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Why This Harvard Economist Is Pulling All His Money From Bank Of America
A classicial economist... and Harvard professor... preaching to the world that one's money is not safe in the US banking system due to Ben Bernanke's actions? And putting his withdrawal slip where his mouth is and pulling $1 million out of Bank America? Say it isn't so...
From Terry Burnham, former Harvard economics professor, author of “Mean Genes” and “Mean Markets and Lizard Brains,” provocative poster on this page and long-time critic of the Federal Reserve, argues that the Fed’s efforts to strengthen America’s banks have perversely weakened them. First posted in PBS.
Is your money safe at the bank? An economist says ‘no’ and withdraws his
Last week I had over $1,000,000 in a checking account at Bank of America. Next week, I will have $10,000.
Why am I getting in line to take my money out of Bank of America? Because of Ben Bernanke and Janet Yellen, who officially begins her term as chairwoman on Feb. 1.
Before I explain, let me disclose that I have been a stopped clock of criticism of the Federal Reserve for half a decade. That’s because I believe that when the Fed intervenes in markets, it has two effects — both negative. First, it decreases overall wealth by distorting markets and causing bad investment decisions. Second, the members of the Fed become reverse Robin Hoods as they take from the poor (and unsophisticated) investors and give to the rich (and politically connected). These effects have been noticed; a Gallup poll taken in the last few days reports that only the richest Americans support the Fed. (See the table.)
Why do I risk starting a run on Bank of America by withdrawing my money and presuming that many fellow depositors will read this and rush to withdraw too? Because they pay me zero interest. Thus, even an infinitesimal chance Bank of America will not repay me in full, whenever I ask, switches the cost-benefit conclusion from stay to flee.
Let me explain: Currently, I receive zero dollars in interest on my $1,000,000. The reason I had the money in Bank of America was to keep it safe. However, the potential cost to keeping my money in Bank of America is that the bank may be unwilling or unable to return my money.
They will not be able to return my money if:
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Many other depositors like you get in line before me. Banks today promise everyone that they can have their money back instantaneously, but the bank does
not actually have enough money to pay everyone at once because they have lent most of it out to other people — 90 percent or more. Thus, banks are always at risk for runs where the depositors at the front of the line get their money back, but the depositors at the back of the line do not. Consider this image from a fully insured U.S. bank, IndyMac in California, just five years ago. -
Some of the investments of Bank of America go bust. Because Bank of America has loaned out the vast majority of depositors’ money, if even a small percentage of its loans go bust, the firm is at risk for bankruptcy. Leverage, combined with some bad investments, caused the failure of Lehman Brothers in 2008 and would have caused the failure of Bank of America, AIG, Goldman Sachs, Morgan Stanley, Merrill Lynch, Bear Stearns, and many more institutions in 2008 had the government not bailed them out.
In recent days, the chances for trouble at Bank of America have become more salient because of woes in the emerging markets, particularly Argentina, Turkey, Russia and China. The emerging market fears caused the Dow Jones Industrial Average to lose more than 500 points over the last week.
Returning to my money now entrusted to Bank of America, market turmoil reminded me that this particular trustee is simply not safe. Or not safe enough, given the fact that safety is the reason I put the money there at all. The market turmoil could threaten “BofA” with bankruptcy today as it did in 2008, and as banks have experienced again and again over time.
If the chance that Bank of America will not return my money is, say, a mere 1 percent, then the expected cost to me is 1 percent of my million, or $10,000. That far exceeds the interest I receive, which, I hardly need remind depositors out there, is a cool $0. Even a 0.1 percent chance of loss has an expected cost to me of $1,000. Bank of America pays me the zero interest rate because the Federal Reserve has set interest rates to zero. Thus my incentive to leave at the first whiff of instability.
Surely, you say, the federal government is going to keep its promises, at least on insured deposits. Yes, the Federal Government (via the FDIC) insures deposits in most institutions up to $250,000. But there is a problem with this insurance. The FDIC currently has far less money in its fund than it has insured deposits: as of Sept. 1, about $41 billion in reserve against $6 trillion in insured deposits. (There are over $9 trillion on deposit at U.S. banks, by the way, so more than $3 trillion in deposits is completely uninsured.)
It’s true, of course, that when the FDIC fund risks running dry, as it did in 2009, it can go back to other parts of the federal government for help. I expect those other parts will make the utmost efforts to oblige. But consider the possibility that they may be in crisis at the very same time, for the very same reasons, or that it might take some time to get approval. Remember that Congress voted against the TARP bailout in 2008 before it relented and finally voted for the bailout.
Thus, even insured depositors risk loss and/or delay in recovering their funds. In most time periods, these risks are balanced against the reward of getting interest. Not so long ago, Bank of America would have paid me $1,000 a week in interest on my million dollars. If I were getting $1,000 a week, I might bear the risks of delay and default. However, today I am receiving $0.
So my cash is leaving Bank of America.
But if Bank of America is not safe, you must be wondering, where can you and I put our money? No path is without risk, but here are a few options.
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Keep some cash at home, though admittedly this runs the risk of loss or setting yourself up as a target for criminals.
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Put some cash in a safety box. There is an urban myth that this is illegal; my understanding is that cash in a safety box is legal. However, I can imagine scenarios where capital controls are placed on safety deposit box withdrawals. And suppose the bank is shut down and you can’t get to the box?
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Pay your debts. You don’t need to be Suze Orman to know that you need liquidity, so do not use all your cash to pay debts. However, you can use some surplus, should you have any.
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Prepay your taxes and some other obligations. Subject to the same caveat about liquidity, pay ahead. Make sure you only pay safe entities. Your local government is not going away, even in a depression, so, for example, you can prepay property taxes. (I would check with a tax accountant on the implications, however.)
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Find a safer bank. Some local, smaller banks are much safer than the “too-big-to-fail banks.” After its mistake of letting Lehman fail, the government has learned that it must try to save giant institutions. However, the government may not be able to save all failing institutions immediately and simultaneously in a crisis. Thus, depositors in big banks face delays and defaults in the event of a true crisis. (It is important to find the right small bank; I believe all big banks are fragile, while some small banks are robust.)
