The bank works by way of a pyramid scheme, one which is deceptively legal – although if you or I, or any business tried this, we would be jailed for fraud.
If you ever wondered how the bank system works (in layman’s terms), here’s one explanation…
The banks count on the following assumption:
That most people won’t figure out the apparent Pyramid/ Ponzi scheme.
While you might think that after you’ve deposited your money, that your money remains in the bank – you would be wrong…
Fractional Reserve Banking
The bank begins the pyramid scheme by taking your deposit (which you might think goes into the vault) and they loan most of it out. In fact, generally, with some variation, for every $1 dollar that you deposit, the bank will loan out approximately $10. In other words, the bank uses your deposits to loan out more (way more) than they have in reserves in order to make big profits. This is ‘Fractional Reserve Banking’. The banks only keep a fraction of the overall money on hand.
An effect of loaning out ten times more than the bank has in reserves, the money supply is increased – created out of thin air. Poof.
This scheme works only so long as people don’t start asking for their money back. Oh by the way, the money you deposit in the bank is technically no longer yours anyway. During the recent G20 meeting of NOV-2014, apparently the member nations decided that your bank deposits will become property of the bank if a crisis takes it down (a bail-in).
To visualize Fractional Reserve Banking, think of a pyramid upside-down, with bank assets being a small point at the bottom while all the debt and loans are piled on top.
How easy would it be to fall over due to some small ‘breeze’?
Central Banks
The ‘Federal Reserve’ is the Central Bank of the United States. It is at the center of our financial system. They print money (currency), they control interest rates, and they loan money to commercial banks. Today’s interest rates for such transactions are near zero (given the perpetual state of our current economy and the apparent necessity for ZIRP – zero interest rate policies). Today’s ‘Fed Funds Rate’ is 0.25%.
By the way, today’s ‘money’ (currency) is actually called ‘Fiat’. A fiat money system is one of paper dollars with zero backing except the government’s promise to pay (e.g. no gold backing up the dollar).
The Central Bank (The Fed) lowers the interest rate when the economy is slow, with the intent to stimulate more borrowing (the system NEEDS MORE DEBT to stay afloat). Today’s (near) zero interest rates and easy credit (easy money) have resulted in more speculative risks (bubbles) than even before the 2008 ‘crash’. In other words the pyramid is even more top heavy than ever before…
Derivatives
Sitting on top of the inverted pyramid of the banking system are the Derivatives. Similar to Fractional Reserve Banking, it is yet another scheme in which bankers gamble huge amounts of ‘money’ with only tiny (fractional) underlying assets. I read a description once which stated, “Think of a dollar bill in a Hall of Mirrors. There is only one dollar, yet there appears to be hundreds more. Bankers can use these hundreds of dollar bills, even though they are not really there.”
Thoughts
When you think about today’s ‘dollar’, the unit in which we are required to trade and exchange our work and productivity for, it is interesting to visualize how we are actually exchanging a piece of essentially valueless paper.
I read this recently (a comment on zerohedge.com) which I found enlightening:
I’m a Banker. For those of you that haven’t yet figured out the scam, let me explain it to you.
Let’s say I have some sand I can loan you with interest. But I won’t accept the interest payments (sand) from any other source than mine, because all other sand is counterfeit under my laws. Only my sand will be acceptable as interest payment. Which means you will have to borrow even more of my sand, in order to pay me back the interest (in sand).
You don’t have to be a genius to figure out that it basically means you will never be able to get out of debt, unless of course, you forfeit something of value of yours in exchange for my sand.
Which is my intention all along – to steal your land, resources, your labor, your flesh and all your assets. Oh, and to pay me rent. And taxes.
Given the apparent impending toppling of the pyramid (it’s inevitable, isn’t it?), I personally feel safer by eliminating debt (mine is all gone – although it took hard work and time), and exchanging these pieces of fiat paper for hard tangible assets. Assets which will help me in my self reliance, self sufficiency, and sustainability – while leaving enough for the tax man… 😉
0 (today) 23 (week) 46 (month)
Damn good article explaining the banking system/fiat currency schemes in the most simple layman’s terms.
The day of reckoning will inevitably come…
Thanks Ken.
If You Listen Carefully, The Bankers Are Actually Telling Us What Is Going To Happen Next
http://theeconomiccollapseblog.com/archives/listen-carefully-bankers-actually-telling-us-going-happen-next
“Are we on the verge of a major worldwide economic downturn? Well, if recent warnings from prominent bankers all over the world are to be believed, that may be precisely what we are facing in the months ahead. ”
and if you are a believer in Biblical prophecy
the book THE HARBINGER by Jonathan Cahn is quite interesting
he is saying that another major financial collapse will occur before the end of this year,starting in September
If your not a believer in Biblical prophecy reading The Harbinger might make you one! Good read.
