The Unknown Twist About The FDIC

It seems that everyone is concered about their bank accounts these days. People ask me all the time what if my bank fails, will I get my money? The answer is yes the FDIC will insure your deposits up to $100k…but there is a twist.

What happens when the FDIC runs out of money? Thats easy. The government will just print all the money that the FDIC needs. But wont that cause inflation? Yes, and that is the twist.

Websters dictionary defines inflation as the continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services.

See the FDIC can insure the amount of dollars in your bank account but not the value of those dollars. So while it is true that no one has ever lost a dime of FDIC insured deposits. It could also be said that everyone who has ever collected from the FDIC has lost a dime of every dollar.
— Justin of Vizionkc
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3 responses to “The Unknown Twist About The FDIC

  1. People say FDIC insurance creates moral hazard. It probably does. But why put an arbitrary cap on the coverage? Currently $100,000. Why not insure all funds to an unlimited amount. Then people will think more about the value of their money and not the quantity of it.

  2. There’s an email going around saying that instead of spending 700 billion on the bank bail-out, we should spend it on ourselves. Divide the 700 bil. into 300 million equal parts to give to each of us. My co-workers seem to think this is a great idea (disclaimer: I work at a bank). How do you begin to argue with logic this flawed? Why stop at 700 billion? Why not print out a gadjillion dollars for each of us? We’d all be super rich then right?

  3. Yeah we will all be about at rich as the people of Zimbabwe. You can’t find a person in Zimbabwe who doesn’t have a few hundred grand or a couple mill on hand. Each trip to the super market in Zimbabwe has to average a million dollars. Some people just do not understand hyperinflation.

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