Someone should start a bank (or maybe someone has) that charges (rather than pays) interest and does not make loans. Such a bank would be a good example of how Fed actions create unintended outcomes that defeat their goals. The Fed wants to stimulate lending, but an anti-lending bank could be quite successful. I would be a customer.
(Interestingly, there was a famous anti-lending bank and it was also a “BofA” — the Bank of Amsterdam, founded in 1609. The Dutch BofA charged customers for safe-keeping, did not make loans and did not allow depositors to get their money out immediately. Adam Smith discusses this BofA favorably in his “Wealth of Nations,” published in 1776. Unfortunately — and unbeknownst to Smith — the Bank of Amsterdam had starting secretly making risky loans to ventures in the East Indies and other areas, just like any other bank. When these risky ventures failed, so did the BofA.)
My point is that the Federal Reserve’s actions have myriad, unanticipated, negative consequences. Over the last week, we saw the impact on the emerging markets. The Fed had created $3 trillion of new money in the last five-plus years — three times more than in its entire prior history. A big chunk of that $3 trillion found its way, via private investors and institutions, into risky, emerging markets.
Now that the Fed is reducing (“tapering”) its new money creation (now down to $65 billion a month, or $780 billion a year, as of Wednesday’s announcement), investments are flowing out of risky areas. Some of these countries are facing absolute crises, with Argentina’s currency plummeting by more than 20 percent in under one month. That means investments in Argentina are worth 20 percent less in dollar terms than they were a month ago, even if they held their price in Pesos.
The Fed did not plan to impoverish investors by inducing them to buy overpriced Argentinian investments, of course, but that is one of the costly consequences of its actions. If you lost money in emerging markets over the last week, at one level, it is your responsibility. However, it is not crazy for you to blame the Fed for creating volatile prices that made investing more difficult.
Similarly, if you bought gold at the peak of almost $2,000 per ounce, you have lost one-third of your money; you share the blame for your golden losses with Alan Greenspan, Ben Bernanke and Janet Yellen. They removed the opportunities for safe investments and forced those with liquid assets to scramble for what safety they thought they could find. Furthermore, the uncertainty caused by the Fed has caused many assets to swing wildly in value, creating winners and losers.
The Fed played a role in the recent emerging markets turmoil. Next week, they will cause another crisis somewhere else. Eventually, the absurd effort to create wealth through monetary policy will unravel in the U.S. as it has every other time it has been tried from Weimar Germany to Robert Mugabe’s Zimbabwe.
Even after the Fed created the housing problems, we would have been better of with a small 2009 depression rather than the larger depression that lies ahead. See my Making Sen$e posts “The Stockholm Syndrome and Printing Money” and “Ben Bernanke as Easter Bunny: Why the Fed Can’t Prevent the Coming Crash” for the details of my argument.
Ever since Alan Greenspan intervened to save the stock market on Oct. 20, 1987, the Fed has sought to cushion every financial blow by adding liquidity. The trouble with trying to make the world safe for stupidity is that it creates fragility.
Bank of America and other big banks are fragile — and vulnerable to bank runs — because the Fed has set interest rates to zero. If a run gathers momentum, the government will take steps to stem it. But I am convinced they have limited ammunition and unlimited problems.
What is the solution? For you, save yourself and your family. For the system, revamp the Federal Reserve. The simplest first step would be to end the dual mandate of price stability and full employment. Price stability is enough. I favor rules over intervention. We don’t need a maestro conducting monetary policy; we need a system that promotes stability and allows people (not printing presses) to make us richer.
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Other than the "trend is your friend", can you name another financial aphorism?
How 'bout "don't fight the FED"?
They are removing the punch bowl after 5+ years of goosing the golden fleece.
Did this 'genius' move the money to a credit union or where?
What's he know about the stawk merket that we don't know?
I feel a storm is coming.
a shuckster?
shuckster
To seek compliments and/or support by insulting oneself or by complaining about the difficulty of one's life. n. A person who uses self-deprecation as flattery bait.Only an idiot....or an economist.
I don't believe he had 1 mil in checking. That's asinine.
I don't believe it either. I know some relatively well-off people; but I've never heard of anything like this. No one has. the article is some kind of a shill. maybe just to boost his blog hits.
Never Be the Last one in Line.. For a Pony Ride.. :)
Terry Burnham forgot his free healthcare condom and wanted to hedge on a speculative deposit.
Atomizer. I read every comment you make. We go back over 2 years. You're my CORE. I'll back you up any hour/day/week Atomizer!
He got you. I got him. We got us. Yeah.
I'm so proud of you " Iridium Rebel" .
Thanks Yen. Same here for you. Waiting for a new ZH posting to surface. Will give my thoughts on the two decisions we face. :)
What about a bail in which look likely?
That's it. My $300 is coming out of the bank tomorrow. In small bills.
Well, get ready for the third degree from your banker. Better have a good explanation.
If your dollar is not safe in a bank, it is not safe anywhere. The vast majority of deposits are insured. The only way to destroy those deposits is to refuse to support the dollar in the event of a run. If the banking system is attacked, all dollar holdings will also be attacked, including treasury notes.
The government will not let that happen, and they have plenty of tools to stop it. One extremely useful tool is the bank holiday. Another is capital controls. And a third is the printing press.
Bottom line: we're all in this together. You cannot "beat" any run on the dollar or the dollar-denominated banking system, except by getting out of them altogether. Holding your cash in a safe is a preposterous move. And if you are actually paranoid enough to convert all your dollars to gold... well, perhaps you should have studied a little more history and geopolitics, and a little less "economics."
Also, any jackass that thinks a million dollar withdrawal can start a bank run on the country's largest deposit bank is, well, a jackass. Harvard??? Really???
" we are all in this together"
The fuck we are! Before Katrina hit, some people got the fuck out and ate and slept well- like me. Others hung out at the Super dome for the hurricane and got fucked.
Watched the surf crashing onto the Emerald Coast beaches while my house got flooded with 8' of water and the roof was ripped off. Best decision I ever made.
Especially so if they stuck around and were white.
I am slowly taking money out of my local bank.....
