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#4 Why do banking crises keep happening?

Felix Niederer

Banking crises and their impact on your hard-earned money. In this podcast, we dive into a topic that is both fascinating and troubling.

The enigma of banking crises

Banking crises are a phenomenon that concerns us time and again. But what is actually behind them? Can you really be sure that your money is in good hands at the bank? In a world based on trust, you rely on getting your money back when you need it. But beware, this assurance is not set in stone.

The mystery of banking

Why is that? Here's where an interesting aspect comes into play. Your bank doesn't hoard money like gold in a vault. Instead, it's used for a variety of banking transactions – whether it's financing mortgages, making corporate loans, or making consumer loans. The exciting thing is that these transactions often yield more profit than you get in interest on your account.

The profit and the risk

Of course, this business is highly profitable for the banks, but as is so often the case in life, it also involves risk. As long as everything goes smoothly, all is right with the world. But as soon as anything goes wrong – be it a real estate bubble bursting or an unexpected interest rate hike – the system can start to falter.

The domino effect of a banking crisis

A banking crisis does not come out of nowhere. A trigger causes the first loss of confidence. Customers start withdrawing their money, and that leads to unrest. No one wants to be the last to keep their money safe, because it quickly becomes clear that there is not enough for everyone. The behavior is rational, because who wants to risk losing their savings? The infamous «bank run» is the result.

The solution: professional wealth management

Is there a way to escape these risks? Yes, there is an approach: instead of leaving your money in the bank and hoping for minimal interest, you can invest it directly in the capital market. This is where professional wealth management comes in – a service that is also available online these days. This allows you to pursue a customized strategy and invest your money more securely.

Conclusion: Security for your financial well-being

How safe is your bank? This is a crucial question that affects each and every one of us. History has shown that banking crises are not uncommon. It's best to develop a smart financial strategy and minimize potential risks.

Do you have any questions or comments? Feel free to send an e-mail to Felix Niederer.

Disclaimer: We have taken great care with the content of this article. Nevertheless, we cannot exclude the possibility of errors. The validity of the content is limited to the time of publication.

About the author

Felix Niederer

Founder and CEO of True Wealth. After graduating from the Swiss Federal Institute of Technology (ETH) as a physicist, Felix first spent several years in Swiss industry and then four years with a major reinsurance company in portfolio management and risk modeling.


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