In the Great Depression, the profligate banks failed, insolvent. The wealth of their depositors was lost as the banks, having wasted it, could not provide it to its legitimate owners. From that failure, the banks vanished.
In the 2008 financial crisis, the banks failed again bu t this time, we heard a new mantra: “Too big to fail” and in response, the government recapitalized the banks at the expense of the taxpayers, using debt so that said taxpayers would not notice. It would be their children and grandchildren who would actually pay.
But that recapitalization did not fix the problem; it merely papered over it for a time. Too many of the bank’s loans will not be repaid by too many enduring a declining living standard; that reduces the value of derivatives capitalizing said banks. They will collapse again – soon.
But this time, the government is prepared. So are most of the governments of Europe. New laws have been passed or are in process, authorizing banks to seize the customers’ funds and use them to replace the banks losses. In return, those customers will receive bank stock, thereby losing any FDIC insurance.
If your funds are on deposit in a ‘troubled bank,’ the bank will take your money, leaving you with some stock of no guaranteed value. It will say that you are now an owner of the troubled bank. When the bank goes on to fail under its newly government appointed managers, you will own worthless paper as a shareholder, and an increased share of national debt as a taxpayer. That last will be vehemently denied until it comes time to collect the debt.
As you may imagine, you will not hear much of this until it becomes time for you to be relieved of your money. That will of course, be too late. Oh, well ….You won’t be able to say that we didn’t tell you ahead. We suggest a bit of a stash of cash under the mattress for a wile. More elaborate detail here.