Me, too. A decent chunk one month, skip a month, a decent chunk the next.
Not too fast, all below the ten G limit, nothing to ignite too much attention.
Turning it into something safer.
I have not got a single ponzi dollar left in the banking system in the US.
Everything is now overseas in an acount in a stable country where banks are very conservative, its outside Western banking system of derivatives, closed to western bank ownership of shares or manipuation, and I have a numbered ATM card , no name on the card a card that I can withdraw over a $1,000 a day from any ATM worldwide, My cash is availabel by ATM, never lets me down, and if one ATM is not paying out I sinply go to another, and I also know asa fact that banks are starting to load less cash to ATM's to deliberately let them run out and slow cash wthdrawals.
Cost just over $150 to get the account opened with a numbered generic ATM card and guess what, it pays INTEREST too.
And that bank is called BDO
You think that a bank which his HIGHLY LEVERED to continued real estate speculation (and FDI) in the Philippines is safe?
(or just in relatively safe when compared to BofA)
BDO -- Banco de Oro. My girlfriend is opening an account for business at BDO this Tuesday.
Told her, if for business, open one outside Tondo in a more prosperous area of Manila.
Most of the other bank choices were straight up Chinese and short term negative 'til the shadowbank thingy settles. Henry Sy runs BDO and is a Han Chinese immigrant from long, long time ago. Richest man in the Philippines. Net worth $16B. Ironically, he started out selling used shoes in Tondo, a run down part of Manila where my girlfriend was raised.
BDO ATMs are everywhere in PH and they've never let me down in my own travels.
The problem is not so much where you stash your fiat dollars but the dollars themselves.
The big question left unanswered is where did he put this 990,000 dollars?
Heyyy ! I do not want to insult anyone.
But are U asking for Asset Shift probabilities ?
Or d U want to Rob Him ?
Telling people to get their money out of the banks is only half advice. Where it should it be put? Mattresses? Shoe boxes? More gold? Magic beans?Some foreign country?
I liked reading that simple summary of the situation, although it grossly underestimates the full magnitude of the implications of its best line:
"The trouble with trying to make the world safe for stupidity is that it creates fragility."
The foundation of the current economic system is legalized lies, backed by legalized violence. That kind of force backed fraud has made "the world safe for stupidity." The ability of the banksters to covertly take control over the political processes through the systematic application of the methods of organized crime has created America, as well as pretty well the whole world, as a place which IS "safe for stupidity!" A world dominated by the international banksters demands not only that the vast majority of people do not understand how the monetary system works, but also that they do not want to understand. The kind of world controlled by banksters must be made safe for stupidity, in order to continue operating. Therefore, the banksters pumped some the profit they made from their financial frauds into funding the schools, and buying up control over the mass media, to make sure that those would continue to make that world safe for stupidity. Indeed, the banksters became so socially successful in setting up their government enforced financial frauds, that it became more unsafe or unsuccessful for most people to not be stupid. After the banksters were able to have their financial frauds take over control of the economic system, as the Federal Reserve Board has done for a Century, then for people to be safe and successful within that social context demanded that they operate within the banksters' systems. Inside of a social world that has been made safe for stupidity it becomes more difficult and dangerous to not agree to also be stupid. After the banksters had succeeded in making the world safe for stupidity, then agreeing with huge lies was rewarded, while disagreeing with huge lies was punished. However, since that American and global civilization had been made safe for stupidity, of course, it does stupid things, and indeed, stupider and stupider things, at an exponentially accelerating rate.
The paradoxical playing through of controlling civilization by systems of legalized lies, backed by legalization violence, "is that it creates fragility." The whole world is thereby driven towards runaway social polarization, and destruction of natural capital, on a scale which could not be fully comprehended until that fragility finally breaks. (However, in a world which has been made "safe for stupidity" there are NO safe places to put one's "money," because the whole system becomes so fragile that almost everything could break down, to unprecedented psychotic degrees. I.e., there are NO sound banks, and actually NO sound private property inside of a whole world which has been made too safe for stupidity too much, for too long.)
Since money is actually based on measurement backed by murder, and that has become electronic frauds, backed by atomic bombs, the fragility of that system has made the world "safe for stupidity" to the point of utterly irrational insanity, since everything it does is based upon the triumphant application of the methods of organized crime, to be able to take control over the powers of governments, to legalize frauds, and back those frauds up with the force of those governments, AS THE WAY THAT THE WORLD HAS BEEN MADE SAFE FOR STUPIDITY. From a sublimely objective overview, that was the stupidest thing that human civilization could possibly have done, but nevertheless, that situation was created by the long history whereby success in warfare depending upon deceits gradually morphed into success in economics depending upon frauds.
While I enjoyed the astonishingly simple way that the article above presented the situation, however, it grossly understated the magnitude to which making the world SAFE FOR STUPIDITY has resulted in human beings tending towards destroying the life of the planet. As one would expect from a Harvard economist, he still mostly stays within the mainstream frame of reference, and does not put into perspective that the economics of making the world safe for stupidity also applies orders of magnitude more so to rampant runaway stupidity with respect to the ecology. The human species being able to control its civilization through systems of legalized lies, backed by legalized violence, required making the world safe for stupidity to the degree that the final fragility is not merely the collapse into chaos of the human world, due to social polarization running amok, but also, in the bigger context, driving everything else surrounding it through similar processes!
Our entire civilization is based on the systems of triumphantly enforced frauds, which requires having made the world more and more safe for stupidity to flourish. However, that is now not merely true about American society, but rather, true about how human beings treat the natural world around them. Almost everything we are doing is the result of having made our world safe for stupidity, so that attitudes of evil deliberate ignorance can be maintained regarding the real consequences of almost everything we are doing, while the fragility in that may continue to be disregarded, and discounted, because we DO LIVE IN A SOCIAL WORLD WHICH HAS BEEN MADE QUITE SAFE FOR STUPIDITY!
I know one day, my lack of stupidity will make me unsafe.
You're honest. You never quit!
I took a 6 figure balance out of ETrade bank and put it into a local one, a piece out of there into another local ( and I researched the boards of both banks- Landscapers, my son's orthodondist etc) The rest is going to gold in Singapore: I'll keep 6 months of expenses.
