Testing Our Banking Power

According to the recent Bloomberg article Fed Gives Banks New Dire Scenarios for 2014 Stress Tests, The Fed is finally able to address some of the problems that led to a near catastrophic banking failure in 2008.

The problem being the largest banks in our country securing their capital in a very narrow band of investments and insurance holdings, when they do this if one of those companies defaults the bank loses a large chunk of capital and has a much greater chance of defaulting.

Stress tests are a good thing but they usually fall well short of what many preppers see as a financial crisis.
The title of the article announces the “Dire scenarios” that will be tested this year.

Such dire things as “the jobless rate peaks at 11.25 percent, stocks fall almost 50 percent and U.S. housing prices slide 25 percent, while the euro area sinks into recession. Developing economies in Asia also experience a “sharp slowdown,”. But how dire is this scenario, really?

During the great depression unemployment went to over 25%, more than double what the Fed is testing for. Also leading up to the great depression bank loans were paid off in high numbers leading to less profitability for the banks.

If you look at how the Fed has kept interest rate artificially low in an effort to keep money moving, you might be able to correlate the two, since they both equal less profit for the banks.
“BlackRock Inc. CEO Laurence D. Fink, 61, who said Oct. 29 that the Fed’s effort to boost the economy by holding down interest rates has fueled “bubble-like markets.”

The Fed knows it is on the edge of disaster and is trying to tightrope its way out. These harsher stress tests are better if not good. No one knows what would really happen in a new financial meltdown.

Think of it this way. You take you BOB to the woods and test out your shelter and food gathering skills, while you completely ignore fire starting and water gathering. Yes shelter and food are good but water and fire are essential also.

Until the Fed makes a realistic worst case stress test, preppers should take their own financial future seriously and stock up on hard assets that will see you through an era of worthless fiat currency, just in case.

Category: Media