Markets now feel that banks are much less safe. Suddenly, the credit rating agencies have decided what we knew a couple of years ago. Fifteen major banks have had their ratings downgraded so that the relatively position of each to each is more or less unchanged but putting your money in a bank is deemed to be much more risky that it was before.
There are four reasons why bank are unsafe, regardless of their ratings by credit agencies.
1. Banks which need to get support from governments can never be safe becasue governments do not have endless supplies of money to bail out those banks.
2.Banks are unsafe becasue they leverage their customer deposits too much.
3. Banks are unsafe becasue they enter into transactions involing derivatives which no one really understands, gambling hugely on them and for every winner there is a loser.
4. Banks are unsafe because they put our money where their mouth is.
Filed under: banking Tagged: | credit rating agencies, economics, economy, money, unsafe banks
May I also add number 5 “Banks are part of a gigantic Ponzi”