The central piece this Haavaahhd pos gets right is that he's taking risk for no posibility of return.
Just three points:
1. He really didn't tell us where he put his money.
2. One of the major reasons the system is so fragile is because banks take very little security by lending a very high proportion of the purchase price or because they take no security as in the case of student loans and credit cards.
3. If it took an economist some ten years of being ass raped by ZIRP then is it a sign that a great awakening approaches or is it a sign of how stupid people still are?
His best bet would be to lend directly to borrowers who are solid and who provide a high proportion of equity towards their purchase.
All True. And Peter, i would"nt have told anyone either , Exactly, where i
parked my money. Be it Mutual Funds, or the BackYard.
he's talking figuratively, or he has exactly a million in a zero interest BOA checking account, which means he is subnormal. no one needs to write that kind of check. meanwhile he will get something from a BOA savings account, maybe 1% even, so the man is not speaking to us directly, or truthfully (harvard economist) we all know savers are getting raped, thank you. and we also know the Fed can print those FDIC dollars, and the only people who lost money in 2008 were those with uninsured deposits, or non-treasury MM funds.
the fed bailed out the worst debt in the market, why not chase yield? look at whats happening in europe as the center has bail-ins at the margin. now ukraine wants out of the eurozone and back into russia? comrade?! i suspect the poor states in america will undergo a similar marginalization, despite obamas piss poor record his party has a thumb on the gop red states. most of them poor and about to get a lot poorer. FDIC insurance for Goldman (no retail banking) while there will be bail-ins for small banks, mostly in the south and midwest.
based on experience you would have to be fool to pull your money out of BOA and put it in some poor community bank, a state the size and composition of Cyprus. if you live on the margin buy gold, if you're a harvard economist where the hell did you get a million dollars anyway?.
Bank of America should be called Bank of Fucking Assholes.
And he has a million dollars in a checking account, so we should consider him an investment advisor? I'm not feeling it.
If an Harvard PhD economist pulls all his money out of his bank and warns that all US banks are unsafe -- my first reaction is to do the opposite. And that is not even a counter intuitive reaction these days.
However, given that liars and criminals are known to forensically leak the truth subconsciously some of the time, and nervous persons are subject to mental breakdowns from the burdens of their deceit, this might be one of those times to pay attention.
If an Harvard PhD economist pulls all his money out of his bank and warns that all US banks are unsafe -- my first reaction is to do the opposite. And that is not even a counter intuitive reaction these days.
However, given that liars and criminals are known to forensically leak the truth subconsciously some of the time, and nervous persons are subject to mental breakdowns from the burdens of their deceit, this might be one of those times to pay attention.
Doesn't the law now declare your deposits to be assets of the bank and not yours anymore? How do you expect those poor, parasitic, criminal bastards to make a living, if you are able to confiscate the bankster assets for your own selfish interests and ruin their marvelous bankster ponzi/fraud on a whim. It is just not fair.
This has been well known legal fact for centuries. That the bank owns the deposited money is not new.
Lets all just calm down. There is no need to be moving your money, everything is fine. Besides thats not your money you can't move that money. Isn't it a crime to speak against the Banksters? Oh well "YANK THAT MONEY!" Isn't that from Jerry McQuire?
My google ad at "igobanking.com" has a whopping 0.75 rate they are offering. Well fuck me running! I'll just sell every thing and plop my cash there! On second thought, I'll keep my money at "The Bank of IridiumRebel".
This guy might have his heart in the right place, but he makes a few glaring errors:
1. "After its mistake of letting Lehman fail, the government has learned that it must try to save giant institutions." - This is simply asinine. Letting Lehman fail was the one thing the idiots in Washington did right. If they would have let the whole lot of them go bankrupt the malinvestments of the previous years would have been liquidated and we would be in a much better place. The system would still be unstable due to inherent problems with fiat money and fractional reserve banking, but the imbalances would be much smaller.
2. "f you bought gold at the peak of almost $2,000 per ounce, you have lost one-third of your money; you share the blame for your golden losses with Alan Greenspan, Ben Bernanke and Janet Yellen." - If you bought gold and still have it, you have lost nothing. You still have exactly the same number of ounces, or even more if you are smart and kept buying as the price went down. If you were stupid enough to sell real money for fiat, then you got what you deserve. Gold has nowhere to go but up in the long term, and if this guy understands anything about economics and the nature of fiat money he should see that.
3."For the system, revamp the Federal Reserve." - The only real solution is to abolish the Federal Reserve and return to sound, market-created commodity money. Cut off the state's ability to create money once and for all. Obviously he wouldn't last a day at Harvard if he came out and said this, but at least we can hope he's smart enough to know it's true.
Despite these glaring weaknesses, this is a step in the right direction, and every individual who pulls money out of the system is helping the cause of liberty. Instead of worrying about where to store dollars, convert them to something with real value, such as food, land, guns & ammo, precious metals, etc.
Solid commentary - Agree on all points.
While I agree with you commentary, would just like to note that the good professor is a former trader at GS... As far as your second point is concerned, don't discount the possiblity of his deliberate obfuscation.
Get ready to see the weakling loser bailed out powers that be scumbags sissies and whores have the mightiest hissy fit in history as they screech in vain for someone to save them.
You just can't make this stuff up....incredible.
Reading Tylers epitaphs?
Like this poster, I am not particularly sanguine about the future of BoA. So, I am glad to be out of there (as of last month).
However, I also think that this guy is not particularly well informed. He repeats the often-debunked myth that banks loan out the money of their depositors. That is just nonsense. When banks lend money, that is new money, and they are empowered by the Federal Reserve to create that money. Conversely, when loans are repaid, the principal is "destroyed" -- it goes out of existence. They do not have a pool of "deposits" that is decremented when money is lent, and incremented when loans are repaid. It just isn't so.
Other commenters have remarked on the $1,000,000 in the checking account. That is an amount that a Harvard prof could easily accumulate over a lifetime of work. However, it would certainly not be sensible to keep it in a checking account. I guess that what has happened is that this guy had his money in CDs which were rolling over as they matured. At some point he decided to get out, and instructed the bank to stop rolling them over. That would dump the money into his checking account. After a while, all of the CDs will have matured and he is then ready to write a big check to move the money elsewhere.
