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banking

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Photo by termduewednesday at DeviantArt

Photo by termduewednesday at DeviantArt

This article from Mashable suggests that waiting in line to deposit checks may be something we don’t have to do for much longer. Oh, my frugal friends! How I have longed and ached for this day. In fact, I wrote a post a while back about how some smaller banks already let their customers deposit checks via fax. But to be honest, I thought this was just another pie-in-the-sky pipe dream that this would start happening anywhere on a mass-scale.

But now I hear that USAA, a bank based in Texas, is already allowing people to deposit their checks remotely via their iPhone app. Because everything is bigger in Texas I guess, so it takes longer to get to the bank. It makes sense that they’d start doing this first. Apparently, the deal is that the bank won’t even require customers to mail in their check later, they will handle it all electronically, and then ask the customers to void the check on their own. At present, you can also use a scanner to deposit checks with USAA.

Here’s a live demo of the service, though the process seems pretty simple (i.e. take a picture of the check, email to the bank):

Pretty damn cool. Now if we could just get it installed in banks in California, I’d be all set

Mr. Right-Click and I were talking about the recent changes made to the federal interest rates, and what kind of an effect this might have on the economy. With all the talk about the economy in the news lately, it is really easy to get depressed and go into that denial state where things like “interest rates” and “quantitative easing” and “treasury bonds” start to blur together and you decide to go take all of your money out of the bank and put inside your mattress. But then you find out that the federal government is going to print more money and then you realize, wait, my mattress isn’t even safe anymore, is it? Maybe I should put all my money into gold? What can I do? Where is my tinfoil hat?

First of all, let’s all start breathing regularly again. It’s not time to cover our walls with Reynolds Wrap just yet. Things are bad, but let’s try not to make them worse. I remember when I was a kid and there was a problem with the national debt, and I asked my dad why the government just didn’t print more money and pay it all off, if they were the ones who ran the U.S. Mint. This made all kinds of sense to me back then. Then my dad explained what inflation was and what “inherent value” was, and that paper money didn’t have it, and then it all blurred together and I stuck my piggy bank into my daybed mattress.

People have been talking lately about the various steps that the government is taking in order to stop the economy’s downward spiral, and without a little bit of explanation, it might seem like the fed intends to print money and pump it into the economy. They are sort of doing that. Or talking about doing it. But it is not just as simple as going over to the mint and asking them to print out a bunch more greenbacks. Basically the process is this:

  1. Banks won’t lend money to each other, or anyone else, because they’re worried they won’t get it back.
  2. To try to get banks to lend money, the Fed lowers interest rates, so money is super cheap to get, thinking this will make banks more willing to lend money.
  3. Because they are greedy criminals, banks take the money at low rates that the Fed is offering, and still refuse to lend money, still worried they won’t get it back.
  4. Instead of lending money (like they were supposed to), the banks buy 10-year treasuries, because they have a 2% yield, which sucks, but it’s better than losing your money, which is what will happen if you lend money to other banks, businesses, or consumers.
  5. The Fed is pissed and has to come up with another plan to make the banks lend money, short of just demanding that they do, or we will send them to Gitmo.
  6. What they come up with is called quantitative easing, whereby they say, hey, we’ll buy all your trash securities from you, bank, and then you will feel more inclined to take on risk, since we are lessening it. To do this, we will pump money into the economy by, well, printing up more money and giving it to you in exchange for worthless securities.
  7. The banks take the new money because hey! free money!, even though they probably know that this will lessen the worth of the dollar, if only slightly.
  8. As an added measure to make banks lend money, the Fed will start buying up all those treasuries that the bank was using, trying to flood the market and thereby reduce the return so the banks won’t buy anymore. To do this, they will, uh, print up more money.
  9. Theoretically, now the banks will be more inclined to lend money so that they can get a better return, since they have less bad debt on their hands and also because the treasuries aren’t returning anything anymore.
  10. Everyone holds their breath and waits to see what happens next.

Basically, we don’t know what will happen next. In order for businesses to run effectively (and, therefore, for our economy to run effectively), they need credit. That’s why the government keeps dicking around with the banks. I’m sure they’d rather not. I’m sure they’d rather just give money directly to small businesses, but perhaps they don’t know how to do this. What will hopefully happen is that the banks will discover their hearts grew three sizes that day (along with their coffers) and start lending money again, and getting things started again. But that remains to be seen. Now, would I go buy gold? No, I wouldn’t, and here’s why: the commodities market was inflated just like everything else, it was just the last to get there. By the time you hear about “selling your gold” on TV, it’s too late–everyone who was going to make money in the short term on gold has already gotten out. Now is when you lose money from buying gold. And besides, there is no inherent value in gold, either, my friends. If the economy were to completely collapse and we went all Mad Max Beyond Thunderdome, what you want to do is start stockpiling water and gasoline, not paper showing that you own these things–the actual things themselves. So, unless you have a giant warehouse and a glut of stuff left over from Y2K, save the conspiracy theorizing for the crazies and let’s just try to stay sane while we ride this one out, OK?

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