most temporary of “gains” for those who are committed to traditional moral principles, and the power one administration consolidates for itself must inevitably be handed over to the next administration, which will use that increased power for its own agenda.
Brought to you by Alan’s Money Blog
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November 18, 2008
By Adam Hewison
I was looking over several charts this past weekend and I was shocked to recognize a chart formation playing out before my very eyes. I’ve seen this same formation a million times before, but I just didn’t want to believe it could be happening to my favorite stock, Apple (NASDAQ_AAPL). Some would call this denial.
In the past I’ve written extensively about Apple products on this blog. If you have read any of these postings, you’d know how crazy I am about their products.
Several months ago I discovered a major technical formation that spelled trouble for Apple. I have to admit that I was saddened by this. This formation was also picked up by our “Trade Triangle” technology. Our algorithm triggered a sell signal and has continued to suggest a short position for Apple all this time.
Watch my new video on Apple:
http://www.ino.com/info/262/CD3336/&dp=0&l=0&campaignid=3
I was surprised that we’ve seen this market come down so easily. It seems like every time I visit an Apple store they are always busy and their products always seem to be selling well.
The question is, are we at the end of the iPod era?
Given the chart formation, the double top and pivot point, it seems we are headed lower. The Pivot Point measures down to the $40-$50 range and Apple at $90 still has a long way to go on the downside.
What caught my eye this weekend was a weekly continuation pattern to the downside and the fact that Apple closed at a new weekly low for the year. This is not a bullish sign by any stretch of the imagination.
For this coming week, I expect to see further downside pressure on Apple. I believe that we are going to be looking at the $50-60 dollar range as our target zone. Of course everything within will be tempered by our “Trade Triangle” technology. When our short-term “Trade Triangle” turns positive, we will close out short positions and take to the sidelines. In my opinion, it’s going to take some time for this market to improve and turn around. The technicals are just too weak at the moment.
http://www.ino.com/info/262/CD3336/&dp=0&l=0&campaignid=3
Every success in trading,
Adam Hewison
President, INO.com
Co-creator, MarketClub
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November 18, 2008
By Ken Lochridge
One facet of effective design that I often see people ignore is guiding the visitor. If you don’t effectively help your visitor find, see, read and click what you want them to on your site, you are missing out on revenue.
When a visitor hits your page, you have a few seconds to convey the message that you have what they want, and they can easily get it.
Doing this while encouraging and enticing them to act on your site can mean the difference between an average site and conversion-churner. This strategy may be more effective on some sites or topics than others, but I believe it can improve any site, no matter the topic or purpose.
If a page’s major elements, such as navigation, logos, headings and images are equally dominant and sporadically placed, the visitor must figure out what to do or read next.
Contrast that with a site that has strategically placed elements, with color and contrast variations that are easy to follow. Here, the visitor will travel the path of least resistance and generally follow your direction. Your site will be more successful when you don’t make the user think. Make it easy by using a bread crumb trail of tasty bits for the eye to follow.
Once your visitor arrives, your page needs to turn into a funnel. Every template or page should have a purpose, a desired action from the user. Whether it’s to drill down, believe and trust you, make a purchase, click on an ad or whatever, you should have a goal for the user at every point in your online presence.
You may have a structure that leads the visitor from basic home page information, drilling down to specific products or services, and sales pages for each. Or, you may have a store that showcases items on every page. Regardless, each page has a purpose and you should help your visitor engage that purpose.
One way of implementing this is the blur test. To perform this test, sit back from your monitor, maybe a foot or two more than usual. Defocus your eyes - start to cross your eyes, but don’t actually let them cross. Your page should be blurry, and the major elements should stand out.
Start at the upper left corner of the page and let your eye lazily fall downwards and to the right, and allow it to stop at the first thing that stands out on your page. Then follow on to the next item, and so on.
With practice, you can simulate what your visitors’ eyes are attracted to, and how they flow through your page.
