You won’t see it in the headliners, but major banks in the US are operating in bankruptcy. Banks such as Wells Fargo and Bank of America are no longer able to cover their liabilities. Instead, they are operating on a fraudulent basis, hoping that their debts are never called in.
The reality is: for a majority of Americans, the bank just doesn’t have your money anymore. “Nonsense!” you say, “I can go online and see that my full bank balance is there!” Not true. Sure, the bank tells you your money is there and available, but in reality, they have already taken your money and given it to somebody else. This is because banks work on a fractional reserve system and at most, are only required to maintain enough liquidity to payout 10% of their total deposits. If too many people ever tried to claim their money at one time, a majority would find their savings missing.
Tell me, how comfortable would you feel using USA Store-It-All if you knew they had a reputation of lending out 90% of it’s current stock of couches, televisions, and beds to Rent-A-Center and other individuals? Why, there’s no way you would do business with such a company! In fact, when individuals such as Bernie Madoff try similar ponzi schemes they are locked away and forever disgraced by society. So why has the United States, much less the world, blindly accepted such conditions?
There was a time when the dollar actually had meaning and backing you could count on. I say an overhaul of the banking and monetary system is long overdue.
The Rogue Economist 
June 29, 2014 at 4:19 AM |
Interesting… Some questions, though.
1. How are you defining “in bankruptcy”?
2. You listed a couple of banks operating in that condition; are there some that are not?
3. I’m not clear on your analogy:
A. Aren’t depositors tacitly agreeing to loan their money to the bank to invest and return a rate of interest?
B. Furniture placed in the trust of USA CO. and loaned out would naturally incur wear and tear, as well as risk of loss. In your thinking, does money loaned to the bank incur equivalent “wear and tear” when loaned to the bank. What role does insurance play (ignoring for the moment FDIC limitations) in this?
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June 30, 2014 at 1:34 PM |
R,
1. I am using the word bankrupt as unable to repay outstanding debts.
2. To my knowledge, there are no banks operating at 100% reserve
3. While many people undersand their money is being loaned out, the problem is that a bank note is not set up as a loan. There bank note is a promise that the creditor can redeem their money on demand whenever they wish. The bank of course cannot possibly fulfill all of their promises. I would have not problem if the bank notes were instead set up as debentures or real loans; in which case the money supply could not be artificially inflated.
4. No it does not and insurance should not be needed. In either case, the promise is to return to the customer exactly what was deposited.
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