US Banking System Insolvent

The banking system in the United States is insolvent according to most learned economists as liabilities and anticipated future liabilities far outweigh existing and projected future assets. What does this mean ? For the average citizen with even decent sized funds in deposit in checking and savings accounts, it means little if anything at this point as all funds beneath $250K are insured by the federal government. But for large deposit holders such as corporations, wealthy elite, pension and hedge funds, and other types of government, this news is grim, and even perhaps dire for these entities that have tremendous quantities of funds in various larger banks that are primarily based in New York City and Charlotte.

It is difficult to fully understand what may happen next with this growing crisis. Federal intervention is likely to a broad extent as the Federal Reserve continues to pump federal dollars into banks using funds gotten from Treasury Bill sales to foreign citizens and governments, primarily from the Middle East, China, and Japan. Other funds will simply be generated by merely printing money with nothing really standing behind the currency beyond mere faith. Both these sources of currency are very risky and dangerous for the economy at large.

The collapse and failure of a bank or banks is becoming increasingly worrisome as the crisis is beyond the point where the Fed may be able to prevent these circumstances.

And markets are likely to react with the realization of these developments in a panicked way. It is not inconceivable to see indexes such as the DJI to drop to near 6500 in the next few weeks with other indices also dropping 20 % in the short term.

And the consequences to private and public pension systems are too tragic to consider, as untold losses and failures of such become widespread.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aS0yBnMR3USk&refer=home

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