You will be able to identify elements that are fighting each other for dominance, which direction the flow moves on your page and then make adjustments and corrections to encourage the behavior you want. You can learn a feel for this, and guiding your visitor can become as natural as ad blending.
Ken Lochridge, of DrasticTactics.com, is a ten year veteran of affiliate marketing.
Source: FeedFront.com
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November 16, 2008
Greetings my dear readers. Today I am going to review Payoneer’s Virtual US Bank Account offering. A while back I was invited by one of their representatives to beta test this new service offering and after a fairly extensive period of usage I am glad to report that finally I have enough info and experience to write a review, so here it goes.
Virtual Bank Account you say? Yes, that’s right. It’s quite an innovative solution in my opinion. Payoneer’s Virtual US Bank Account product is extremely well suited for cash payout needs, such as affiliate programs, dispersing commissions, and various other payment needs. Don’t let the label “virtual” fool you though. The account is quite real. We will get into the details of how it works and all that fun stuff a bit later on, but first permit me to educate you a bit about the Payoneer company.
(quote from their website):
Payoneer allows organizations to pay large numbers of people around the world, efficiently and securely directly to their Prepaid MasterCard® cards, avoiding the delays and heavy surcharges of more traditional methods such as bank transfers and international checks. Payoneer is a privately-held company and a registered MSP with MasterCard.
Committed to meeting the highest standards in service, security, and privacy, Payoneer has partnered with the First Bank of Delaware. Payoneer utilizes, and continually invests in, top-of-the-line secure technology and adheres to stringent regulations for customer privacy, authentication and identity verification. Payoneer complies with the required KYC (Know Your Customer), BSA (Bank Secrecy Act), AML (Anti-Money Laundering) procedures and OFAC (Office of Foreign Assets Control). Read more about Payoneer’s privacy policy.
Founded in 2005, Payoneer employs 55 people, including a team of experienced financial and technology professionals, and is headquartered in New York with R&D offices in Tel-Aviv, Israel. Payoneer is backed by private and venture capital investors including Greylock Partners, Carmel Ventures, and Crossbar Capital.
I can confirm that indeed they have a business relationship with the First Bank of Delaware as I’ve had a few people send me ACH payment and if you know anything about such payments you’d know that the sender’s bank asks for and verifies the receiver’s bank.
Why do I need a Virtual US Bank Account?:
Good question, and here is the answer. The cool thing about Payoneer is that it allows people that live outside the US to receive direct Automated Clearing House (ACH) deposits/payments without the necessity of actually having a US bank account. I know you can technically open up a US Bank Account, but for foreigners it’s more difficult and cumbersome as they have to actually travel to the United States to do so. Payoneer allows you to have your very own US Bank Account with minimal effort.
How does it all work?:
The way in which their Virtual US Bank Account offering works is quite simple really, and I wonder why there aren’t many similar offerings out there. Payoneer maintains a series of sub-accounts under its main account, which is held with the First Bank of Delaware (click here to find out more about this bank) When an ACH transfer is initiated, each of these sub-accounts is referenced using its own routing and account numbers. When the funds are credited to one of these sub-accounts, Payoneer loads the funds to an associated “prepaid debit” card. This debit card will have YOUR name on it. Essentially what they’re allowing you to do is to “rent” their bank account.
So like I said you will get a MasterCard prepaid debit card to go along with your US Bank Account. Here an picture of the welcome letter debit card I received (click on the thumbnail to view the full image):
For me the sign-up process was very simple, and I imagine it will continue to do so for everyone once this product is available to the masses. Once I signed up and one of Payoneer’s account representatives approved my account I patiently waited to have the debit card mailed out to me. When I received it I went to Payoneer’s website and activated the card and I was up and running. The whole process was painless and smooth.
What can I use Payoneer’s Virtual US Bank Account for?
