Giovanni Russo Elon Musk, the CEO of Tesla and Twitter, said it’s better for people to take their money out of the bank because the government (U.S. Treasury and Federal Reserve) has made it so that you get more interest when you do that than when you keep your money in the bank. He thinks this will cause lots of people to move their money away from banks – even those big banks that are supposed to always stay safe.
Invest in Treasury Bills to Get a Higher Interest Rate Than Bank Accounts
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On Monday, Tesla and Twitter CEO Elon Musk said he has a special deal for people who take their money out of banks in the United States. He answered someone on Twitter, called unusual_whales, whose had quoted Hugh Hendry. Hugh is the founder of Eclectica Asset Management and used to run a hedge fund for fifteen years. The quote talked about how the US Treasury and Federal Reserve may have to not let people bring their cash abroad if too many people leave it from the banking system here in America.
According to Musk, there’s a big difference between money market accounts (like Treasury Bills) which give interest rates of about 4.5% and bank accounts which provide only less than 1% interest. He suggested that people should move their money out of the banks as they can get much more return if they do so.
This isn’t the first time that Elon Musk has talked about a problem. On May 2nd, he responded to a tweet about money-saving accounts and said that people are putting their cash into these accounts with interest rates at 4.5%, which could create an issue with having enough money around.
It’s a big problem if you have money in a bank account that earns less than 1% interest, instead of putting your money in an account with 4.5% – like a Treasury Bill – since people and companies know this. If too many people move their money away from certain banks, even ones that normally can’t fail, it could be dangerous.
Someone named Genevieve Roch-Decter tweeted that banks are making money by giving people a low interest rate (0.4%) on the money they give them to save while they make even more money (5%) by using that money to invest in Treasury funds. But if people learn how to manage their own money and buy treasury funds themselves, banks won’t be able to make as much money.
A lot of people are worried about the U.S. banking system’s situation. Recently, First Republic Bank was taken over by regulators and put up for sale to JPMorgan Chase, making it the second-biggest bank to fail in the United States since 2008. Plus, Silicon Valley Bank and Signature Bank both failed this March. But government leaders like Mr Powell have said that our banking system is secure and strong even though last week they upped interest rates by 25 points.
A Swedbank expert has said that the U.S. banking crisis is getting worse, which means more banks will close soon. Billionaire Bill Ackman also said that we need to fix this problem quickly before it’s too late. Even the Fed showed us that many banks in America had losses amounting to at least 50% of their money in the third quarter of last year.
Recently, a famous hedge fund manager named Hendry shared with Bloomberg his view of the U.S banking system and it’s not looking great. He went on to explain that although the government said all deposits are safe, people are still withdrawing their money from banks in order to gain returns elsewhere. Also, he speculated that the government might have to enforce a 180 day freeze on people being able to withdraw money from banks altogether.
Do you think Elon Musk has a good idea to encourage people to take their money out of bank accounts? Let us know in the comments section!
