Did anyone else just receive this in email? What do you think? Individual bank accounts not insured by FDIC? Convert all digital assets to cash coins and bury in PVC tubes?

Lars

-- lars (lars@indy.net), September 13, 1999

Answers

It seems to me that you have to get your bank to agree that that is the amount of money they owe you; they submit it to FDIC and everything is kosher.

Only problem, FDIC can go broke and not pay off on everything.

-- Gypsy (GypsiGold@aol.com), September 13, 1999.

text pasted -- hope it's ok

Gary North's REALITY CHECK Issue 42 September 13, 1999

KEEPING GOOD BANK RECORDS WON'T HELP YOU IN A Y2K CRISIS

I have already explained this to REMNANT REVIEW subscribers in the July 2 issue. Here, I want to follow up on some of the implications.

The U.S. government from the beginning has dismissed Y2K as a minor problem with mild consequences: the 72-hour hurricane. Mild consequences call forth inexpensive answers. Problems that produce mild consequences are ignored by most people.

What are the likely consequences of Y2K for banks? According to the government, hardly any. But, just in case, we are told to keep good records. This means we should keep our bank receipts. That's all? Yes.

The Federal Deposit Insurance Corporation is a government agency, or at least a quasi-government agency. It has a Web site with .gov ending its address. On the FDIC site, the Y2K-concerned reader is told this:

"As always, keep good records of your financial transactions, especially for the last few months of 1999 and until you get several statements in 2000."

http://www.fdic.gov/news/news/press/1999/checklist.pdf

Why should we keep good records? We are not told. It is implied by the FDIC that these records will get you your money on any account up to $100,000. Well, they won't -- not according to the FDIC's own rules. Read Section 330.1 from the pertinent FDIC Web page. Pay close attention to the words, "books and records of the insured institution." They are not your books and records. Here is what you possess: "account statements, deposit slips, items deposited or cancelled checks." These are specifically exempted as evidence. Here is the text:

330.1 Definitions. For the purposes of this part:

(e) Deposit account records means account ledgers, signature cards, certificates of deposit, passbooks, corporate resolutions authorizing accounts in the possession of the insured depository institution and other books and records of the insured depository institution, including records maintained by computer, which relate to the insured depository institution's deposit taking function, but does not mean account statements, deposit slips, items deposited or cancelled checks.

[Codified to 12 C.F.R., 330.1]

[Section 330.1 amended at 58 Fed. Reg. 29963, May 25, 1993, effective December 19, 1993; 63 Fed. Reg. 25756, May 11, 1998, effective July 1, 1998]

You can verify this by clicking through:

http://www.fdic.gov/regulations/laws/rules/2000-15.html

This is also spelled out in detail in the FDIC booklet for banks, "Financial Institution Employees' Guide to Deposit Insurance" (Fall 1996):

For the purpose of determining legal ownership of accounts, deposit account records do not include: Account statements, Deposit slips, Items deposited and cancelled checks.

Are you getting the picture? The FDIC has soothed the fearful hearts of Y2K-aware depositors by telling them that all they need to do is keep good records. But these records have no legal status. What has legal status are the records of the banks. Problem: the computers are non-compliant. If your bank's computer will not give access to your accounts' records, you are left without recourse. Your account is closed. You cannot get your money. The FDIC owes you nothing. It only owes the bank that paid its FDIC insurance premiums.

What we have here is deliberate deception. The FDIC knows exactly what it's doing. It is calming the public by means of a false hope. It is trying to head off a bank run that will bankrupt the FDIC. It is a self-interested party that is misinforming the depositors.

The depositors know nothing about all this. This information is buried in the FDIC's regulations. The press has not picked up the story, even though I published it, with the full documentation, on July 2. I have not received any inquiry from the press on this matter. The press is not going to break ranks with the banks. The government's greatest Y2K fear today is that there will be a run on the banks. The press will not risk creating a bank run by exposing this chicanery.

All digital money is at risk. The risk is so great that the FDIC is playing games with the public. This means that all forms of capital that derive their present value from markets based on digital money are also at risk.

WORTHLESS RECEIPTS

You have a bank receipt. Goodie for you. Try to spend it.