How dare you speak logic. Spot on. As nice as it would be to have a cool mil at my disposal, I do not. This economist although well off, pales by comparison to the real assholes we should be lynching.
That is an amount that a Harvard prof could easily accumulate over a lifetime of work. -- Ancaeus
A previous poster linked to pundit track .com which states the good professor is a former trader at... GS.
The last person to publicly announce his intention to withdraw all funds from BAC, governor Blago of IL, was charged with fraud the very next morning.
After reading this, I've decided to pull $5,000,000 outta my checking acount too.
Sorry-assed WORLD OF DEBT we live in!!! ... See Video Below "WORLD OF DEBT" ... that's all I got:
https://www.youtube.com/watch?v=99xsqxzJnXs
Gold and a AR-15 =)
He's part of the problem, not the solution. Higher Ed is the biggest fraud perpetrated on the masses. The mere fact that he has $1 million sitting in a DDA says everything. Debt slaves to enrich this asshole who complains that his ill gotten gains are at risk.
How bright can this guy be in the first place?
I pulled out of BoA with my few hundred back in 1991. Worst bank I ever did buisness with.
So he woke up this morning and decided to take ONE MILLION DOLLARS out of his CHECKING ACCOUNT and prepay his property taxes?
Economic moron.
Harvard - Summers and this guy
Princeton - Bernank, Krughole
Columbia - Foodstamp
Yale - W, aka 'now watch this drive'
Over fucking rated.
Federal Reserve of the Banks, by the Banks and for the Banks.
The main aim of the political class and the central bankers around the world is to create one bubble after another for the zombie bankers to feed on. The majority of the population who actually work hard to earn their living by engaging in productive work have to pay the price by either loosing a majority of their earnings in the form of taxes, interest on loans or paying the bill for the bailouts.
http://www.marketoracle.co.uk/Article40231.html
So where did he put his money? Just another load of lip-flapping.
Repeal Glass–Steagal.
already been repealed; r u sure you don't have this backwards?
We know what he means. Un-Clintonized the financial sector.
you mean no more cuban cigars?
Re-instate.
There, fixed it for you.
"Why This Harvard Economist Is Pulling All His Money From Bank Of America"
Kinda way late on the trigger.
Academia dumb down makes people think they are smart.
Then the academics speak and prove it...(the dumb down).
The author can add at least two other reasons for pulling his cash out of his bank:
- the serious possibility of being sucked into a bank bail-in.
- the serious possibility of a wealth tax, proposed by the IMF.
I see no reason at all nowadays for leaving any cash in banks at all, except to pay bills etc.
Direct way to faster deflation by payibg down debts..and hoarding cash. But there is no ther way, just an illustration of what is going to happen.
Bitcoin, Mr. Harvard fancy pants.
This is astounding, coming from someone formerly this mainstream. Mr. Burnham has opted out of the nonstop lies and manipulation. My congratulations. My novel, The Golden Pinnacle, has a chapter, Fools' Gold, which destroys the intellectual facade of central banking in a few pages. It is, and always will be, a concept full of contradictions and destined to fail. Mr. Burnham has realized this and has gone public. This took a great deal of courage and I can only imagine the abuse he's going to take because of it.
If I had a million dollars in a checking account, I'd write checks. I'd write a check to somebody I know who could use a few extra dollars to make their lives less miserable. I'd give a lot of the money away to somebody who can really use some more than what they've got. They could by beer.
But, I don't have 1 million dollars in a checking account, so I won't be writing any checks to anybody. Not that I don't have any, I just don't have a million in a checking account.
If I were a Harvard Schmarvard professor with a million dollars in a checking account, I would at least begin by buying some land in Colorado where you can raise some hemp and drive to Avery Brewery for an afternoon to drink beer. A couple of glasses of Hog Heaven from Avery for starters. Then leave Boulder as fast as you can, then drive to Longmont to Lefthand to drink some beer. Then a drive up to Fort Collins to drink some O'dell's St. Lupulin or Mercenary. Then over to New Belgium for some Rampant IPA. Then back to Longmont for some Dale's pale ale. Then back to Fort Collins because it is a great place on the planet. Go to Hog Wild up on the north end and have a brisket sandwich.
The professor should be slapped by an orangutan for not putting the money to work in one way or another.
Another useful idiot who thinks they have seen the light by cursing the darkness.
Reserve some of that cash for bail money and a good DUI lawyer. They are very tough on drunk driving in that neck of the woods.
Most investors think that even if things go downhill fast that they will be smart enough to get out of the markets. After the debacle in 2008 where they saw the market do nasty and violent swings they learned a few things, this time they figure they will make the right moves before it is to late. But what if it hits like the flash crash on steroids? We know that can't happen because circuit breakers have been put in place to arrest panic style moves, but imagine a market that falls, trade is halted, and the market simply does not reopen for days, or even weeks. How would values change over that time?
For a long time I have been trying to develop a scenario for a market crash and a reasonable map that would arrive at such a situation it can happen, more on this risk in the post below,
http://brucewilds.blogspot.com/2013/01/flash-crash-on-steroids.html
So why should anyone with a pulse listen to someone that kept $1,000,000 on deposit at Bank of America at 0%? That defines a financial retard. First, you don't have the Federally backed insurance on $1,000,000, Duuuh!, Second, you can do a lot better even in another poor choice commercial bank, third, if your concern is risk to principal why not buy treasuries? But if you feel as many others do that the dilution of the dollar is the problem, why not put in Swiss Francs or or Canadian dollars? Yeah, nothing is really "safe". Not even putting it in a safe deposit box. Inflation will eat you alive over time. Best to get financially educated which is a strange proposal to make to someone that claims to be a Harvard Economist. Perhaps, we really should question Harvard's education. A lot of loons have come out of Harvard. But the truth is you only recently recognized putting your money at Bank of America at 0% was monumentally stupid, and opted to make a change while at the same time taking this opportunity to attempt to make a statement. Well, here's what I've garnered from your investing history at bank of America-----you're a financial illiterate. Now what point were you trying to make today?