The primary purpose of this service is to allow you to receive ACH (direct bank to bank) payment from anyone in the United States. It is a perfect payment collecting solution for receiving secure payments from anyone with a US bank account. When you wish to receive a payment you simply give your bank account details to whoever is supposed to send you funds and they just go to their bank (or log online) and make the payment - quick, secure, but best of all, fraud proof.
Also since you’re getting a prepaid MasterCard debit card along with your Virtual US Bank Account you can load money into your account via Western Union and withdraw it anywhere in the world. This is perfect if you don’t want to carry cash or a credit card with you. This is just like using your bank’s debit card. And since this is a MasterCard debit card you can use it to pay for purchases wherever MasterCard is accepted.
Can I link my Virtual US Bank Account to my PayPal account?
You betcha! Non US residents will for sure agree that this is one cool feature. I bet you now have a big grin on your face. If you live in a country where you can open a PayPal account but can’t link your local bank account to your PayPal account then Payoneer’s Virtual US Bank Account is exactly what you must have. After you’ve linked your US Virtual Account to your PayPal account you simply withdraw money to your US bank account and then you can withdraw it at any ATM in the world.
However there is one limitation that you must keep in mind. YOU CANNOT WITHDRAW money from your US Virtual Bank Account into your PayPal account. In other words the flow of money must go in only one direction, from your PayPal account into your Virtual US Bank Account. Please DO NOT attempt to withdraw money from your Virtual US Bank account into your PayPal account because Payoneer’s bank will refuse this attempt. But it what is worst is that PayPal will notice the rejected transfer and disable and PERMANENTLY BLOCK your Payoneer US Virtual Bank Account. That means that you won’t EVER be allowed to add this bank account again.
There is a way you can contest this by sending proof that you own this account, but trust me you don’t want to go through that hassle. I accidentally made the very mistake I’m warning you not to make and in spite of me sending all the necessary proof they asked for they still did not reinstate my US bank account. Yeah, I know, PayPal is a royal pain the backside sometimes. So make sure you don’t make the same mistake I did.
Pricing & Fees
I found Payoneer’s fees to be fairly reasonable. Here is a table that outlines all their fees:
| Card |
| Card activation - US |
$9.95 |
Per card |
One time - when card is first loaded |
| Card activation - Non US |
$19.95 |
Per card |
One time - when card is first loaded |
| Loading of payoneer payments |
$2.00 |
Per card |
Each time card is loaded |
| Monthly account maintenance |
$3.00 |
Per card |
From available card balance each month |
| Transfer funds from card to bank account |
$ 00.00 |
Per Trx |
Each time a transfer in being made |
| Replacement card - within US |
$9.95 |
Per card |
One time - when issuing replacement card |
| Replacement card - outside US |
$19.95 |
Per card |
One time - when issuing replacement card |
|
| ATM Cash Withdrawals or Transactions or Transactions |
| ATM withdrawal - US |
$1.35 |
Per Trx |
When withdrawal is requested |
| ATM withdrawal -outside US |
$2.15 + upto 3% of transaction amount |
Per Trx |
When withdrawal is requested |
| Declined ATM withdrawal |
$0.90 |
Per Trx |
When withdrawal request is declined |
| Purchase Transaction within US |
$0.00 |
Per Trx |
When card is used for purchases |
| Purchase Transaction outside US |
$0.00 + upto 3% of transaction amount |
Per Trx |
When card is used for purchases |
Is their website easy to use?
I found their website interface to be very easy to use. The interface is clean and functional without any clutter. When you log into your Payoneer members section you’ve got everything you need to manage your debit/US virtual bank account in one section. All transactions on your account will be plainly visible on the main members page. There you can also change your debit card’s PIN code, print out an image of a “void check” which you can give to your employer or anyone from whom you expect to receive recurring ACH payments.
Is this service safe?
I believe it is. The money is sitting in a bank account with a reputable and FDIC (US Federal Deposit Insurance Corporation) insured Bank. I received hundreds of dollars in payments to my Virtual US Bank Account and withdrew all of that money without a hitch. I just leasurely walked on over to the nearest ATM, inserted the debit card, punched in my PIN code and withdrew cold hard cash in my local currency. The whole process took me not even ten minutes.
