Real Estate vs. Bank Account - Ask ChatGPT

I enjoy real estate, economics, and tinkering with new tech.  Therefore, I asked ChatGPT to remind me of a few facts about our financial system and why I love real estate.  Underlined are a few subjects I asked ChatGPT to explain to me in 1 paragraph and below each are ChatGPT's responses.

Fractional Reserve Banking - Your money isn’t in the bank

Fractional reserve banking is a system where banks are only required to hold a fraction of the deposits they receive as reserves, while the rest can be lent out as loans or invested. This creates new money in the economy and allows for the expansion of credit. However, it also exposes banks to the risk of a bank run if depositors demand more money than the bank has in reserves, leading to potential financial instability.

FDIC Insurance - Anything over $250k is uninsured

FDIC insurance, or the Federal Deposit Insurance Corporation, is a government-backed program that provides insurance coverage to depositors in case their bank fails or goes bankrupt. Under FDIC insurance, each depositor is insured up to $250,000 per account, per depositor, per institution. If a bank fails, the FDIC steps in to pay back depositors up to the insured amount. This helps to maintain confidence in the banking system and protect consumers' savings. Banks pay premiums to the FDIC to fund the insurance program, which is overseen by the Federal Reserve and other regulatory agencies.

Inflation - Your money is worth less than yesterday

Inflation is the general increase in prices of goods and services in an economy over time, which leads to a reduction in the purchasing power of money. This happens because as inflation increases, the same amount of money can buy fewer goods and services. Therefore, inflation reduces the value of money, making it less valuable than it was previously. In addition, inflation is also considered a tax because it reduces the real value of money held by individuals and transfers it to the issuer of the currency or the government. As a result, individuals who hold cash or other financial assets that are not inflation-adjusted may lose their purchasing power over time, which is similar to a tax on their wealth.

The banking system is a confidence game.  Your money isn’t in the bank, the Federal Gov only insures $250k, and the money in your bank account is losing value everyday to inflation. What happens when confidence goes away?  Take a look at Silicon Valley Bank.  Perhaps it's time to start thinking about investing in supply constrained hard assets such as Summit County real estate, gold, or Bitcoin.

Enough doom and gloom.  Time to go Spring skiing.

PS - this is not financial advice, just the musings of a real estate agent and an AI chat bot