Who Owns Your Money (What Is A Bail-In)?

Did you know that the money parked in your bank account is not actually yours? 

That’s right, in accordance with the 2008 Dodd-Frank act, the international banking charters were changed so that bank depositors (little ol’ you and me, were no longer depositors) but are now “unsecured creditors”. 

Today we’re going to talk about what it all means and what I’m doing to minimize my risk of losing my money like all those poor unsuspecting people did in Cyprus’s bail-in back in 2012.

Hey friend, I’m Brad Long and welcome to the channel where we help career burnouts get control of their money and move toward financial independence by starting and growing an online business. 

In today’s video we’re going to continue our discussion about a possible economic collapse and the Great Reset and some of the implications IF the plan is actually implemented as outlined by the WEF and other global entities.

If you missed my introduction to the Great Reset, I’ll leave a link below and make sure to share it at the end of this video.

So, how much money do you have in your bank account? What would you do if it were to just, “disappear”?

These are important questions and I’ll share with you what we and our community are doing to try and step out of this thing..

Some Important Background

The 2008 financial crisis saw the emergence of the term “too big to fail” or TBTF where governments used taxpayer funds to rescue what were considered “systemically important” banks from total collapse.

As you probably remember, this didn’t go over well with the public resulting in the US Congress passing the “Dodd-Frank Wall Street Reform and Consumer Act of January 2010”. And while this act eliminated the option of bank bailouts, it introduced the equally (in my opinion) odious idea of bank bail-ins.

The Difference Between A Bail-In And A Bailout

Let’s start with a great explanation provided by Investopedia (I’ll link the article below).

“A bail-in and a bailout are both designed to prevent the complete collapse of a failing bank. The difference lies primarily in who bears the financial burden of rescuing the bank. With a bailout, the government injects capital into the banks to enable them to continue to operate. The government doesn't have its own money, so it must use taxpayer funds in such cases.

With a bank bail-in, the bank uses the money of its unsecured creditors, including depositors and bondholders, to restructure their capital so it can stay afloat.

As unsecured creditors, depositors and bondholders are subordinated to derivative claims. Derivatives are the investments that banks make among each other, which are supposed to be used to hedge their portfolios. However, the 25 largest banks hold more than $247 trillion in derivatives, which poses a tremendous amount of risk to the financial system. To avoid a potential calamity, the Dodd-Frank Act gives preference to derivative claims.”

What does all of that mean? It means that you and I as depositors are hosed if there’s ever a financial meltdown that causes our bank to fail. It means that both we (as depositors) as well as any bond holders are “subordinate” or last in line when it comes to being made whole.

It means that all of that cash, likely representing weeks, months and years of your toil, can be benevolently “confiscated” (actually turned into completely worthless “bank stock” without our permission) in order that your bank doesn’t completely implodel. You know, it’s for the “greater good”. Pretty infuriating, right?

And who IS first in line to be made whole? The colossally irresponsible fat cat bankers who create all of these incredibly risky derivative contracts are deemed more important and “given preference” over Joey and Jilly bag of donuts (you and me) in the case of a financial crisis. So, just like in the 2008 crisis, the financial institutions that cause the crises with their incredibly risky behavior get full repayment. I know… Wow!

Oh and if you’re thinking, “aren’t my deposits covered under FDIC insurance?”. I wouldn’t hold my breath on that as 1) the joint FDIC/Bank of England document makes no mention of FDIC insurance and 2) in a major financial collapse the FDIC would not have enough to cover the losses.

So the next question is…

Can This REALLY Happen?

Yes, absolutely it can AND it already has. Let’s look at the case of Cyprus in 2012. I’ll link this article below.

In July 2012, Cyprus became the fifth euro-zone country to seek a bailout from the EU in the amount of €17.8 billion.[5]

On March 16, 2013, the bail-in took effect. A 9.9 percent levy was imposed on the country’s bank deposits over the government insured limit of €100,000 ($130,000) and a one-time levy of 6.75 percent was imposed on deposits below the insured limit.[7] Deposits below €20,000 were exempted from the tax.

So, in this instance, bank deposits over €100k were given a 10% “haircut” and those under €100k were given a 6.75% reduction. And while deposits below €20k were exempted, I wouldn’t hang my hat on that as this event was not the result of a greater macro financial crisis.

What Should You Do About it?

Currently bail-in policy applies to banks in excess of $50 billion. So possibly for the first time in your life, you need to understand the “soundness” of your bank. 

What we’re doing to mitigate our risks to any future bail-ins (NOT financial advice, please do your own research). This strategy will likely be fluid as the environment changes, but these are probably the most concrete of our current tactics.

1. Get all money out of “big banks” ($50+ billion).
2. Use a credit union or local bank (with monitoring of their policies and health).
3. Move large cash sums to brokerage accounts (i.e. Vanguard, Fidelity, etc.).
4. Own physical gold, silver.
5. Learn how to invest and custody private Bitcoin keys (see my free “Basics of Bitcoin” guide).

Beyond that our recommendations are always to:

1. Get out of all consumer debt (and mortgage debt if you can).
2. Build a giant emergency fund of at least 6mo-1yr of expenses.
3. Diversify (a reasonable percentage) out of fiat denominated assets into gold, silver and Bitcoin (link my FREE “Basics of Bitcoin” guide linked below).
4. Diversify your income by starting an online business as a side hustle.

Now, I know that all may be a little easier said than done and quite possibly more than a little overwhelming. So to help you, I have two FREE resources to either get you started or to continue your momentum.

1. My “8 Steps To Erase Debt/The Foundations of FI” Workshop and
2. My “How To Start And Grow An Online Business” Quick Start Guide

Links for both of these below.

And, for more background on this important subject, check out my video of Dave Ramsey vs Glenn Beck on the Great Reset. Make sure to click over to this video and I’ll see you there.

Some great resources for further research:

https://www.investopedia.com/articles/markets-economy/090716/why-bank-bailins-will-be-new-bailouts.asp

https://cdn2.hubspot.net/hub/233034/file-393290406-pdf/Bail_In_Materials/Protecting_Your_Savings_In_The_Coming_Bail-In_Era.pdf

https://gbr.pepperdine.edu/2015/10/is-cyprus-the-warning-bell/

https://www.youtube.com/watch?v=pRpzTTDZWfE

https://www.fdic.gov/analysis/cfr/bank-research-conference/annual-18th/1-berger.pdf

https://www.imf.org/external/pubs/ft/sdn/2012/sdn1203.pdf

https://sdbullion.com/legalized-bank-bail-ins

https://www.inclusivecapitalism.com/what-is-inclusive-capitalism/

Struggling Or Feeling Alone?

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Now, if this decision process is something you struggle with and you constantly feel isolated about, I’ve got some great news for you and it’s free.

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All that said, let's keep on building your financial acumen and make this your best year yet!

Thanks so much for reading and we’ll see you in the next video post!