Should you keep some or any money in Banks given the economic conditions? (1 Viewer)

Are the Banks a relic of the past? Or, are they still a safe haven of storing wealth?

It looks increasingly likely that the German Dutcha Bank may actually fail. We wake up to see one company after market close hours loosing 10% to 50% of stock value. Now, we hear that banks are under stress.
As the NY Times said, the bubble expectations that central banks could manage the economy is popping.
Some banks around the world pay Negative Interest rates. Or, the interest is so low that the monthy fees make it the equal to negative. Basically, one could just put the cash under a matress.

The number of Americans that no longer have Bank Accounts is something like 30%. People actually get Cash Cards for paychecks, so they go to directly spend the paycheck and don't have the luxury of savings.

Is 2016 the year to trust banks?

Just my opinion, but I don't think it's realistic to avoid banks altogether, unless someone is in the position of living hand-to-mouth and everything they earn is gone the same week. Like it or not, most people need banks.

I spent 8.5 years working in the head office of one of the major Canadian banks and while the level of incompetence displayed was sometimes staggering, they've done a good job of ensuring that it's difficult to get anything done without some bank or other being involved.

Unfortunately where I work, we do not get pay checks. It is either direct deposit or a ATM card (with enough fees and restrictions to discourage most people to use them). Thus my money ends up in a bank. Of course I could pull most of it out right away (my car insurance pulls directly from my bank account, a bit cheaper that way).

If the bank offers/allows direct-pay services such that you never actually need to hold cash in-hand for your bills and you don't need to write a paper check that would go through the mail (snail-mail), then banks still offer some advantages.

For most people, a bank failure isn't an issue because of the Federal Depositor's Insurance Corp., but for those of us with really hefty bank balances, other methods of money management might be better. I'm afraid I don't fall into the latter category.

I can't remember the last time I wrote a cheque. Everything except my bar bill is paid for either by direct debit - all regular bills, or I use my debit / credit card or my pay-pal account.
I rarely even pay my bar bill with cash.

I think this is quite common in the UK, unless you have no on-line account access. I even transfer money to friends using my mobile phone banking app as it's so easy.

The UK Government has a guarantee for I think up to £50,000 for each individual for each back, just in case a collapse happens again..

Good luck with that Deposit insurance Promise.
In the US, it is called FDIC but it changed and most people feel secure that it is the same as it ever was (
Thanks to the new provision of the Dodd-Frank Act:
Let’s say ABC bank fails in the US. ABC bank is too big for the FDIC to make hold. So…

1) The FDIC takes over the bank.
2) The bank’s managers are forced out.
3) The bank’s debts and liabilities are converted into equity or the bank’s stock. And yes, your deposits are considered a “liability” for the bank.
4) Whatever happens to the bank’s stock, affects your wealth. If the bank’s stock falls at this point because everyone has figured out the bank is in major trouble… your wealth falls too.
So… if a large bank fails in the US, your deposits at this bank would either be “written-down” (read: vaporize) or converted into equity or stock shares in the company. And once they are converted to equity you are a shareholder not a depositor… so you are no longer insured by the FDIC.

This was in response to what happened in Greece. In the US, a depositor is an Investor if things go wrong. I thought the EU adopted this too. Maybe not.

Certainly with those with serious liquid resources I think most financial advisors would advise some kind of diversification.

I think this is one of the reason why property prices in the major cities are so high / Moscow / London / Sydney.

People with wealth invest in property if they are wealthy enough they start investing in foreign property in cities that have a different political status. I guess in the hope that they can hedge against wonky government.