Money in banks is at risk
AUX operates through a regulated financial institution independent of the banking system
Most people in the world currently do not realise that when they deposit money in a bank that money stops being theirs, it does in fact become the legal property of the bank. People are in reality unsecured creditors of the bank, which simply means they’ve lent that money to the bank.
As news of BAIL-INS start to enter the psyche of the average person, they will start to realise that their money is in fact at risk in a bank and will look to alternatives.
This is why AUX is attractive to those looking to return to a value storage system where client’s money remains their legal property at all times..
Instead of the government of Cyprus borrowing money and handing it to the banks, the money to ‘rescue’ the banks came from the depositors of the banks themselves. At the start all bank accounts were frozen, meaning depositors couldn’t withdraw any money. When the dust settled, anyone with more than the insured deposit amount (€100,000) lost around 40% of their money.
So if a person had €500,000 in a Cypriot bank at the start of 2012, just a few months later they were left with around €340,000 - a huge loss, and nothing they can do about it.
At the time the Cyprus ‘bail-in’ was called a ‘one-off’, but it has now become clear that rather than being a ‘one-off’, the bail-in model is in fact going to be used as a template to prop up the banks in the future.
During a speech by the Bank of England’s Andrew Gracie titled; “A practical process for implementing a bail-in resolution power”, the following was said:
“The tools include the ability to transfer or sell assets and liabilities of G-SIFIs and to carry out a bail-in of creditors within a resolution…Rather, the creditors of the failing banks should bear losses, as they would do in insolvency, but without the financial instability and disruption to critical functions…the bail-in power may be used to ensure creditors are exposed to losses without disrupting critical functions…Bail-in, like other resolution tools, involves some interference with property rights”.
Clearly all G20 countries are moving full-steam ahead with a system of bail-ins, and in the coming months and years ‘bail-ins’ will become an embedded part of the global financial architecture. This means that people with uninsured bank deposits risk losing a large percentage of that money just by leaving that money in a high-street bank. In short, having a bank deposit will no longer be ‘risk-free’ - making so-called ‘free’ banking a very expensive proposition.