An upcoming banking crisis with record amount of bank loan defaults could be on the horizon. With your money on the line, banks and financial institutions could use it for either:
- Bail-in – where you pay for it right now as the bank takes some of your deposits
- Bail-out – where you have to pay for it through future taxation
The national debt has skyrocketed beyond a recovery point and is still increasing post covid-19. The credit worthiness of the U.S. is at risk and the government can’t afford to take on more debt unless it is willing to face imminent insolvency and ultimate bankruptcy. The financial burden to stabilize this enormous debt is too great. Therefore, a bail-ins could take place sooner than expected and without any prior warning.
Likeliness of a Bail-Ins to take place now?
A bail-ins was first introduced in 2010, via an executive bill signed by President Obama as a direct result of bailing-out the 2008 “Too Big To Fail” banks and financial institutions.
A bail-ins is another form where banks and financial institutions are rescued where the responsibility is transferred from taxpayers (in the case of bail-out) to depositors, which is you. In other words, bail-ins will not add to the government’s deficit and it will allow banks and financial institutions at risk of failing to take some of your deposits to bail themselves out. A perfect scenario, where neither the government nor the too big to fail institutions bear any risk. It all falls on YOU “the depositor”.
While Bail-outs erode your buying power and further devalue the dollar, Bail-ins risk your immediate deposits and funds. Either form of bailing has a significant negative impact on your financial well-being. Now more than ever it’s crucial to protect your hard-earned money and shield your wealth from government and bank interventions.
Since your investment products such as stocks, mutual funds, bonds, annuities, life insurance policies, U.S Treasury bills and notes, municipal securities and contents of safe deposits are not insured, the banks or financial institutions can use the money of its unsecured creditors, including depositors and bondholders, to restructure their capital so it can stay afloat, in case it is not acquired by a larger instiution. In effect, banks will be allowed to convert their liabilities into equity for the purpose of increasing their capital requirements, while the government, will not use taxpayer money to inject capital into failing banks.
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How Your Money Will Be Used In A Bail-Ins ?
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Why could Bail-ins be the ultimate risk to your money?
To answer that question, neither the government nor the banks want to to bear the financial burden of rescuing the bank anymore. The bail-in was created so clients like yourself bear most of the risk.