Another banking crisis…this time in Kabul, Afghanistan, where the main bank lent our more deposits than it had on hand. Government paychecks are issued against an account at the bank, and government employees have mobbed the bank, while depositors have withdrawn more than $250 million. I’m sure some depositors didn’t make it there before the mobs.
Turns out, bank managers made a series of risky off-the-books loans and property investments in Dubai. A traditional bank account is actually a loan to the bank, which the bank then loans to someone else. If the bank doesn’t get the money back, neither do you. If you want to make money on your money, invest in a company you choose, don’t let the bank choose for you, unless of course you believe the bank can make a better decision, which will depend on the bank managers. Clearly, the Kabul bank managers were not acting in the interest of the depositors.
Don’t let this happen to you. The only “safe” savings account is wealth converted into a real product and stored in a secure safe at home, at a local bank, or in a bank in another country.
If a massive banking collapse happens in the United States, Federal Reserve could create money and provide it to failing banks, but the newly created dollars would buy much less than the dollars saved before the collapse. Depositors would get their dollars back, not their purchasing power. When Federal Reserve creates money, when it adds “more liquidity,” when it “eases the monetary system,” it takes purchasing power from people who hold dollars and gives it to people who get the new dollars, just like a company that issues more shares without increasing the shares of existing shareholders. Your dollars have a hole in the bottom.
Read a UPI article about the bank run in Kabul.
Choose your money.