Other items of interest
I’d really like to commend the Payoneer staff for their excellent customer service. During my whole beta testing period I received absolutely stellar support from their customer service department. I mostly dealt with one gentleman by the name of Aryeh. Whenever I ran into a snag he always promptly responded to my e-mails. Aryeh, I know you’ll be reading this review sooner or later, so cheer mate, and thanks for your support! Best of luck to you and your company!
Conclusion
In conclusion I’d like to state that I am very satisfied with my Payoneer US Virtual Bank account and I’m definitely going to continue to make use of it. Now if only I can convince PayPal to reinstate the link between it and my Virtual US Bank Account I’d be in heaven.
Currently Payoneer’s Virtual US Bank Account service is not available to the masses, only to selected Payoneer prepaid debit card holders. So the first step you’d have to take if you want to have your very own US bank account is to get a Payoneer debit card. Then you can request of Payoneer to activate the US bank account feature. Bear in mind that you will have to comply with Payoneer’s KYC (know your customer) regulations!
For any other details, info, questions, inquiries, etc please visit the Payoneer homepage at:
https://www.payoneer.com/
Cheers,
Alan
http://alansmomeyblog.com
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November 15, 2008
Hello e-currency fans. Have you heard of the Liberty Reserve before? No you haven’t? Dang, well then you may be interested in checking out this extremely informative link I found:
http://dgc.wetpaint.com/page/Liberty+Reserve
That link will take you to the DGC (Digital Gold Currency) Wiki page where you can learn some very detailed information about Liberty Reserve, such as when it got started, how it got started, and who started it - a lot more too.
There is a lot of excellent due diligence info on that page! A lot of it raises some serious suspicions too!
I’m not sure whether to trust them now. What do you guys think? If you want to share you opinion I suggest you visit a forum thread I just started over here:
http://www.moneyguruforum.com/liberty-reserve/25594-liberty-reserve-scam.html
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November 14, 2008
Here is a hilarious video I came across on a blog called “Friar Forex” I won’t comment much, just watch the video and you’ll get it. Enjoy!
YouTube Directvideo link
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November 14, 2008
With the election behind us, our country turns hopeful eyes to the future. I have a few hopes of my own.
I congratulate our first African-American president-elect. Martin Luther King, Jr. certainly would be proud to see this day. We are stronger for embracing diversity, and I am hopeful that we can continue working through the tensions and wrongs of the past and become a more just and colorblind society. I hope this new administration will help bring us together, and not further divide us. I have always found that freedom is the best way to break down barriers. A free society emphasizes the importance of individuals, and not because they are part of a certain group. That’s the only way equal justice can be achieved.
We will face more tough economic problems during this new administration. In fact, the worst is yet to come. A vast amount of problematic mortgages have not begun to reset their variable interest rates and go into default. We already have unprecedented deficits, spending is out of control, and more big industries are coming to government with their hands out. My hope is that this administration will handle this economic crisis better than the interventionists and big government spenders of the 1930’s, the bureaucrats that prolonged the Depression. I hope that new government programs and spiderwebs of red tape do not pop up to interfere with American productivity, and that we can quickly get our financial footing again. We have to understand that an economic correction needs to take place and the only way out of the coming recession is to go through it. Efforts to avoid it can only prolong it. I hope we can somehow find our way back to sound money and reject corporate cronyism.
We cannot address our budget problems at home without changing our disastrous foreign policy abroad. I am hopeful that the new administration can take on the mantle of peace and diplomacy in foreign policy that many Americans feel they were promised. Many other nations also have this hope, which exudes from their congratulatory sentiments offered after the election. They hope that national sovereignty will be respected. They hope that through diplomacy violence and war can be averted. I hope so too. One thing is unquestionable: our aggressive foreign policy of the past has been costly, in blood and in treasure. Our treasure is running out, and fewer volunteers are stepping up to enable that foreign policy. So for these reasons, if we are to continue to have an all-volunteer military, and see prosperity again in the future, I have every reason to hope our foreign policy will change. In order for it to remain the same, mandatory military service would have to return, as well as accelerated theft through debt and inflation to pay for it. I have a hard time imagining popular support for these policies, simply for the sake of war and conquest, when we clearly want peace.