Good brief and succinct summation, Ken. But, alas, it is just the tip of the pyramid:
http://www.zerohedge.com/news/2015-02-09/how-wall-street-broad-daylight-took-over-us-government
and the band played on.
Yes, the article is indeed correct. Now, by law, banks are supposed to be at a 10-1 asset to loan ration, in other words,they can lend out $10 for every $1 dollar “on deposit”. However, according to my next door neighbor, who works seizing the assets of underwater banks, most banks are at least doing the 20 to 1 ration. this means we are far more screwed than even the Federal Reserve is willing to admit.
So, by his count, most banks are hopelessly under capitalized for their FDIC “insurance requirements”,. Also, the FDIC is indeed under-capitalized itself, so that in effect, only the Congress can authorize further printing of money to “insure” those deposits “lost” or at risk, in under capitalized institutions.
Gee, it’s a good time to keep cash and your real assets OUT of the banks and financial institutions.
As soon as Greece defaults and leaves the EU, the derivatives bomb will promptly go off.
The columns of smoke will be visible for miles. There will be nowhere safe to hide if you are a banker or broker, and rightfully so.
Now…..where did I leave my pitchfork??
I saw on a site where the next big financial downturn would happen during Rosh Hashannah , we will be in the time when we are expected to let the fields lay fallow with no reaping or sowing and all old debts are to be forgiven , this is the Seventh year , if ya’ll look back 2008 was seven years ago we had financial trouble , if ya’ll look beck in history 1929 was the Seventh year time , and the downfall happened during Rosh Hashannah , that time is September . Myself feel that this is Biblical Prophcy as you can see there is the proof in our previous financial problems , I can’t say how bad it might be but it does look like we might have problems , also I do not believe any good economic news that comes out of DC , I also look at and ask why has the US government bought so much Survival type food along with major food supplies bought lately , also all of the large ammo purchases , is it that they know that the financial sector is heading for a downfall ? Be prepared and ready . Keep your powder dry .
re: the G20 decision, do you know if that impacts only traditional brick & motor banks (BofA, Wells Fargo, etc)? Or if it would also include credit unions? Or non-traditional banks (Captial One, Discover Card) or something like PayPal’s “account” balance?
Would your cash be more secure in a “contractually obligated” CD vs a checking/savings account or would it not make a difference?
It’s all just 1s & 0s anyway, but I’m wondering if one is slightly better than the other (or more likely to give you a day “head start” to get your stuff out of there while everyone else is in line at the local BofA).
The sad truth is it’s near impossible for the average joe to avoid banks these days. Either their job will *only* pay them via direct deposit, &/or it’s the only way to pay bills. Few places will let you go to the location & pay via a check in person – fewer will take cash. This seems to be because either there is no local office anymore, or there is one but they’re not allowed to touch the money anymore because it’s supposed to get shipped to some head office out of state. Many companies & utilities are trying to heavily discourage me from using my paper checks (“to save the environment” or “save you a stamp” = save us money) & want to pay online only. Even my rent is forcing us to pay online (via echeck or credit card with fee) instead of check in the mail or in person with cash. Before that edict officially started we were “forced” to pay online since if you mailed the check they’d sit on their a$$ & not go to the mail box until after the 1st had passed so you’d be late in payment despite the post mark! Say goodbye your credit rating & hello to penalty fees & possible rent raise or eviction! what’s the saying? slowly raise the temperature on the frog & he won’t notice he’s being boiled?
…you’d almost think there was some conspiracy afoot to force everyone to put their money in the banks only to have a couple of zeros taken off the end be taken off overnight or to start some global digital cash tracker system where you couldn’t by or sell without it… 😉
Excellent information. People really need to take off the blinders. Our government has sold us out again. Once again I invest in precious metals,both lead and brass. Last count about 350000.
I place more value on old baseball cards than on the US dollar 🙂
What to do?
Soundest advice is get out of debt and stay out.
Buy and store food and supplies as insurance against rising prices.
Join with others that you can trust.
Pray and obey the God our nation used to trust in!