The receipt is at least a month old. It's probably six weeks old. Does it prove what is in your bank account today? Obviously not. You probably wrote checks on the account since then. Your bank records are ancient history. Yet the obviousness of this fact is not obvious to tens of millions of depositors who take seriously the warning, "keep good bank records."

You go to the teller. She says, "I'm sorry, our computer is down." Tell me: What good is the print-out of your bank records? It's worthless legally, according to FDIC rules. It's worthless economically because it's out of date. You've got nothing of value.

But you are told by the highest civil government authority not to withdraw currency from your account because all you need are good bank records.

Are you being conned? You bet!

Why? Because the banking system can't pay off its depositors if they all go down and withdraw their accounts in currency and then fail to re-deposit the currency. Fractional reserve banking is based on a lie. Y2K is about to make the public aware of this lie. The authorities are hoping for a silver bullet to solve the banking system's problem before the bank runs begin. There is none.

There is no compliant money-center bank.

One banker recommends that you get traveler's checks. They are safe, you are assured. They are indeed: safe for the banker. They are not legal tender. They are not liabilities for your bank. They are issued by a profit- seeking company, such as American Express. Why would they serve as money in a banking crisis? They won't.

Why would a bank recommend traveler's checks? To keep you from pulling out currency. They will say anything, promise anything, to get you to hold onto non-currency forms of money.

SOURCES OF CURRENCY

Here is what will happen to fast food restaurants in a monetary crisis. Small bills will be hoarded. The fast food restaurant must give change for $20 bills. Where will it replace them? The banks will run short, fast.

Then managers of local stores will start writing personal checks at the end of the day and pulling out bills and coins. I would. Why wouldn't he? It's legal. It requires no currency withdrawal reports by the depositor's bank. It's quick and easy.

Small bills will disappear so fast that the Federal Reserve will not be able to respond. At that point, the entire fast food industry will go bankrupt. A bank run will kill this industry. It's a big industry.

The car wash industry is doomed. So is the laundromat industry. Yet you can buy coins from a local car wash owner today. Bring in a $100 bill and buy 400 quarters. It's easier for him. It's better for you.

Your goal is to avoid buying anything in 2000 for which the seller cannot make change. That's why large bills must be exchanged now for small bills. You have only a few weeks to get this done.

You get $20 bills from an ATM. Take those bills, one at a time, and buy a small ticket item. Keep breaking bills into smaller denominations. Ask for two $5's instead of a $10. Never give up coins. Never add a few cents to get a $1 bill in change. Get the coins.

Do you belong to a church? Offer to buy all of the paper money at the end of the worship services. This is what the toll booth operators did in the late summer of 1963, when silver coins started going into hoards. On Sunday night, they went to the churches and bought coins.

There is liable to be competition for currency in some churches, now that I have recommended this Y2K savings strategy. If pastors had any Y2K awareness, they would have been doing this for years.

WHAT WILL SERVE AS MONEY IN 2000?

Paper currency will. Coins will. People will recognize them as money. That's why I recommend that you have small bills and token coins for your defensive portfolio.

Gold and silver coins are not readily recognized as money today. Their value is not widely known. It will take at least a year for gold and silver coins to come into widespread use, even under a collapse scenario. I think it will take even longer. These are long-term investments for the rebuilding phase, depending on how bad things get.

Why buy them now? Because there may be no local market where you can buy them later. When it becomes clear to a few million people that they need a few gold coins, the coin stores' phone lines will jam up.

One day, the banks will close. The day that the banks close, a coin store cannot get delivery of coins. Worse: every coin buyer's money that was "in transit" on that day may go down with the banks.

Time is running out.

Then there are the old favorites: cigarettes, chewing tobacco, bullets, condoms, toilet paper, and other easily recognized items for which there is demand. These are near-money: barter items that have broad appeal.

For any commodity to serve as money, it must be easily recognized, portable (high value to volume/weight), and divisible. Things that have some of these features can serve as money in very bad situations, such as in a prisoner of war camp (cigarettes).

You must do your best to be out of the markets in 2000. The worse things get, the more true this is. To expose yourself as an owner of valuable assets is risky. It is better to avoid such exposure. This means that you should have consumer goods in reserve.