I have many hopes for the future in this time of transition. But I have seen this country face many forks in the road, and sadly take the wrong one too many times. We have heard a lot of talk, and it remains to be seen what actions and specific policies that talk will translate into. So while I may be hopeful, I remain deeply concerned about our future.
Ron Paul
http://www.house.gov/paul/
Article brought to you by Alan’s Money Blog
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November 13, 2008
When Paulson came out today and stated that his earlier plan to save the western world was not working, he offered up a plan “C” (or is it “D”) to relieve pressure on consumer credit, scrapping his earlier effort to buy the value mortgage assets.
No matter what happens or what the next plan is here, are the 3 reasons I believe stocks are headed lower.
* Number one: The trend in most all stocks is down. This trend is likely to persist and last longer than most people imagine.
* Number two: There is no plan. The government is floundering and does not have a plan that is going to work anytime soon.
* Number three: We have a lame-duck president, and nothing is going to happen of any consequence until President-elect Obama is sworn in.
New Video analysis of what could really happen:
http://www.ino.com/info/259/CD3336/&dp=0&l=0&campaignid=3
Okay, so let’s look at the first problem. Most people trading the market today have had no experience in a prolonged bear market like the one we had in the ’70s. That bear market was brutal as it did not let anyone out. Over the course of the early ’70s, the bear market basically wore people out to the extent they eventually just threw in the towel. We believe the market is going to make another new low and take out the recent lows that were put in place in early October. Unlike a bull market that constantly needs positive news to drive it higher, a bear market just falls under its own weight.
The second problem we have is that there is no concrete plan in place to rescue the economy. In fact, the domestic and global economic issues are so great that they are overwhelming in scope. The Paulson plan, which is being changed and will continue to change, is a major concern and creates significant uncertainty in the marketplace. Only when we see the new regime take! off ice this coming January will we see any meaningful changes.
The third problem we have is a lame-duck president. This is a major problem for the markets as President-elect Obama can not make any sweeping changes until he is sworn into office. Yes, he may hit the ground running, but the reality is, it’s not for over two months from now and a lot can happen to the market in two months. The key levels that everyone is going to be watching for are the recent lows we saw in early October. If these lows are taken out, and I expect they will be, it’s going to push this market and everything else down to new lows. It will exacerbate the housing situation, the unemployment situation and most of all, the morale of the country.
Having lived through the bear market of the ’70s, I know firsthand how difficult the journey we face is going to be. Now this may seem like a very pessimistic outlook and in some ways it is, however there are always opportunities to make money in the marketplace. These opportunities may not be in stocks! , it may be in forex or the commodity markets.
So buckle your seatbelt. I think we are in for a bumpy ride…check out the new video analysis:
http://www.ino.com/info/259/CD3336/&dp=0&l=0&campaignid=3
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November 12, 2008
With big bank bailouts dominating the news, there’s no better time to get the truth about bank safety.
This informative article has been excerpted from Bob Prechter’s New York Times bestseller Conquer the Crash. Unlike recent news articles that are responding to the banking crisis, it was published in 2002 before anyone was even talking about bank safety. However, you may find the information even more valuable today than ever before.
For even more information on bank safety, visit Elliott Wave International to download the free 10-page report, Discover the Top 100 Safest U.S. Banks. It contains details on how you can protect your money from the current financial crisis, updated for 2008.
Risks in Banking
Between 1929 and 1933, 9000 banks in the United States closed their doors. President Roosevelt shut down all banks for a short time after his inauguration. In December 2001, the government of Argentina froze virtually all bank deposits, barring customers from withdrawing the money they thought they had. Sometimes such restrictions happen naturally, when banks fail; sometimes they are imposed. Sometimes the restrictions are temporary; sometimes they remain for a long time.
