Is Paypal FDIC Insured?

With all the alarm lately with the markets, I wanted to find out if my money in Paypal is safe. It is FDIC insured? Is it safe to keep a balance there right now?

No, PayPal is not a bank.

^agreed. Consider transferring funds out of your Paypal account regularly to be on the safe side. I do this regularly and only leave a small amount in for occasional purchases. :slight_smile:

BTW In EU paypal is registered as bank.

No, paypal can seize your funds, confiscate them, go out of business whatever they want with your money and there isn’t much legal recourse if they do.

Consider transfering the funds out early and often and even spread across multiple bank accounts

One thing that might set your mind at ease. I don’t think paypal was doing in “creative fiancing” in the housing market. That’s where all these banks got into trouble. I could be wrong though.

I decided to keep a smaller balance in paypal, but at the same time I want to learn more about the solidity of their operation, and how paypal might be effected in the event of greater financial breakdown or even a run on banks.

PayPal places any funds you hold on balance with them in an FDIC insured bank. As long as they keep records about whose money is in what bank, and your own money (not the total of PayPal’s deposits at a bank) does not exceed $100,000, it is covered by FDIC pass-through insurance. You are protected against the failure of any bank PayPal may be using to store member deposits, but not against the failure of PayPal itself. But PayPal is not a bank and obviously owned no mortgage debt.

The FDIC made a statement reassuring this in 2002:

There are about 1000 reasons not to hold much money in your PayPal account - this is just another one of them…

what a mess we are in with this 777 point drop…

How is this another one? You’re FDIC insured.

FDIC protection realistically only works if one bank collapses due to some reason. PayPal is not going to go out of business any time soon, so this is not really the worry.

If there is a run on the whole banking system, which realistically is the only way PayPal will go down, your FDIC protection isn’t going to do anything. How would they pay out the $100k if all the banks collapse? Where would they get the money? (they don’t have a reserve that large) By the time they finish printing everyone their $100k they have insured, your money will be worthless. That, or they simply won’t pay up.

You’re right, if everything goes to heck, then being FDIC insured won’t matter much anyway.

That’s what the gold and silver bars under my mattress are for, and why another 10% of my assets are held in other currencies.

Do I sound paranoid?

:shifty: :shifty:

Not really, I’ve been pondering buying some gold and silver for some time now. The only problem is I don’t really have a place to store my precioussss :confused:

I think I could find somewhere to store it for you.

Buying gold is buying into one of the largest price bubbles in history. Gold has very little practical use - a small amount of it is used for electronics, but most of it is used for jewlery and savings. Therefore, its prices does not reflect its use value, which means that gold is highly over-valued. Of course, as long as the majority of people think that gold is safe, everything will go well. If there is a major collapse, however, I fail to see how people will get any money (or food) for their gold.

There’s a whole slew of reasons civilizations going back thousands of years, including our own until 30 years ago (leading to this mess!), used gold as currency. Your local currency was gold backed until 1931. Those intrinsic properties of gold haven’t changed.

When you adjust for inflation (especially if you don’t use the US CPI as the inflation measure), gold isn’t in a bubble, it’s actually quite cheap. It’d have to sell for over $5000 USD per ounce to reach the same levels as last time the stock market went this wonky.

And what are those values? What is their practical value? Gold is shiney and pretty, but it doesn’t do much else than that. If you offered a starving family in a starving country the choice between a ton of gold and a ton of canned food, which would they chose?

Gold has functioned as money in this world continuously between 2500 BC and just 35 years ago. Only since world central banks started replacing gold reserves with USD as the official reserve currency has it lost its monetary premium.

When the US’s lenders realize that there’s no way the US can ever pay its $50 trillion in unmet obligations, and that the inflation it’s been hiding with GDP numbers that don’t represent actual production and CPI that doesn’t include the prices that actually rise with inflation are effectively repudiating the debt it owes, they’ll have to dump the USD. As the soundness of the USD comes into question, so will all other fiat currencies where governments can so easily debase its value. Central banks will be forced to become buyers instead of sellers of gold again to ensure adequate gold backing for their currencies as they had since this experiment without began to fail, to restore credibility and public faith in those currencies.

Again, it was only in the last 10-20 years that gold and gold mining shares haven’t been an asset class in investment portfolios and held by most mutual funds and represented in the major stock indexes. We’ve just forgotten after the USD became the reserve currency around the world instead of gold.

The reason gold backed currencies was that, as Peter Schiff puts it, it “represents real effort”. Unlike government-issued paper that can be printed on demand decreasing the value of the currency at will, an ounce of gold represents the effort it took to discover, mine, refine and mint it. “The government can print a $1 bill at the same cost it can print a $1 million bill. But there’s a big difference between a 1-ounce gold coin and a 100-ounce bar. A 100-ounce bar takes 100 times the effort.”

The reason gold was used in the first place is its rarity, mostly. All the gold produced in the world each year would fit in one person’s living room (about 14 cubic feet). It grows only at about 2% each year, even slower recently. And unlike a can of food, it is always there. It doesn’t tarnish or deteriorate with time. Markets created by civilizations over the past 4000 years have tried every imaginable object as currency, and gold is the one that came out on top due to these properties.

That doesn’t change the fact that gold has little practical value, which doesn’t justify its price. You seem to be suggesting that gold should have a high value because it has had a high value in the past, without suggesting an actual basis for that value. For almost all other goods, the price is determined by a demand fueled by an actual need for the good. That is not the case for gold.

I haven’t been talking about the gold standard at all, but since you bring it up, the system is rediculous. Basing the value of the global economy on the mining of a specific mineral, and therefore fixing the growth of the global economy to the amount of the mineral which can be mined, makes no sense. It forces the economy to grow when there is no growth and limits the economy’s growth when there would otherwise be a high growth rate.

The paper standard is excellent, as it can be easily regulated. It isn’t tied to anything, and can therefore be adjusted to suit the economy’s need, rather than trying to cram the economy into factors over which noone has any real control. While it can be abused in theory, so can the gold standard. If noone but the central banks controls the amount of gold held, then the central banks have the same freedom as they do now.

Of course, for those who own lots of gold, returning to the gold standard would be nice, since it would force the gold prices to soar. Other than that, the gold standard is pointless.

I think there is plenty of reason to diversify right now, and be prepared for a loss in some area, even if you are not an investor. Gold is one way to do that. I think also having a website or two that has a lot of traffic and/or pagerank is another great asset, so continuing to do what we are doing, and working hard to improve is also a form of diversification.