This is the third and final Q&A on money. With the changes occurring in our economy today, it is important to understand money and what potentially lies ahead.
How did we get to this point in our economy?
Our arrival at this economic point is a factor of our money /credit system and social changes. Our publication, The Sentinel Financial Report uses technical analysis and a social cycle model to forecast social and economic trends. The social cycle model uses a unit of time, Saeculum, to model cyclic behavior. A Saeculum is a unit of time roughly equal to a human lifetime (approximately 80 years). Changes in social and economic trends are cyclical and the models assist in identifying changes.
How safe are bank deposits?
The capital of many banks today is tied up in mortgages or mortgage securities. In days past, much bank capital took the form of safer, short and long-term government securities. With such risky capital and a greater propensity of bank failure the last two years, banks are no longer the safe haven they once were. At one point in banking history it was not unusual for banks to advertise their capital held and promote their own safety.
But what about the Federal Deposit Insurance Corporation (FDIC)?
The FDIC is a woefully undercapitalized institution. The FDIC maintains a Deposit Insurance Fund (DIF) that by statute must maintain a reserve ratio of 1.15%. On September 29, 2009, the FDIC adopted a plan to return to this ratio – within 8 years!
Where should I invest my money?
The current investment climate will be like none other experienced by most. The unwinding of debt changes the nature of traditional investment options. What worked in the past will not work in the future. Many will be unprepared to deal with the massive overhang of debt at both the public and private level.
Jim Mosquera is the editor of The Sentinel Financial Report and author of Escaping Oz: Protecting your wealth during the financial crisis.
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