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Who's Got Your Money?

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Who's Got Your Money?

No matter what you moved here for, you can feel good that our local banks are safe. Story by Andrew Garvey w/Trish Gannon

I’m neither a survivalist, nor a reactionary. I am a private investor well accustomed to hedging my bets and paying homage to rationalism, not extremism. That being said, the American economy appears to be totally imploding, with no end in sight.

So is it time to panic? Time to grab your dollars out of the bank and bury them in the back yard? Not quite yet.

The reality is, the dollar has been devalued between 12.65 percent and 30 percent. That’s the primary reason why your gas is so expensive, why transportation costs have soared, and why food costs so much more than it did a year ago. (Of course, the cost of gasoline has jumped by a third thanks to our friends at Goldman Sachs and Morgan Stanley and their purchases of oil futures.)

The Federal Reserve has been “printing” an average of $20 billion per week to bail out the many failing financial institutions you’ve been hearing about on the national news. That means your dollar is worth far less than you think it is, and it also means that if you’re making less than about 13 percent on your net worth, you’re actually losing money. It will only get worse if corporate bail-outs continue.

In addition, the housing market disaster is openly being called a “housing depression.” Fannie Mae and Freddie Mac, the mortgage backbone of our civilization (and in which much of our retirement accounts are invested) are failing. Friday, July 11,  witnessed the second largest bank failure in American history with the collapse of California’s IndyMac bank. The Royal Bank of Scotland issued a statement to its investors on the 19th of June to watch out for a global credit and stock market crash in the following three months.

Scary news for those without much information on economics. So what should you do?

First, don’t panic. You might have chosen to live here because of the area’s beauty, or the opportunities for recreation, but an unexpected benefit is that our local community banks are doing very well.

Primarily, that’s because our local banks simply do not engage in the lending practices that have caused trouble for so many other banks nationwide. They don’t loan 125 percent of value, they don’t make loans out of their area, and they don’t make loans to people who can’t afford to pay the loan back.

With bank stocks falling drastically, stock in Panhandle State Bank, for example, rose.

Does that mean you don’t have to worry about what’s happening economically at the national level? Of course not.

“If you have concerns, talk to your banker,” explained Tom Harvill, President of the Sandpoint branch of America West Bank. “That’s the beauty of a local bank - even if you have a small account, we all welcome you to come in and talk about your balances.”

Harvill points out that many people are uninformed about FDIC, the federal program that insures accounts up to $100,000. “That’s $100,000 per account owner and type of account,” he stressed. That means you can get FDIC insurance on your money on several different accounts, depending on how they’re structured. (The FDIC has a fairly user-friendly website at www.fdic.gov., with a calculator to determine your protection levels.)

“The insurance is not limited to $100,000 per person, per bank,” Harvill explained. “It’s very easy to structure your accounts to protect your money.”

But what about your investments? Again, talk to a professional you trust for advice and information.

“When I set up accounts for people, I always have them determine the level of risk they’re comfortable with. And we can always reevaluate those choices,” explained Nancy Hadley, a financial consultant with D.A. Davidson in Sandpoint. “No one likes it when the stock market falls and the value of their stocks decrease. But if you’re investing for the long haul, you have to be able to think long term. Now is actually a very good time to buy!” she laughed.

In addition, the American stock markets are not the only game in town when it comes to investments. Nancy, along with other investors, can help you make decisions regarding  foreign investment, precious metals ETFs and even the purchase of gold or silver.

Don’t have enough money to be really worried about the national economy, but still wondering whether you should be doing anything different with the money you do have? That depends on what you’re doing now.

It’s never a bad idea to stock up on staples, especially in this area where it can be difficult to get to the store even when the stock market looks rosy. You’re investing in something you’ll use, plus stimulating the local economy by spending money.

Get to know your area farmer’s markets, where the price of gasoline will have less daily influence on the price of food. Vendors there can also give you tips on storing the fresh food you don’t eat - be it canning, freezing, drying or simple storage. Your university Extension Offices offer a wealth of information on the same.

Keep some cash at home. One gentleman associated with a local bank laughed and offered that he keeps extra cash “in Canadian dollars!” That keeps your slush fund from being eaten away by small purchases here and there and, if you put a little aside every week and end up not needing to use it, you can do like he does and take an annual vacation to Canada!

Look on the dark side - imagine things continue to get worse nationally. Billions in bailouts are bad enough but it could get worse. For example, if we were to go to war with Iran, it’s likely they would shut down the Straits of Hormuz, the pathway through which anywhere from 20 to 40 percent of the world’s oil passes on a daily basis. In that case, $11/gallon gas is a reasonable expectation, and all-out armed revolution against higher prices might not be so far-fetched.

But look where you live. We don’t generally lock our doors at night, everyone mostly gets along, and most of the complaints regard motorcycle noises and speeding down Main Street. It’s hard to imagine a better place to be if the economy falters.

The future may change our perspectives greatly - it generally does. Our world will become smaller because of rising gas prices and the increasing ineffectiveness of the dollar. But we are situated to weather any storm because of the strength of our community. We really are.

So if you haven’t met your neighbors yet, invite them over for dinner. If you don’t have a garden planted, hurry up and plant one. And by all means, take care of one another.

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Landon Otis

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investments, money, finances, Andrew Garvey

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