Hmmm . . . I may have gone alittle too far out on that limb.
But only in that banks invest your money in higher-paying instruments that are not always “callable” (cash equivalents)
Now that the Fed has expandieditself ad one away wiht mandatory mininums (in favor of secretive and ever0changing “stress tests”) it s wong for me tosay banks are “actuaialy sound”.
Insurance policies ? Yes
Unemployment (ahem) “insurance”? No.
…and yet?
Gasoline futures for delivery in the New York Harbor fell below $1.80 per gallon, the weakest level since February 2021,
now if we can just get meat down as well.
Allan
sorry, I veered off thread topic too far.
My bad
Then why are savings insurance by the federal government?
Isn’t falling demand for energy often a signal of a softening economy?
Or is gas production up enough to account for this?
In theory (and in fact for many decades) the gov’t served only as a “lender of last resort” for banks.
It is only in recent years that the Fed has become a hyperlarge, hyperactive beast.
My basic point however still applies.
Banks work this way.
Insurance companies work thsi way.
Unemployment insurance, social security, medicare and ponzi schemes doot work this way.
In each of those cases the money you pay in todya i sued to pay reciepients today and the system can exist only as long as the existing customers stay and the customer bease continually increases. in perpetuity.
----> Anyone who does not work for the goverment , if they created such a product would be jailed for calling it “insurance.” Governments however are above the law.
The FDIC was created in 1933.
Banks take your money and pay you 1%. They invest some in bonds and other safe intraments for 1.1%.
They also loan money to other customers for 2%.
Some of those loans will pay off. Some will not. If enough don’t pay off, and they don’t have enough in reserve, they will fail.
I’m curious as to why you think banks are rock solid given 2008? Was it that long ago?
The govt. isn’t a lender of last resort to the banks. They insure customer savings accounts against bank failure up to…200K? I forget.
As we learned more than once recently they insure deposits up to 250,000 in writing and up to infinity in practice.
(If we’re considering the federal reserve “government” then government heavily, heavily loans to banks. on a daily basis)
Yeah, but is the federal reserve the government? I’m not sure.
Right. Teh above is correct.
and according to long established statitical law the invetments they make will found your principal and interest 100% and never need another dollar from any new or existing customer.
Hopefully you understnd that. (Hoepfully you are not pretending you do not.)
If you bank closes its doors tomorrow, your money is still, nonetheless invested somewhere that is paying a hihger interest rate than you are getting You getting your money is 100% independent of new customes coming in and old customers staying.
Unemployment insurance does notwork that way. It works differently. It works more like SS and Medicare and Amway and Ponzi schemes.
(If you don;t understand that yet, it’s is okay. This is the point we are discussing.)
That was an interesting question in 1929. I don’t think there’s much of a distinction anymore - they are an independent branch but they are fundamentally part of the executive branch.
Well, no. I mean, we all hope that’s the way it works, but 2008 proves it doesn’t always.
I understand that banks fail because they make bad loans. Happens all the time.
The investments my money is placed in might fail.
Also, I might want my money today.
I’m not sure what point you are trying to make. Are you just oversimplifying how a bank operates to provide a contrast to unemployment insurance? If so, you are leaving out salient facts about how banks operate. They are very much exposed, and not some closed system investment machine.
The actuarial fomulas stillwork
2008 prob=ves when there is massiver fraud int the system it can be like a nuclear bomb.
But that does not make.
a nuclear bomb cn wreck anything.
an asteroid cna wricek anything .
Those statements are true, but they are no reason to believe
“paygo=insurance and insurance=paygo they are both the same thing.”
Banks are not run by AI doing nothing but reading actuaries…yet.
I don’t know what this means.
Paygo “pay as you go”
You pay in and all/partthe money immediately goes to pay someone who is currenctly collecting. If existing payers toppaing or if the new payers stop grwoing fat enough the system collapses.
Insurance
You put in a dollar it is invested making 2% you will later withdraw the dollar plus 1%. Only freak evnets like atom bombs, world wars, asteroids or massive fraud can derail the soundness. It is unaffected by the number of “in-payers” because it is not dependent upon them whatsoever.
Ah.
I don’t think ‘paygo’ is the right term for that, is it?
Anyway, so, are we past the fallacy that banking is like insurance? It doesn’t really matter to this discussion, but it’s not.
Are you sure UI is ‘paygo’? My understanding is, alot of people pay into it way more than they ever use. (I’ve never once used it in my life).
Covid of course created unpredictable stress on the pools, but that is your aforementioned asteroid.
If states raid the fund for other purposes, that’s a different issue altogether.
What does your state do with the excess reserves that accumulate in its UI trust fund during an expansion?
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