I’ve recently had a lot of inquiries via e-mail, asking about bank runs, and the possibility of a national “bank holiday”. For many months I have warned that both are possible. Even mainstream news outlets like Forbes magazine are discussing it. But keep in mind that with the growing prevalence of online banking, your bank could get cleaned out by depositors without a queue of people forming in front of the bank. People can empty there accounts while sitting at the their home PCs, with fuzzy slippers on their feet. This is an invisible bank run. It is essentially what happened to Washington Mutual (WaMu). In their case, it was mainly big institutional depositors that had more than $100,000 in their accounts. Be sure to check your bank or S&L’s safety rating at least once a week. If it drops below a “C” rating, then transfer your funds to a safer bank, ASAP. And, needless to say, never keep more than the FDIC limit in any one institution.
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Reader “Redclay” mentioned that in April 2008 as ammo prices were spiking, the US CMP began limiting the amount of ammunition that one customer could purchase, but those limits have just been abolished. Current offerings can be found at the CMP web site. In my opinion, the US Lake City Arsenal noncorrosive .30-06 ball ammo is a bargain, in today’s market. Stock up.
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“Bee prepared” sent us this article that describes a synergy of bailouts, Peak Oil, and hyperinflation: Hunger for oil could mean hunger for real? The same day, Katya kindly sent us a slew of global economic news: Germany acts to guarantee savings — Brussels moves to salvage Fortis — Iceland’s financial freeze — Timeline: Global credit crunch — Zimbabwe Currency Crisis Peaks (11 Million Percent Inflation Annually!) — Prudence pays off in Ethiopia — and French save money for a rainy day. Meanwhile, Jack B. sent this from The Jerusalem Post: Stocks plunge during hard day of trading at Tel Aviv Exchange. And for a double dose of gloom and doom, Cheryl sent us these: Key German Bank Rescued — Credit Crisis Threatens To Send Car Dealerships Out Of Business — Now Wall Street May Refuse The Bailout — LIBOR Gone Crazy As Commercial Paper Implodes
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F.T. in Tucson wrote me to ask why I’m so “worked up” about hedge funds? He mentioned that he has no money invested in hedge funds, so it is “not a big deal” to him. Well, it should be. There is now more than $3 trillion USD invested in hedge funds. Most of that is not Federally insured. There is the potential for huge losses and investment market turmoil, in the event that hedge funds begin to suspend redemptions and then fail in large numbers. Never underestimate the power of a herd of investors to panic and start a stampede for the exits. A hedge fund collapse could easily trigger a stock market collapse, a banking collapse, a money market collapse, a commercial real estate collapse, municipal bond collapse, and conceivably even a collapse in the US Dollar as a currency unit. But even just in the short term, consider what is covered in this Financial Week article: Hedge funds wilt in credit drought–Investor redemptions could cull herd of hedgies; 700 to 1,000 funds may disappear by year-end.
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Michael H. mentioned an uncharacteristic piece by a mainstream commentator Bill Engdahl: Financial Tsunami: The End of the World as we Knew it.