How safe is your bank? How safe is your money in a depression?

Want a good sense of emerging issues?

Talk to the artists, and track the humor of satirists and the political cartoonists.

Take the Toronto Star newspaper editorial cartoon today on page AA4. A couple is shopping for a mattress at Bed World...while the wife is lying flat on the bed checking out the quality and firmness, the husband is exploring between the two mattress layers. She says to the salesperson.." Harold's interested in the vault capacity.... funny, yes, but this cartoon's  message may be more prophetic and timely then most people realize.

Juxtapose that with the picture in the Business Secetion on B4 (see left) that shows a British shopper walking by a poster in a UK shop that reads: SHOP DAMN IT SHOP...it is your patriotic duty.

 

But what if  self-interest trumps communal patriotic duty?

 

 

 

 

 

 

BNN and Bloomberg reported today:

Dec. 19 (Bloomberg) -- Eric Sprott, the investor whose flagship $900 million fund has beaten 89 percent of Canadian rivals since 2003, said he’s betting against domestic bank shares because he expects loan losses to soar as the global economy heads into a depression.  “There are so many job cuts and output cutbacks it’s shocking,” Sprott said yesterday in an interview. “That’s not a recession, that’s a depression. I look at the data points and they just scream at me that we are off the cliff.”  The 64-year-old Sprott, whose Toronto-based firm Sprott Inc. managed C$5.6 billion ($4.6 billion) as of Sept. 30, said he’s been selling short shares of the country’s six biggest lenders for four months. By selling short, Sprott profits if shares of Royal Bank of Canada, Toronto-Dominion Bank and other lenders decline. “We are shorting the Canadian banks,” Sprott said in his Toronto office. “Look at their assets: Subprime, credit cards, asset-backed commercial paper, there is hardly one asset class that hasn’t gone down 10 percent. The equity is skinny.”

Sprott’s bet against Canadian banks reflects his bearish view of stocks and the global economy.

Sprott, whose stock has fallen more than 60 percent since the firm went public in May, said he sees “little hope” of a rebound in global stocks next year as consumption and economic activity grind to a halt."

Compare that to the headlines you read in the papers lately......Each time the markets hit a new low, the word on the Street was that the bottom had been reached and it was a good time to buy stocks.

Losing our shirt? The problem is that our banks are also losing theirs. Illustration by Barry Blitt.

The Winter edition of Gerald Celente's Trend Journal has a similar dire warning for readers on page 6:

"..[...]...A Greatest Depression consideration: How safe is your money? How sound is your bank? At the end of November, Citigroup, once America’s largest bank, was on the rocks. Fifty-two thousand employees were laid off. In just three days its stock lost more than half its value. Rumors swirled that Citi was so desperate they were looking to sell or split up the company.

Is your money deposited in a local bank whose rep­utation you can bank on? Are you with a teetering giant or a poorly-managed regional? If either of the latter, it would be in your best interest to assess the risks.

Take some out if you think there is risk; take it all out if you think there’s high risk. You may consider spreading it around and even banking abroad … after all, this is the Global Age.

But a Great Depression hazard – finding it impos­sible to withdraw your money from the bank – cannot be ruled out.

Well before Inauguration Day, Barack Obama was cast as the next Franklin Delano Roosevelt. If he follows in FDR’s footsteps he could freeze deposits by declaring a “holiday” to stop a run on the banks. While FDIC insurance may cover deposits, even after banks reopen, withdrawal amounts may be restrictd. (As the Argen­tine government did in 2001-2002.)"

[N.B. Think in can’t happen now? It’s already happening in Ukraine where the local currency has been devalued from 5.1 to $US to 10.45 to the $US in a span of just 5 short months & people are not allowed to take term deposits or large sums of money from their accounts. Nervous depositor in Iceland, Hong Kong and Russia have also caused runs on banks in 2008—-Walter Derzko]

"Publisher’s Note: Suspicious of the soundness of the banking system, I requested to withdraw a substantial sum from our Key Bank account, leaving funds suffi­cient to cover ongoing business operations. First they tried to dissuade me, then they stonewalled me, and finally they turned openly hostile.

I was forced to sign a series of documents, includ­ingone acknowledging that since I was carrying a large sum I could be the target of a robbery. To enhance that possibility, the teller slammed down the bag of cash on the counter and publicly announced the sum.

Despite repeated requests in the days preceding my withdrawal to get the cash in hundreds, they gave it to me in twenties, making for a bag five times the size and more robber-friendly.

When I complained to the bank manager who had processed the request, the response amounted to “take it or leave it.”

This will not be an isolated event. If you attempt to withdraw a large chunk of money from your account, negotiate the details in advance and anticipate possible hassle and obstruction.

We’ve heard similar accounts from clients and Trends Journal® subscribers who, over the past several months, tried to close out mutual funds, 401ks and as­sorted sinking equities. They were dissuaded, cajoled, belittled and arm-twisted by brokers desperate to keep their accounts. Many caved in under the pressure, didn’t close them and lost much of what they had."

[Credit Unions will be safer then banks since they have less exposure to risky mortgages—Walter Derzko]

Could this be a self-sulfilling prophecy? Better safe then sorry.

What could trigger a run on banks?

Many events could suddenly cause a mass public panic and dire loss of confidence.  An honest politician telling voters how bad it could be? Or as I said before, one trigger event could be the pending commercial mortage bubble bursting, triggering a  sudden string of serial bank failures ?.  We see in the New York  Times this week:

A List a Landlord Doesn't Want to Be On 

For many months now, the commercial real estate industry has been grim about its future, but it has been hard to quantify just how bad things are. The default rate for loans packaged into securities and sold on Wall Street has remained well under 1 percent, yet today that low figure is considered highly misleading.   

 

The owners of the building at 450 West 33rd Street in Manhattan, whose tenants include The Daily News, have to repay $1.2 billion in debt by spring.  The building at 660 Madison Avenue is listed as potentially troubled in the Real Capital Analytics report.  

 

Now a New York research company, Real Capital Analytics, has compiled data showing that at least $107 billion worth of income-producing property - including hotels, offices, apartment complexes and warehouses - is already in distress or is headed in that direction.    The distress is occurring all across the country, but  New York tops the list because of the number of costly high-profile transactions that occurred during the boom years. Real Capital Analytics' list includes a total of 268 properties in the New York area, with a value of $12 billion, as already or potentially in trouble.