MONEY AND BANK SAFETY

November 1, 2017


Do you ever wonder if the money, hard-earned money, you earn every week or month is safe?

According to the FDIC:  “The basic FDIC coverage is good for up to $250,000 per depositor per bank. If you have more than that in a failed bank, the FDIC might choose to cover your losses, but there is no promise to do so.” Sep 13, 2016

The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for up to $250,000 per depositor, per insured bank, for each ownership category by identifying, monitoring and addressing risks to the deposit.  This is the law.  Good to know.

The following list will indicate that our banking system has experienced some “hard times” in the recent past.  Let’s take a look at bank failures in this country and then we will look at the safest countries relative to bank and customer money.

BANK FAILURES:

The following list is taken from the web site: Bankrate.com.

YEAR                      NUMBER OF BANK FAILURES

2016(Estimated)                              1

2015(Estimated)                              8

2014(Estimated)                            18

2013(Estimated)                            14

2012(Estimated)                            51

2011(Official)                                 92

2010(Official)                                157

2019(Official)                                140

As you can see, from 2009 through 2016 there have been four hundred and ninety-one (491) bank failures in this country.

Now, The Survey of Consumer Finances is conducted and published every three years, most recently in 2013. According to the Federal Reserve, “the survey data include information on families’ balance sheets, pensions, income, and demographic characteristics.” Data from previous SCF years show significant changes in checking account balances since 2001. Our analysis of average savings account balances based on the same data can be found as follows:

YEAR     AVERAGE CHECKING BALANCE

2013                       $9,132

2010                       $7,036

2007                       $6,203

2004                       $7,382

2001                       $6,404

As you can see, most people are definitely covered if and when their individual bank fails.  That begs the question:  what are the safest countries in which to deposit money?  Let’s take a look. Some may be very surprising.

SAFEST COUNTRIES IN WHICH TO BANK:

  1. Czech Republic — The Czech banking sector is unusual in that foreign-owned lenders dominate the industry, but consumers don’t seem to mind, ranking them the 14th safest in the world.
  2. Guatemala — The densely populated Central American nation of 15.5 million people has three key players in its banking system — Banco Industrial, Banco G&T Continental, and Banco de Desarrollo Rural. All three are seen as being fairly sound, according to the WEF’s survey.
  3. Luxembourg — It’s no surprise Luxembourg scores highly, as the country is famous for its financial sector. Its Banque et Caisse d’Épargne de l’État is often cited as one of the safest on earth.
  4. Panama — As the country has no central bank, Panamanian lenders are run conservatively, with capital ratios almost twice the required minimum on average. Traditionally seen as a tax haven, the country has made substantial strides to shake off that reputation since the financial crisis.
  5. Sweden — Although Swedish lenders are being squeezed by the Riksbank’s negative interest rate policy, Swedish banks are still among the safest in the world, according to the WEF.
  6. Chile — In July, ratings agency Fitch cut the outlook of the country’s banking system to negative, based on “weakening asset quality and profitability,” but that hasn’t spooked Chileans, according to the WEF.
  7. Singapore — Singapore is renowned as one of the world’s great financial centres, and the soundness of its banking sector reflects that.
  8. Norway — As an oil-reliant economy, Norway has faced serious issues in recent years, and in August, its banking system had its outlook cut to negative by Moody’s. However, the country’s banks remain very sound, the WEF’s survey suggests.
  9. Hong Kong — Another global financial centre, Hong Kong is home to arms of most of the world’s biggest banks, and some of the world’s safest financial institutions.
  10. Australia — A small group of four major banks divide up most of Australia’s banking sector, while foreign banks are tightly regulated, making sure the system is sturdy.
  11. New Zealand — New Zealand’s banking sector is dominated by a group of five financial players. Decent profits and growth without too much competition has seen the sector thrive, although it slips from second last year to fourth in 2016.
  12. Canada — Canadian banks have long been a byword for stability. The country has had only two small regional bank failures in almost 100 years, and had zero failures during the Great Depression of the 1930s. Last year, the country’s banks were seen as the safest on earth, so confidence has clearly slipped a little.
  13. South Africa — South Africa’s so-called ‘Big Four’ — Standard Bank, FirstRand Bank, Nedbank, and Barclays Africa — dominate the country’s consumer sector, and are widely seen to be pretty safe, with only one other nation scoring higher.
  14. Finland — Finland’s banking sector is dominated by co-operative and savings banks, which take little risk. The country’s central bank governor, Erkki Liikanen, below, has led the way on proposals to split investment banking and deposit-taking​ activities at European lenders. Ranked fourth in 2015’s list, Finland’s banks have got even safer this year.

According to the same company that made the list above, the United States ranked number thirty-sixth (36) in depositor safety.

CONCLUSIONS:

I’m definitely not saying run out tomorrow and transfer all of your money to a bank located in one of these countries above but really, can’t we do better as a country?  Can’t the FED just get out of the way?  Regulations and banking philosophy are to blame for the failures given above—not to mention plain OLE GREED.  REMEMBER WELLS-FARGO?

