Today’s all about #BYOB (Be Your Own Bank) because the unfortunate truth is that when times get tough, and odds are, that time is coming fairly soon. Banks may and most likely will use YOUR money to bail themselves out.

What we’re looking at today:

• Banks can use client funds to bail themselves out during a financial crisis

• The “Dodd-Frank Act”

• It’s Already Happening

• BYOB

🏦 Bank “Bail-Ins”

To understand how we got here in the first place, we need to look back at 2008. I know you’re probably sick and tired of seeing everybody reference 2008, but we must understand what happened back then.

Obviously, in 2008, banks had less regulation and could get away with more corruption. Ultimately, the banks were severely over-leveraged, and when it was time to pay their debts back, they actually had no money.

Well, if you have no money, you’re going out of business.

As a result of the financial crisis:

• The total cost of bailing out the entire Financial system during the 2008 financial crisis is estimated at $700 billion.

• The U.S. Treasury gave over $200 billion in loans to hundreds of financial institutions during the 2008 financial crisis.

• The average American was left to blame and felt the most pain.

Bailing out banks is not fun or cheap for the U.S. government, but it is the Central Banks’ (Federal Reserve) responsibility. You can think of the relationship as a rich parent lending money to their spoiled children to get them out of trouble.

Regulators wrote up some provisions to ensure this doesn’t happen again and created the “Dodd-Frank Act.”

📜 Dodd-Frank Act

The “Dodd-Frank Act” was written in 2010 as a direct response to what happened in 2008. It essentially looked at how to ensure banks never get this risky/scummy again and made the Consumer Financial Protection Bureau (CFPB).

Using the analogy above again, it’s like your parent is tired of watching you, so they hire a very strict babysitter to watch everything you do.

So, now we have new banking provisions and the CFTP to keep us safe from this ever happening again, right…? WRONG

Regulators, bankers, and politicians are greedy and will always want to make their money. They know this, so they throw in provisions that will cover their butts when this happens again.

Let’s dig into “Dodd-Frank Act, Section 165(d)” which goes over bank bail-ins.

I know that’s a lot of confusing jargon, but I highlighted the most essential part at the bottom, “and other resources necessary to execute the plan.” 

The Fed will try everything in its power to take money from other places and provide funding itself because it knows the moment it takes money from YOU, that’s when all trust is lost in the system.

⏰ It’s Already Happening

What do you think is more important to banks, we the people, or the derivatives market valued at around $1 quadrillion (That’s $1,000 Trillion)?

Derivative:

If banks start failing, the bank itself and its customers get affected, and so does the liquidity in the system, which can turn into a domino effect very quickly.

The 25 largest banks hold roughly $250 trillion in derivatives. Now imagine if one of them were in financial trouble and the wide-reaching effects that would have.

To show you how serious the Fed is about using “Bail-Ins’ as an option, they have even run scenarios to see how it would affect us.

You can watch the simulation here: FDIC Bank ‘Bail-In’ Simulation 

• Source: Coin Bureau

• Just click the link, then play the video, then hit play again

Just to put the cherry on top, this was ALREADY implemented in Cyprus in 2013 when the government of Cyprus needed to be bailed out.

Here’s how everything went down:

1. In March 2013, the government of Cyprus was facing a financial crisis

2. They agreed with the International Monetary Fund (IMF) to receive a $10 Billion package… BUT

3. As part of the package, they were required to implement a ‘bail-in’ scheme

4. Depositors in the 2 largest banks in Cyprus with deposits over €100,000 were forced to lose 47.5% of their money to aid in the package.

5. This led to anger and protests within the country… rightfully so

🪙 BYOB

This article is not intended to be financial advice, make you angry, or anything along those lines.

My main goal is to highlight what is happening in these 7-hour financial hearings held by our “trusted” government officials, decode what they are saying, and let you decide for yourself with the information presented.

I have seen enough corruption and lying within these institutions and politicians to know they are willing and capable of f***ing you if push comes to shove.

Thankfully we live in the digital age and have alternatives to this game they are playing.

While there are many options, some are more complicated than others.

My favorite and personal strategy is to trust NO ONE!

This is why I am such a firm believer in Bitcoin; it was designed for this very thing; Satoshi Nakamoto knew that no one could be trusted, especially people in power, so he created something that didn’t need to be trusted.

Something where you could, BE YOUR OWN BANK.

Takeaways

While this article may seem far-fetched or unbelievable, it’s better to be proactive than reactive.

I think one thing is sure, though, that as long as we have a fiat system in place that the people in power can manipulate, there will be more problems in the future caused by unethical and incompetent behavior.

I would also like to thank Coin Bureau for initially making the video that sparked this post; all credit goes to him and his team for the bulk of this information.

- Krystian

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.