http://www.bbc.co.uk/iplayer/episode/b01mnxzd/margin-call available until 14th June, BBC iplayer!
Whilst it's unusual to open an article with a link to a film, albeit with an impressive cast: Kevin Spacey, Paul Bettany, Jeremy Irons, Demi Moore, Stanley Tucci, it does illustrate what I discuss and try and make clear in these columns. (No prizes for spotting that this is not the original Movie cover!)
"Margin Call" takes us on a journey with an investment firm selling toxic bonds, and the ensuing carnage that unfolds with a massive sell off. As it unfolds it charts the downward spiral of the firm and its employees, with all the moral and financial decisions made. It highlights how the whole system is corrupt. The bankers justify what they are doing, with the attitude that we're all in it together (sounds familiar), because we want to maintain our lifestyles, buy houses with mortgages we can't afford etc., you know the drill by the now.
How true to life is this film and should we trust the banks?
Whilst the film is not a “true story”, since the financial reset began in 2008 we have seen some of the biggest names in banking hit the rocks through similar malpractices. Lehman Brothers became bankrupt and Merrill Lynch, RBS, Alliance & Leicester and HBOS, to name a few, all came within a gnats whisker of collapsing.
Right now trust is in short supply. The financial authorities are in a tight spot with the millions of pounds they have printed, and the raising of taxes. They have created an un-payable debt. Tight spot is perhaps an understatement, it's more like a knife fight in a phone box. The arbitrary figure of £75,000 that most people believe is guaranteed if a bank should fail is folklore. Imagine if every creditor tried to withdraw his/her savings from a failing bank, it would all simply grind to a halt. The banks don't actually hold the money, worse still, it is no longer backed by gold. So not only do vast amounts of it not exist, but it is worthless too. Remember the queues at Northern Rock branches?
More sinister still are Bank Bail-ins which have been operational since the beginning of 2016 in the EU and other countries. Bank Bail-ins continue to be one of the most poorly understood financial threats to your wealth and are under-reported in the media. For more on exactly what a Bank Bail-in is and how it affects you: http://cavendishcoins.co.uk/6/post/2015/05/what-is-a-bank-bail-in.html
As the film shows, we can no longer trust the people who head the institutions we have grown up to trust. So where does this leave us regarding money we hold in banks? Although it takes time to research saving accounts or bank bail-ins we should all be making in-ways to become more self informed. Blind acceptance could squander your wealth. You have to make it work for you, but putting it all in one basket is not your best option. As I have mentioned many times before, not only should you spread your wealth, it is safest to hold a significant proportion in something that really exists; something that won't vanish through actions beyond your control!
If this has been of any interest or help please share. As always your comments are most welcome!
Sources: Bank Bail-ins
Enrique Suarez International Business Strategy Consultant/Partner/Up2Europe