Why I don’t put my Cash in Banks

0:00Did you know that when you put your cash into a savings account at a bank, you're actually loaning the bank money? And whenever you do a loan, there's two things you want to know. How likely is it that I'm going to get my money back, and how much am I getting paid for the risk? That's the interest rate. And so, banks will pay you nothing, basically, on the risk for the money because most people feel confident that the banks are going to be able to give them their money back. The problem is history doesn't say that. Banks have gone bankrupt many times in the past by getting greedy, and in a period that it was over-leveraged and lots of free money, there is lots of institutions that were massively over-leveraged, and we will probably see that in the next however many months. And so, the easiest way that you can combat against that is a different vehicle. It's called T-bills, or treasuries, from the government. And you can buy treasuries so that you can guarantee that you're going to get your money back because they can always print it. And you get 4% per year on the money. So, rather than risking the money in a riskier vehicle that pays you less, anybody can go buy a treasury bond and use it as their figurative bank account where they store their money. Because if you're not going to do anything with the money, you might as well let it sit there before you figure out what you're going to do next.