Why Shouldn’t I Have a Savings Account?

savings, savings account, savings pro conQ: I shouldn’t have a savings account??

A: It’s not so much having an account that’s bad – it’s holding wealth in one.

Gold and silver react to market forces and inflationary and deflationary triggers – such as central banks printing currency – but the market, the rules, and decisions of others can’t destroy the inherent and natural value in these precious metals. The cash in your savings account, on the other hand, is manipulated and devalued every time a central bank prints more currency and expands the supply. Every time interest rates are lowered or bond-buying programs like QE2 and QE3 are implemented, cash gets crushed.

Holding wealth in the bank is dangerous. As of Fall, 2010, the FDIC has identified more than 100 at-risk banks that it put on its “problem list.” When JP Morgan bought Bear Stearns, they were allowed by the Federal Reserve and FDIC to hide $400 BILLION worth of suspect assets and keep them off the balance sheet. Who’s going to be responsible for the losses when those assets collapse?

In 2011, the financial system saw a criminal example of counterparty risk when MF Global collapsed. This brokerage firm misplaced over a billion dollars of client money that was supposed to be in trust accounts, untouchable by the firm, by law! The CEO, Jon Corzine – a heavily connected former U.S. Senator, Governor of New Jersey, and Goldman Sachs executive – swore under oath to Congress he had no idea where the money went.

The clients of MF Global were always under the impression that those cash assets were safe and couldn’t be lost (since they were required by law to be held in trust). This was a very real lesson in counterparty risk and how easily anyone can be hit by the actions of others who disregard the rules in the name of greed. This type of illegal activity is an extreme example of the counterparty risk inherent in any form of a savings account.