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Are Your Savings Really Safe? - The Dollar Stretcher
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The Dollar Stretcher

The Dollar Stretcher blog will explore people and money.

Are Your Savings Really Safe?

Boy, this one is a shocker. CNBC is reporting that banks are being pressured into buying government debt (story here). They say that US banks have bought $700 billion worth of Treasuries since 2008. So what's wrong with this picture?

Let's drop down to the real world and take a look. You managed to save $1,000 and put it in a bank. You feel safe because of the FDIC or FSLIC insurance. After all, if the bank goes under, Uncle Sam will make sure you don't lose any money.

But, let's for a moment suppose that a few years from now the bank does fall on hard times. The people who they loaned money to can't pay it back. So they're closing the doors. You're ok, though, because the insurance has your back.

But, wait...there's more. You find out that part of the reason that the bank is having trouble is because the US Treasury can't repay the money they borrowed when they issued the $700 billion in bonds. Humm...could that be a problem for you?

You betcha! The same government that promised to guarantee your savings can't pay their own bills.

In reality it probably won't happen that way. If the government couldn't raise enough taxes to pay their bills they'll just run the printing presses. They'd issue enough dollars to cover their debts. So your savings would be secure. You'd still have $1,000 in the bank. The only problem is that you'll need that much to do your weekly grocery shopping.

So the next time you hear about government borrowing remember that it's your savings they're playing with.

Comments

 

Cheryl said:

Gary, thank you for the wakeup call. Wow, scary stuff!

I would like to see you post more about the economy, it's very insightful and informative.

I keep reading about Greece and now Spain, but the news stories can be partial and confusing. Is that what happened in Spain? They woke up and realized their money isn't safe, so they took it out?

June 2, 2012 3:29 PM

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About Gary

For more than 25 years, Gary Foreman has worked to manage money effectively. Prior to starting The Dollar Stretcher, he was a financial planner and purchasing manager. While helping clients manage their hard earned money as a financial planner, he applied commonsense, time-tested techniques during the turbulent 1980’s. The experience convinced him that you didn’t need to hit the lottery to accumulate significant wealth. Following that, Gary had an opportunity to learn more about how to get the best value for a dollar spent in the corporate world. As the Purchasing Manager for a computer manufacturer, he was responsible for supervising over $10 million in annual purchases. Gary began The Dollar Stretcher website <www.TheDollarStretcher.com> and newsletters in April 1996. Over 300,000 readers benefit from the time and money saving ideas presented in The Dollar Stretcher newsletters each week. His mission is to help people "Live Better for Less". He also provides private label newsletters for companies wishing to provide money saving information for their clients and/or prospects. Gary lives in Florida along with his wife of thirty years and their two children. Much of his time is spent working with the men's ministry of his church. One of their ongoing projects is the "Holy Smoke BBQ" which sells bbq on Friday nights with the profits going to support local foster kids and orphans. When he has a free moment you’ll find him restoring a Checker station wagon nicknamed “Two Ton” or cruising in a '65 Impala SS Convertible with doo-wops playing in the background.

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Gary is a former financial planner and purchasing manager who edits The Dollar Stretcher website <www.stretcher.com> and newsletters. You can follow Gary on Twitter.com/gary_foreman
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