There is a question of risk. Will it be safe to be on the roads? Will gasoline be rationed? If fuel is rationed, anyone in a car or truck will be assumed to have assets or military power. Do not make yourself a target.

This is why you should make plans for being in a community where there is not much interaction with outsiders. You do not want word of your assets to get beyond the local group with which you trade.

I realize that this sounds like advice to "head for the hills." But local urban neighborhoods will become sealed-off communities in 2000 if power and water go off. Residents will seal off access by setting up cars in the streets.

But urban communities can break down if there is not trust. This is a theme of the 1997 movie, "The Trigger Effect." Unlike the movie, there will be no clear highway out if water and power go off. There will be military roadblocks or else bumper-to-bumper traffic. There are not enough roads out of our cities to allow ready escape.

The person with a swimming pool will own a valuable asset: drinkable water. He can grow food, too. It's time to buy a hand pump for your pool if you own one.

The person with non-hybrid seeds will also be in a good position. For information, click through:

http://www.kbot.com/y2kseeds

I would rather have $1,000 in non-hybrid seeds than $1,000 in currency, if I had my choice of one or the other. But I would prefer go $600-$400 in favor of the seeds.

WHAT TO DO TODAY

Clean out your wallet or purse. Start putting aside all of your currency at the end of the day.

Start thinking of ways you can get currency quietly, outside of the bank. There is no question: it's legal to buy currency from non-bank sources. But I would not want the sellers to know who I am or where I live.

Move from large bills to small bills. Move from small bills to coins.

Visit a hardware store. Buy PCV tubes with screw-on ends. They make great dirt safes.

END

-- A (A@AisA.com), September 13, 1999.

Where did you hear this from? I find it hard to believe.

-- bobby joe cowen (cowenb@hotmail.com), September 13, 1999.

I understand FDIC has enough funds to cover maybe two large banks going belly up at one time. They normally just sieze assets and transfer some, sell the rest to cronies for pennies on the dollar.

Judging from stories of the savings and loan debacle I wouldn't expect timely help from the government.

As for banks verifying your accounts! HAH! Today, with ZERO pressure, my bank can't explain how they managed to debit our account twice for the same item number.

I can explain it. Sheer stupidity. That and the attitude that the customers can go bugger themselves. Imagine what it will be like if bunches of them have corrupted data. Their first reaction, ALWAYS, is to keep whatever assets they have in THEIR hands.

Hell, We had those jerks bounce a CERTIFIED check to our account!!!

Hell, We had a bank put a 10 day hold on our account while they waited for our CASH deposit to clear!!!

We had a bank close an account because it had no money in it the day AFTER they accepted a wire transfer into the account!!! It took legal threats to get our money back, along with great pressure from the mutual fund who initiated the wire transfer. The mutual fund was highly ticked.

We had a bank bounce three checks written over a two day period just MINUTES before recording a deposit we had made BEFORE writing the check. We were told our ATM deposit slip was a worthless reciept. We told them to take their fee's and shove them so they put our name on a 'bad customer' list. Another bank refused to open a (large for us) CD for us based on that report. We told that bank, clearly and loudly, in their lobby, to the manager, exactly where his head was and what he could do with it. The customers there looked like they were going to applaud.

One bank our business deals with sued their own customers because the customers held them to a CD contract that the bank didn't feel like paying out on!!! The bank is one I go into almost daily. Their tellers wouldn't look me in the face when I brought it up.

Trust a bank? Sure, every bit as much as they trust me. Their word is worthless as are their contracts. They have as much value as you have a good lawyer. The next time a bank hands me a stack of cash on a handshake, then they'll maybe start seeing my families money again.

We keep a checking account with a minimal ammount in it. We KNOW they are going to screw us over, but only as much as we let them. Been there, done that, got the rectal scars.

-- Art (artw@lancnews.infi.net), September 13, 1999.

Just a couple of comments on North's latest Reality Check:

1) I don't know why he is saying to use $20s to buy small ticket items. If you just take them, maybe $100 worth at a time, to virtually any bank you can easily get change in whatever denomination of greenbacks or coins that you want. Especially if its right before a weekend, always can pass for a "garage sale".

2) I have read of horror stories on other Y2K forums where people took currency and put it in PVC pipe, buried it, and had it destroyed or nearly destroyed by moisture and mildew. In the archives one can find entire threads on how to protect cash, with great advice.