Well, he said he was a Harvard PhD in Economics... He didn't brag that he was a smart one.
1 mil in NIRP-ville is a high price to pay for liquidity.
Now, a Dunkin Donut franchise in Denver on the other hand...
I understand he is just making a point, but what the hell is he doing with a mill in the bank anyway?
We pulled many times that amount out of the fraud factories when they got caught breaking every law concerning finance, FASB 157 was suspended, and record bonuses were paid by taxpayers to atone for lawless criminals that couldn't see anything coming. That was in 2008, and we were anything but alone in that exodus. Speaking for myself, there is no coming back.
This blathering economist of vanity is 5 years late. Better late than never as they say as not one thing has changed in the factories.
What has changes is there is five more years of fleecing of Americans and these crooks are interdependent and leveraged to be more fragile than before.
Did everyone forget (including the kind professor) that your cash won't be worth anything either?
800 oz of Gold and a boating accident.
Kind of post that will get a ton of comments on here (90% of which are entirely worthless) but I still don't understand why anyone with $1M in cash would have it in a single account at a single institution especially if that is the overwhelming part of their liquid asset portfolio. That is just a ridiculously foolish thing to do.
It would be really nice to see an article that said if you have a pile of cash what are some alternative strategies to investment and what some of the risk levels may look like. Goes against the entire ZeroHedge motto though especially for oped pieces they post. It is only 'we are doomed/we are screwed' variety. Say me the Cassandra wailing $hit please.
I hear you brother!
It's so hard to find somewhere to put your $1m in cash these days, it's a travesty what these rich people are doing to other rich people these days.
How did this dopey shit end up with $1m in the first place? That's the real question.
FED's Fisher says : FED is not Central Bank of the World !
You don't SAY !
Having created the greatest monetary problem in the world since the famous " Our money your problem" mantra, having made petrodollar the staple monetary marker for all commodity trades in the world, having made the global economy the ONLY game in town to ensure US WS capitalist hegemony on the world, having made the derivative Banksta soup the most toxic financial concoction of the world, having supported the Banksta cabal and WS plutocratic wealth by ZIRP/TARP/QE 1-2-Twist-3, having obliged in currency wars Japan, EU and UK to follow suit via CB surrogate "cut and paste" plays to protect 95% of paper asset wealth denominated in their currencies; the FED now says :
World Moral Hazard, now BOTH political and financial, of our SOLE making, is your OWN problem.
MORE FOOL YOU FOR BELIEVING US YOU EM SUCKERS!
Well we know now that the buck never stops at the FED... Mr Fisher you have juster/jestered poured that into CONCRETE. Consequences...
http://www.marketwatch.com/story/fed-is-not-central-bank-of-the-world-fi...
Some of his recomendations sound hare brained. Prepay your taxes so you won't have cash in the bank?
I like that he's questioning our banks, but it seems like he's focusing on the wrong problem.
Has this "harvard economist" ever heard about von Mises? All these harvard economists are just well paid clowns that has been spreading statist propaganda bullshit for decades instead of educating the kids. Fuck.
And still he is so stupid not even mentioning gold as an alternative. Got this guy paid for acting like an uber educated asshole?
What about 401K's and IRAs? Should we close those out from Fidelity, Schwab, etc., too?
Yes. MyRA is the warning signal. Bumping you into UST is no different then confiscation when you get defaults and currency destruction/collapse.
How about adding another one to that list? Swap your rapidly depreciating fiat and store your wealth and gold and silver. Or buy a house in a foreign country again by swapping your fiat for a real asset that someone will want decades from now. It's laughable to think what may become of the dollar decades from now if it holds any value at all.
Until Cyprus you could count on your money in the bank... with recent events (e.g., cyprus) and the spreading legislation that's followed, it is NOT safe. Cash was king during the depression and will be once again - at least initially --- that's when I'll increase my PM holdings, not a minute before.
I have a feeling that when you "need" gold, it's not going to be available.
A) your deposits at a TBTF bank and many other banks is simply a high risk loan to a gambling degenerate also hooked on coke and heroin that is only functional due to gubmint assistance
B) because of the abolition of legit accounting rules there is no way to know the banks' true exposure to toxic sludge such as derivatives and MBS
Connect the dots and hedge accordingly. This is not complicated.
We all have the power to do this TODAY!
Occupy Wall Streeters camping in the cold for weeks was nothing more than an inconvenience for the bankster elite & our lapdog elected representatives.
Appealing to a sense of what is right or fair is pointless when dealing with people who have no conscience.
The TBTF institutions will not be content until the world population is maxed out on debt and all wealth is being collected to cover only the interest.
Would love to see the effect of the nation closing all accounts with JPM, BofA, Citi et-al.
Put it in a local credit union or pull it out in cash. It could be done in a week.
That would be a protest that the banksters would have to react to.
And he is not alone:
U.S. Mint Gold-Coin Sales Jump 63% in January; Silver Triples
How January goes, so the year does - we will see whether this year will prove it to be right again, but so far general equity markets are down in January and Gold, Silver and Miners are strongly up for the month. It is very important to see the demand for physical Gold and Silver is picking up not only in China, but in US as well. Similar reports are coming now from Mints all over the world.http://sufiy.blogspot.co.uk/2014/02/us-mint-gold-coin-sales-jump-63-in.h...
if the rich did not approve of Fed policy it would a lot easier to abolish the Fed
"Because Bank of America has loaned out the vast majority of depositors’ money, if even a small percentage of its loans go bust,"
I had to stop right there, this man doesn't seem to know how banks work. And if he does, he sure as hell cannot articulate it very well.
Banks indirectly create the deposits by making loans. I think perhaps he was keeping it simple on purpose I believe.
.
If you like your central bank,you can keep your central bank
He did admit he has been a stopped clock these last five years.
Timing is difficult and the system can remain stable longer than we can remain solvent betting against it.
So much to unpack here.
I applaud the professor for his actions, but he comes off as half-assed (as most Harvard morons do).
