The uncomfortable truth is that the entire banking system in the developed West is insolvent. This is not some wild, attention seeking headline. Rather, it is a carefully researched assertion based on fact.
Let’s briefly examine the evidence in the United States, the world’s largest and most important banking system :
1. Some of the largest banks in the US (such as Citigroup, for example) have just failed their “stress tests”.
2. The FDIC’s insurance fund fails to hold anywhere near the amount that they are required by law to maintain in order to insure the US banking system.
3. The Federal Reserve is nearly insolvent. Its capital ratio now stands at just 1.35%. Lehman Brothers was at 3% when they went bankrupt.
4. The US government’s “net worth”, i.e. all of its assets minus all of its liabilities, is NEGATIVE $17 trillion.
So you can see that in the US, you have poorly capitalized banks backed by a poorly capitalized insurance fund backed by a nearly insolvent central bank and an insolvent government. Hardly a beacon of stability.
Again, this is not some wild conjecture. This is all fact, backed by publicly available data. But it’s an incredibly uncomfortable conclusion for most people to stomach.
Let’s face it– we all grow up being told that banks are safe. It must be, after all… it’s a bank!
The mere thought of a bank conjures images of conservative stewardship and rock solid responsibility. The reality, however, is far different from the myth. And when the situation is this stark, any number of things can happen.
You may recall back in 2013 when the government of Cyprus bailed out the banking system there by stealing people’s deposits.
Even though the data was just as clear, few people in Cyprus saw this coming. Everyone went to bed on Friday night believing everything was fine. Many people probably logged on to their banks’ websites to check their balances.
It turns out, though, that there’s a big difference between a number printed on a website, and a well-capitalized bank that holds abundant cash. People in Cyprus found that out Saturday morning when they awoke to the reality that they had been frozen out of their accounts.
It literally happened overnight.
Governments all around the world, from Cyprus to the US, can freeze and confiscate your assets without even having to prove their case.
Several countries, from Canada to the US to the United Kingdom, have already either passed or introduced legislation making it easy for governments to confiscate people’s bank deposits.
This is the world we live in. The facts may be uncomfortable, but it’s all true.
The conclusion to draw here is very simple: when every shred of objective evidence suggests that every major player in your home country’s banking system is borderline insolvent, does it really make sense to hold 100% of your savings there?
Probably not. I recommend that you consider establishing a foreign bank account as an important diversification “flag” to plant abroad.
You should consider jurisdictions with low debt, low taxes, a strong and stable financial sector, and one without a history of plundering the banks in bad times.
A point worth mentioning is that offshore banking is not about hiding your money from the tax man. It is about diversifying your sovereign risk.
Often you’ll also find that offshore interest rates are far better than domestic ones — if this comes as a surprise for you, it is not your fault.
For obvious reasons, domestic banks are not going to tell you that you can get a much better return just by having your money in a foreign bank account, not to mention the fact that foreign banks are likely to be stronger than banks in your home country.
Places where you will find the best, safest offshore banks include countries like Switzerland, Norway, Hong Kong, Singapore, and many others.
*Information taken from Sovereign Man*