-- Jack (jsprat@eld.net), September 13, 1999.

About two years ago I read an article about saving coins and small bills for y2. Well, I started with a small bank in my closet for silver colored coins. Each week I went to the bank and bought rolled quarters, dimes and nickles. These things are heavy! I have a rubbermaid plastic storage container full of coins in my closet and noone knows its there but me. Looks like a sweather box full of junk behind my clothes. I really don't know what to do with them except maybe hide them all through the house. I swear, if I was to meet my maker soon, my family would have a very confusing time trying to figure out what on earth I was doing finding all my little hidden stores!

-- Carol (glear@usa.net), September 13, 1999.

I'v had the bank tell me the computers are down so many times it's not funny anymore, never was! Think about it lots of banks having the same problems at the same time. Your shit out of luck! You think the FDIC is really going to pay you??? They just might in a month or two or maybe never. It's your choice what you do, me I'v allready done my thing. most people don't give a shit about y2k, but when you think there just might be a problem then you feel it deep down inside a very sick feeling, why did'nt I do something when I had the chance? Hindsight is 20-20.

Good luck America

-- Cashonly (Thetimeis@near.now), September 13, 1999.

A bird in the hand is worth two in the bush. Yes, in a systemwide financial/banking crisis, it is best to have your assets in your possession. Of course, there is an inherent risk of loss though fire, robbery or natural catastrophe. And the FDIC is an unknown in such a state of chaos. Sure, it has paid off depositors of individual past bank failures, but who knows in some system-wide failure that is part of a larger national crisis. Who cares? If TEOTWAWKI hits, I'm not going to be thinking about banking and it's not realistic to think anything would function normally under those circumstances, including FDIC.

On a practical level, bank at smaller local banks where you can meet and get to know your banker. I used to go to large interstate banks, thinking I got better service. Went in one day and they told me the computer was down, and since no balances could be verified, none of my funds were available to me. Talking to the manager, who never seemed interested in me, did no good. Well, you can imagine how I felt. A month or two later, I went into a smaller, neighborhood bank where I had opened a savings account I use for investment purposes only to be greeted at the door by my banker who explained that the electric was out. They had remained open, and when I showed my banker a month old receipt, he directed me over to a teller and I was able to withdraw $700 in cash without the teller being able to verify the balance. They had, at that moment, no idea what I had in my account. They soon had my business account there too.

The moral of the story? Deal with people you trust and who trust you. Banking is never fun (in my book), but there's good banks out there and there's bad ones. Don't keep all your eggs in one basket. And don't worry about the FDIC. If it's like the 30's again, we're all in trouble anyway...

-- KJ (kjstrat@hotmail.com), September 14, 1999.

"The moral of the story? Deal with people you trust and who trust you. Banking is never fun (in my book), but there's good banks out there and there's bad ones. "

Another one of the joys of living in a small town. I walk in the door and every single teller knows my name. If I have a problem it is usually solved within 60 minutes (depends on the complexity) and so on. Funny how I hated living in a small town when I was a teenager. Now, Y2K or no Y2K, I wouldn't trade it for the world.

-- b (b@b.b), September 14, 1999.

Your bank getting to know you......

The bank across the street gets our business deposits. I go in there just about daily. Most of the employee's are customers of our business. They know me. We all joke together and have a great time.

When the power goes off they lock the door within 20 seconds. If I go to the door then they won't even talk to me, they just wave me away. When the puters are down they no longer know me. I can say hi and joke all I want, but forget cashing a check. I can get change, pick up receipts, and leave a deposit, but that's it.

-- Art Welling (artw@lancnews.infi.net), September 14, 1999.

The main thing to understand is that there has ALWAYS been a risk with having your money IN the bank, just as there has ALWAYS been a risk with keeping it OUT of the bank. Its just that, with Y2K coming, the risk of doing the former outweighs doing the latter.

And make no mistake about it: if you think that you can just count on moseying down to the bank in late December and converting to cash -- especially small bills and change -- you are kidding yourself.

Carol: Gawd, I'd love to see you wrestle in mud that has been seasoned with all those coins!

-- King of Spain (madrid@aol.com), September 14, 1999.