His justification for his actions is somewhat flimsy:
a Gallup poll taken in the last few days reports that only the richest Americans support the Fed.
So what? They should, but that’s not really relevant.
I don’t give a shit what some poll says about anything; I can construct a poll to say almost anything I want.
Many people are already doing most of the things on his list.
To Professor Burnham’s list, I would add:
1. Get a gun safe. Keep your cash there. You should have a significant portion of your savings available at any time.
2. Get guns. Learn how to use them, against government agents if necessary (eventually it will be)
3. Get ammo. Lots and lots of ammo. All calibers. See #2
4. Get pm – store them in #1
There is no disincentive to hording cash (other than the inflation deterioration factor) currently; ZIRP has destroyed interest payments. Hide it under your mattress if you have to.
If you are invested, be prepared to liquidate immediately. Have a plan to convert any paper assets to physical immediately.
As others have said, don’t panic, but if you do, be the first to panic.
Government is not your friend, especially this government. It is time to plan for the worst.
During the "boom times" when asset values are going up lots of people think they are getting rich. In inflationary times, government tax revenues do well. Not only does government get to spend the money they print, the side effects of inflation on taxes are good for government, though bad for their subjects. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. said John Maynard Keynes.
As the central banks print like crazy to control interest rates on bonds they devalue the currency. While there are not many Bond Vigilantes there are many Currency Vigilantes. The post below questions the logic of keeping much cash because the value could drop rather quickly,
http://brucewilds.blogspot.com/2014/02/when-will-inflation-strike_1.html
Some of you need to understand that just because the prof had $1M in a checking account at any one given time, does not mean he kept it there for ever, or for even a lengthy time. If you have a CD mature, you roll it into a checking account while you determine your next course of action. If you sell an asset, you roll the proceeds into a checking account while you determine your next course of action. Is that too difficult to understand? Apparently it is for a large number of you.
If you like your money, you can keep your money!
"a Gallup poll taken in the last few days reports that only the richest Americans support the Fed. (See the table.)"
Suprise! "Elected Officials" are officially the problem, now what? Only thing you can do is boycott the system as much as possible.
Still 300 tweets short of dead bankers society.
How about Credit Unions? Are they a good alternative to a bank?
Credit Unions are banks ... i.e they take in cash and loan out more. A credit union, as with any bank, should be checked out. Investigate where they make their loans, which assets and then determine if these assets provide sufficient stability.
Last week I moved a bunch from Chase to a money market. Is that any safer? Maybe a little...
It isn’t.
The SEC is currently developing rules to restrict withdrawals to prevent runs similar to 2008, when the system came within an eyelash of total collapse.
If/when it happens again, the SEC (or FSOC, or the Fed, or OCC, or any number of federal agencies) may step in and “freeze” mmmf assets, making the situation worse.
I would severely limit my mmmf participation because of these factors.
65,000 reads ... Congratulation Tyler
Someone should start a bank (or maybe someone has) that charges (rather than pays) interest and does not make loans.
GoldMoney.com is just such a bank ... unless you want to get fussy about the definition of a bank.
BTW: How did an economist this stupid ever come up with$1,000,000?
My point is that the Federal Reserve’s actions have myriad, unanticipated, negative consequences.
A properly managed Medium of Exchange (MOE) has zero (not myriad) unanticipated negative consequences. The Fed is improperly managed because such improper management is very profitable to the small cabal that owns the Fed which controls our MOE.
The Fed did not plan to impoverish investors by inducing them to buy overpriced Argentinian investments, of course, but that is one of the costly consequences of its actions.
Oh yes it did! It's their farming operation which they like you to call the business cycle. The IMF and World Bank are their principal agents.
Similarly, if you bought gold at the peak of almost $2,000 per ounce, you have lost one-third of your money; you share the blame for your golden losses with Alan Greenspan, Ben Bernanke and Janet Yellen. They removed the opportunities for safe investments and forced those with liquid assets to scramble for what safety they thought they could find.
What nonsense. There is absolutely nothing that has occurred since July 2011 that would drive down the price of gold. The Feds printing press has been running full speed; the government has been spending way more than they take in; and people have been buying gold like crazy; the known inventories in visible gold vaults have become trivially small; the paper representation of gold can no way be covered by the physical gold it should represent; Germany is getting stiffed on their request to have their gold delivered to them. So why the price reduction? Just good farming my friends. In this case it's straight out price manipulation.
Bank of America and other big banks are fragile — and vulnerable to bank runs — because the Fed has set interest rates to zero.
Bank runs are impossible in a properly managed MOE. Why? Because money is "a promise to complete a trade". The money in the bank under a properly managed MOE is guaranteed to enjoy zero inflation. It is never loaned out. And it doesn't earn interest. Any INTEREST charged is just an amount equal to the DEFAULT experience of the MOE. INTEREST reclaims failed trading promises (DEFAULTS), thus preserving the integrity of the marketplace and the MOE by the relation INFLATION = DEFAULT - INTEREST = zero!!!! Bank runs are the result of over greedy capitalist farming operations. In a "tradist" economy, there's nothing to cause them. Money is always in free supply to "responsible" traders at zero INTEREST.
What is the solution? For you, save yourself and your family. For the system, revamp the Federal Reserve. The simplest first step would be to end the dual mandate of price stability and full employment. Price stability is enough. I favor rules over intervention. We don’t need a maestro conducting monetary policy; we need a system that promotes stability and allows people (not printing presses) to make us richer.
Become the first "enlightened" person on your block. Know that money is "a promise to complete a trade". This is obvious by examining the three steps of trade: (1) Negotiation; (2) Promise to trade; (3) Delivery on trading promise. With direct barter, (2) and (3) happen simultaneously on the spot. Money allows (2) and (3) to happen over time and space. Traders create "money" by getting their trading promises certified. These certificates (money) then circulate because they have implicit value. They never inflate or deflate and so never lose their value. And this integrity makes them universally exchangeable in direct barter.
