What Happened To The Banks We Bailed Out?

By Peter Costa

Gold continues to break record highs while the economy shows no sign of recovery. Inflation is around the corner and will be unprecedented from anytime in the nation’s history. Will it be at the levels of the Wymore Republic or former Soviet Union? I sure hope not but I am not staying in the dollar to find out. There has been a lot of speculation about hyper inflation and some very congenial arguments have been made. I am on the hyper inflation train and these days I am feeling it is going to happen sooner than later. How have I come to this conclusion? The banking crisis unfolding in 2009 is all the proof I need and is rapidly becoming a never ending black hole sucking away any hope we have for dollar recovery.

This year alone over 115 banks have declared bankruptcy and there are still over 400 banks on the troubled list which amounts to over 5% of the nation’s banks. We have already seen the 6th and 10th largest bank failures in the United States history take place this year with a combined loss of $33 billion in assets. Last Friday marked the largest one-day government seizure since the financial crisis began closing the door of 9 banks nationwide. Rumors have been swirling around for some time that Citigroup is next and that they are likely to file for Chapter 11 if the Abu Dhabi Investment Authority pulls its $7.5 billion investment. Bank of America posted a $2.2 billion loss from July through September making it the second quarterly loss in the past year. Things are extremely unsettled in the banking world and we could see it escalade into the New Year.

The most alarming data from this unfolding crisis is the current state and solvency of FDIC. In the beginning of 2009 FDIC was down to $52 billion in their insurance fund for failing banks. With over 115 bank failures this year it has nearly dried up the fund leaving less than $10 billion. With less than $10 billion, FDIC is now promising to insure over $6.3 trillion in assets. We all know that the government would never let them fail and that FDIC has the ability to borrow up to $500 billion. The problem is what that will do to the overall buying power of our dollar. The grand total of all government and FED programs aimed at absorbing or supporting bad loans has now reached $23.7 trillion. With 400 banks on the troubled list we could see this number escalade very quickly guaranteeing rapid inflation. “The banking crisis is just the tip of the ice berg and as more countries jump ship from the dollar things are going to start compounding” says Ronald Fricke president of Regal Assets in response to Friday’s bank seizures.

The banking crisis is becoming worse and more countries are jumping ship from the failing dollar. Banks have been operating on a faulty system for decades and the breaking point is near. It is safe to say that the digits in our bank accounts are nothing but digital numbers and there are not enough greenbacks in circulation to back up the number. If you have any dollars that you do not need for a couple years you owe to yourself to start preserving them now and place them in gold . Last year the dollar lost 15% of its total buying power this year the number could very well double. If we continue on this path in less than 5 years the dollar could become worthless.

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