Why do banks fail? For nearly 200 years, the courts have sanctioned an interpretation of the term “deposits” to mean not funds that you deliver for safekeeping but a loan to your bank. Your bank balance, then, is an IOU from the bank to you, even though there is no loan contract and no required interest payment. Thus, legally speaking, you have a claim on your money deposited in a bank, but practically speaking, you have a claim only on the loans that the bank makes with your money.
If a large portion of those loans is tied up or becomes worthless, your money claim is compromised. A bank failure simply means that the bank has reneged on its promise to pay you back. The bottom line is that your money is only as safe as the bank’s loans. In boom times, banks become imprudent and lend to almost anyone. In busts, they can’t get much of that money back due to widespread defaults. If the bank’s portfolio collapses in value, say, like those of the Savings & Loan institutions in the U.S. in the late 1980s and early 1990s, the bank is broke, and its depositors’ savings are gone.
Because U.S. banks are no longer required to hold any of their deposits in reserve, many banks keep on hand just the bare minimum amount of cash needed for everyday transactions. Others keep a bit more. According to the latest Fed figures, the net loan-to-deposit ratio at U.S. commercial banks is 90 percent. This figure omits loans considered “securities” such as corporate, municipal and mortgage-backed bonds, which from my point of view are just as dangerous as everyday bank loans. The true loan-to-deposit ratio, then, is 125 percent and rising. Banks are not just lent to the hilt; they’re past it.
Some bank loans, at least in the current benign environment, could be liquidated quickly, but in a fearful market, liquidity even on these so-called “securities” will dry up. If just a few more depositors than normal were to withdraw money, banks would have to sell some of these assets, depressing prices and depleting the value of the securities remaining in their portfolios. If enough depositors were to attempt simultaneous withdrawals, banks would have to refuse. Banks with the lowest liquidity ratios will be particularly susceptible to runs in a depression. They may not be technically broke, but you still couldn’t get your money, at least until the banks’ loans were paid off.
You would think that banks would learn to behave differently with centuries of history to guide them, but for the most part, they don’t. The pressure to show good earnings to stockholders and to offer competitive interest rates to depositors induces them to make risky loans. The Federal Reserve’s monopoly powers have allowed U.S. banks to lend aggressively, so far without repercussion. For bankers to educate depositors about safety would be to disturb their main source of profits. The U.S. government’s Federal Deposit Insurance Corporation guarantees to refund depositors’ losses up to $100,000, which seems to make safety a moot point. Actually, this guarantee just makes things far worse, for two reasons. First, it removes a major motivation for banks to be conservative with your money. Depositors feel safe, so who cares what’s going on behind closed doors? Second, did you know that most of the FDIC’s money comes from other banks? This funding scheme makes prudent banks pay to save the imprudent ones, imparting weak banks’ frailty to the strong ones. When the FDIC rescues weak banks by charging healthier ones higher “premiums,” overall bank deposits are depleted, causing the net loan-to-deposit ratio to rise.
This result, in turn, means that in times of bank stress, it will take a progressively smaller percentage of depositors to cause unmanageable bank runs. If banks collapse in great enough quantity, the FDIC will be unable to rescue them all, and the more it charges surviving banks in “premiums,” the more banks it will endanger. Thus, this form of insurance compromises the entire system. Ultimately, the federal government guarantees the FDIC’s deposit insurance, which sounds like a sure thing. But if tax receipts fall, the government will be hard pressed to save a large number of banks with its own diminishing supply of capital. The FDIC calls its sticker “a symbol of confidence,” and that’s exactly what it is.
For more information on bank safety, including how to choose a safe bank during the current financial crisis, download EWI’s free 10-page report,
Discover the Top 100 Safest U.S. Banks.
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Feast your eyes.