But this MOE needs to be managed. The manager freely certifies all trading promises. Using actuarial principles, the risk of DEFAULT is appraised and INTEREST is collected in advance according to the reliability of the trader. When he completes his trade the money he created is extinguished. In the interim, the balance between supply and demand for money is always perfect ... it's the nature of a trade. And if he DEFAULTs, the INTEREST collected has anticipated this. And if he doesn't DEFAULT, he is moved to a better class of trader with lower propensity to DEFAULT and lower INTEREST collection. It's perfect automatic feedback ... far more manageable than insurance risk, claims, and underwriting, but following the exact same principles. INTEREST is not a profit mechanism. It just reclaims DEFAULTs.
Notice: There is no "injecting of liquidity". Governments do this now by making trading promises they have no intention of keeping (as evidenced by their constant rolling over of debt ... which is DEFAULT). Governments are deadbeat traders. With their reputation, pawn shops and payday loan shops wouldn't even loan to them.
Also notice: Proper management of the MOE has no interest in prices, money supply, employment levels, consumpition, savings, the stock, bond and commodity markets, or anything else. It's strictly an adding machine keeping track of trading promises. It has no options whatever. It is driven by the relation INFLATION = DEFAULT - INTEREST. It is charged with the job of holding INFLATION at zero at all times everywhere ... not at 2% because that sort of feels good.
It's not rocket science folks.
I will repeat; I was in Vietnamfrom late 1968 to mid 1974. The military used MPC [military payment certificate].I have gone through three changes, it goes like this, the new mpc is changed for the old mpc on a 1 to 1 basis UP to a fixed amount. No more than a few hundred I recall. It was done on all closed down bases. In the morning of the change people with more than a few hundred would give 10 cents on the dollar to change by the end of the day it was 90 cents. Outside the base people with MPC in the 1000's now had funny coloured paper.
This I never forgot. I do not feel comfortable holding lots of cash. I do not like big banks/govt. The FED has been adding zero's to our FRN's ALL of our lives. Wealth in FRN's is cognitive dissonance. WE have a problem.
Brgds
Rene
I will repeat; I was in Vietnamfrom late 1968 to mid 1974. The military used MPC [military payment certificate].I have gone through three changes, it goes like this, the new mpc is changed for the old mpc on a 1 to 1 basis UP to a fixed amount. No more than a few hundred I recall. It was done on all closed down bases. In the morning of the change people with more than a few hundred would give 10 cents on the dollar to change by the end of the day it was 90 cents. Outside the base people with MPC in the 1000's now had funny coloured paper.
This I never forgot. I do not feel comfortable holding lots of cash. I do not like big banks/govt. The FED has been adding zero's to our FRN's ALL of our lives. Wealth in FRN's is cognitive dissonance. WE have a problem.
Brgds
Rene
I will repeat; I was in Vietnamfrom late 1968 to mid 1974. The military used MPC [military payment certificate].I have gone through three changes, it goes like this, the new mpc is changed for the old mpc on a 1 to 1 basis UP to a fixed amount. No more than a few hundred I recall. It was done on all closed down bases. In the morning of the change people with more than a few hundred would give 10 cents on the dollar to change by the end of the day it was 90 cents. Outside the base people with MPC in the 1000's now had funny coloured paper.
This I never forgot. I do not feel comfortable holding lots of cash. I do not like big banks/govt. The FED has been adding zero's to our FRN's ALL of our lives. Wealth in FRN's is cognitive dissonance. WE have a problem.
Brgds
Rene
You sure weren't lying about "I will repeat".
Time to take my $$ out of BOA ....Save some for me dammit. .....
The ad currently showing up to me on this page is for Ally Bank "high yield" CD at 0.99%. How appropriate.
Its not that if you held gold your money would fluctuate. Its just that when holding dollars you are so far successfully passing a 38%-strong test of your fiat faith. If this dip can't tempt you into abandoning support for your current masters (only saying you don't like them means nothing), then it looks like you are really confident in your decisions. Congratulations. You are now an accomplished fascist.
Edit.:
No need. It means you are a fascist.
...& so now he has a load of cash and is storing it where? Why the 4377 did this guy have $1M at BOA and not spread it over the multitude of institutions which perform banking services on Planet Earth???? Now, reality check here - if the US banking system looks like it is going down then digital printing will commence. Your money will still exist (if it is within FDIC limits) but due to the inflation caused by "printing", it will not be worth as much as it was prior to the collapse. The professor seems to think that his "paper" money will somehow be exempt from the perils of inflation. The only difference between him having cash on hand and people conducting business with digital money will be that the Professor will have the option to also use his paper for other uses such as toilet paper, wall paper, note paper, etc. along with his ability to buy a loaf of bread with a wheelbarrow of the stuff.
Kids, if the US banking system is allowed to collapse, the whole first world collapses or has a really bad time of things for a while. Now maybe this eventuality is why Drudge keeps reporting that the US Govt is buying bullets, freeze dried foods, and building underground bunkers, but for some reason the rational side of my brain denies this possibility. However, if I am wrong and TSHTF then everyone, including the good professor, is royally screwed and I'd hope for his sake that he rolls his $1M into the purchase of a small arsenal, some freeze dried food, and evacuates the city he lives in for some remote mountainous area if he really believes that we are on the precipice of TEOTWAWKI.
at a minumum the Federal Reserve needs to be reformed ..... start with downgrading the primacy (control) by the NYFed and its composition.
Watch ...... my car will suddenly and inexplicably accelerate into a tree tonight
and we have not mentioned Dodd-Frank or its even more monstrous cousin FACTCA (most have no idea how bad FACTCA .... I hope ZH starts to pay attention to this hideous legislation designed for the ultra- too big to fail
1 mil in deposit with Bank of America?? - my kids are not going to Harvard
1 mil in deposit with Bank of America?? - my kids are not going to Harvard
True true. Everyone in the bubble thinks they'll pull out right before the pop, but staying in just feels so damn good.
'Someone should start a bank..that charges interest.....and doesn't make loans.'
These types of banks do exist in the Carribean and other offshore centers and many have very low minimums. And, of course, virtually none of the world's private banks make unsecured loans but they have much higher minimums. Many banks in the Carribean charge high application, outgoing wire, and monthly maintenance fees instead of making loans. The question with these smaller banks is one of 'trust'.