 

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CROWDFUNDING

March 20, 2016


If you have an idea you feel will be profitable over the long haul, you will no doubt be very interested in commercializing that idea and turning it into an on-going company or even a not-for-profit company.  At any rate, you will need financing.  Have you tried getting a bank loan for an idea lately?  Ever tried getting an SBA loan?  If so, you know the odds of success are very limited, even for a project or product that is seemingly “bullet-proof”.  You may have credit that is pristine but the odds are still not in your favor.  Money is remarkably tight because banks and other lending institutions have no idea as to where our economy is going or what might be the next “big thing”. Our government, you know the one supposedly on our side, has burdened this country with so many regulations and taxes we are literally stagnating to the point of no real return.   For this reason, banks are remarkably risk-averse at this time in our country’s history.    You better know somebody to get the money and it very well may take forever at that.   This just might be where crowdfunding has a huge advantage.

DEFINITIION:

I think the very best thing we can do is start off with a definition of crowdfunding.  Just what is it?  Then we will discuss how it works:

Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, today often performed via internet-mediated registries, but the concept can also be executed through mail-order subscriptions, benefit events, and other methods.

According to a new survey of one thousand people, only twenty-nine percent (29%) of Americans have heard of this funding method, in which individuals donate cash in exchange for a portion of a company’s ownership. The research was conducted by a third party on behalf of equity crowdfunding company NextGen Crowdfunding.com.  This was after the Securities and Exchange Commission voted to approve Title III equity crowdfunding rules on October 30, 2015.  According to Entrepreneur Magazine:

“The Securities and Exchange Commission voted 3-1 to adopt the next generation rules for equity crowdfunding this morning for entrepreneurs and small-business owners. Equity crowdfunding is the exchange of a piece of a company for cash. Before today’s ruling, entrepreneurs could only sell pieces of their companies to accredited investors, or those individuals who meet sufficient levels of assets and income. With the passing of this new set of rules, entrepreneurs can sell pieces of their companies to anyone who has the interest and cash to do so.”

The JOBS Act, signed into law in April of 2012, made equity crowdfunding for unsophisticated investors legal, but it has taken the SEC more than three and a half years to wrangle a set of rules for how equity crowdfunding should be implemented.  This is how our government works.  I wonder how many members of Congress had to be guaranteed campaign money by special interest groups to get this passed?  At any rate, I do think the possibilities are great and can have beneficial significance.

SUCCESS:

OK, what does it take to be successful?  Let’s look.

  1. Solve a real problem.  You must create a product or process that people want to buy. It must be marketable.  You have to have something of a viable nature to sell.
  2. Do your homework. The success of any crowdfunding effort is inextricably linked to the amount of hard work you put into testing and refining your idea long before launching the campaign. You MUST look at any competition you may have.  Determine what sector of our country might purchase your product.  What is the “staying power” of your product?
  3. Bring money to the table-– Crowdfunding shouldn’t be your first source of money.  You, as the inventor, must have skin in the game.  You have to initially contribute.
  4. Get a smart funding goal—You MUST make a distinction between how much money you would love to have and how much money you need.  Develop a one year, three year and five year business plan as well as a first year cash flow spreadsheet.  If you don’t know how to do this—LEARN. Learn before you make your first presentation asking for financing.
  5. Make an effective presentation relative to your idea—People are drawn to a vision, a dream, a hope.  They are looking for eventual success. If you cannot articulate this vision you are SUNK.
  6. It’s not always about the money—Listen to those individuals who have ideas as well as interest in becoming part owners and contributors to your idea(s). Feedback can drive product design.  The product you start out with may evolve into an eventual offering far better than you first envisioned. This is critical.
  7. Make the campaign your passion--Managing an active crowdfunding campaign is an intense process. “It’s not only full-time for one person, it’s full-time for everyone in the company,” says Gyalokay. Sager agrees. “When we ran our campaign, the entire team was 100% focused on crowdfunding,” he recalls. “We sent out multiple surveys to our backers. I personally answered 3,000 emails in the first week.” Although it can be a nearly overwhelming experience, the campaign offers a valuable opportunity to engage with your backers. “We believe that if we can have a dialogue with the market, we can be successful,” says Fish. “We decided to host a separate forum for our backers, to continue the conversation beyond the crowdfunding campaigns.”

THE BEST CROWDFUNDING SITES:

The best crowd-funding Internet sites are:

  • Chuffed.org
  • Fundly
  • Crowdrise
  • Indiegogo
  • GoFundme
  • Kickstarter
  • Buzzbnk
  • JustGiving/Yimby
  • Pozible
  • Startsomegood
  • NextGen Crowdfunding

Here again, do your homework.  Look at all crowdfunding web sites and determine which one or ones, if any, meet your needs.  Each web site lists the fees, if any required and how they manage your request, so study each as you would prior to taking a university final exam. You may save yourself a great deal of heartache later on.    You also may develop other ideas also and if so, factor those into your business plan.

I am constantly amazed at the resourcefulness of the American people.  Crowdfunding would have never come to fruition if lending institutions were willing to look at people with ideas.  It’s always been tough but in today’s economy, it’s doubly tough.  Maybe this method of raising money is good for you.

DO YOUR HOMEWORK.  WATCH OUT FOR SCAMS.  They are out there.

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