FOURTH TURNING – THE SHADOW OF CRISIS HAS NOT PASSED – PART TWO
from theburningplatform.com/
“The dominoes are beginning to fall. The initial spark in 2008 has triggered a series of unyielding responses by those in power, but further emergencies and unintended consequences juxtapose, connect and accelerate a chain reaction that will become uncontainable once a tipping point is reached. The fabric of society is tearing at points of extreme vulnerability, with depression, violence and war on the foreseeable horizon. Mr. President, the shadow of crisis has not passed. The looming shadow of crisis grows ever larger and darker by the day as this Crisis enters the most dangerous phase, where the existing social order will be swept away in a torrent of carnage and ferocious struggle. We are not a chosen people. We are not immune from dire outcomes. There are evil men wielding power and influence over our nation and their actions could lead to tragic consequences. The future course of our country hangs in the balance, as Strauss & Howe so forebodingly warned in 1997:”
Henry Ford once said this:
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
The following report from KingWorldNews.com sums up what I’ve been following and believe to be accurate as of this moment in Europe…
7 Terrifying Warnings That The Greek Disaster Is Now Set To Catapult The World Into A Global Meltdown
Here’s the most important quotes out of those articles.
Quote : The EU President just said that ‘Greece risks bankruptcy if they continue with the strategy.’
Well, Varoufakis responded, ‘We are already bankrupt.’
It’s actually refreshing to hear a finance minister admit that a country is bankrupt, especially since virtually every major Western economy, including Japan, is bankrupt. There are a lot of finance ministers who should own up to this. And isn’t it fascinating that a relatively small economy can now take a bankrupt world down?” Unquote.
Virtually every western country is bankrupt.
Society is being held together by central banks kicking the can down the road. The can is getting too big to kick.
It’s inevitable that the economic ship is going down.
NRP, Sounds like you won’t be getting the social security retirement and that I won’t be getting it much longer. I did take it early because I doubted that it would be around into my old age. I did manage to get myself mostly debt free. I still owe about 6 grand on the car. Does anyone know how that would work? If my balance is still in the black when the to big to fail does, can I still write checks to the other bank to pay for my car?
FRN are payment for debt. If there is a collapse, I plan on selling a few guns and a little food to pay off my house (debt). The loan is in dollars. When dollars are worthless, I will have my house paid off! Did I mention my wife makes bread from scratch? A loaf of bread went for hundreds of thousands of dollars in other 20th century collapses. We will be rolling 8 the worthless dough.
I have warned my family about this who believes I am living alone in the forest too long as a crazy woman. They don’t believe it. Now the banks HAVE to collapse in order for me to get my credibility back. 🙂
There are those who will believe that you are crazy for participating in a forum like this one. The guv for example. Living alone in a forest doesn’t sound all that bad to me.
the banks, and the federal reserve brought us the greatest prosperity the world has ever known. how can anyone blame the banks when we are the ones that placed ourselves in debt to them? We over burdened ourselves with easy credit and keep up with the Jone’s mentality: Is that not our own fault: Really!
@me
You may be absolutely correct, but retirement is starting to look better and better all the time. Actually been searching the “net” for that little 10 acre spot on a river to build that “last house”.
NRP
When TSHTF, expect “the gvt” to come down hard. Remember that Roosevelt in 1934 made the ownership of gold by US citizens illegal, with a $10,000 fine and 10 years in jail. http://en.wikipedia.org/wiki/Gold_Reserve_Act . You won’t be able to buy/sell gold for anything. Have a secret store of cash hidden in your basement? The gvt. will declare “old” cash illegal and not usable in commerce; new cash/vouchers will be issued weekly.
Without the average citizen’s ability to “call a cop” when he needs it, expect desperate folks to try to enter your house, steal your goods, and take your kids hostage, for what they desperately need. As soon as it becomes clear that the cops won’t come to help you, and the supermarket shelves are empty and there is no gasoline at the station and the electric, water & sewer aren’t working (look for that two or three days after SHTF), you are going to be at war with your neighbors for whatever you have stocked up. Don’t bother planting a garden, the neighbors will steal it the night before you harvest it. Ditto raising chickens, goats, etc. Beware roving, starving bandits. If you can’t control & protect what is yours, you’re sunk.
Also, forget that “hoarded” stash of food, water and guns – “the gvt” will declare Martial Law the day after SHTF and the day after that, anybody “hoarding” more than three days worth of food must voluntarily turn it in; “trucks will visit each street in Happyville USA, collecting “excess food and water”. Armed soldiers will then “examine” your house for anything that you “forgot”. Of course all guns & ammunition must be turned in “on pain of death”. A couple of homeowners shot on each street in town will soon having the toughest ex-SEAL outside on his front lawn with his arms full of shotguns and deer rifles, waiting for the next truck…
Better work through this in your minds, folks! It’s going to be really, really bad for most of us and worse, if war is declared with Islam at the same time. Look up the Book of Matthew, Chapter 24 for a preview.
Hello Wiseman, Commenters will disagree with you: saying there are not enough military and LEO’s to carry out the actions you have itemized. As you say all they need to do is make examples of a few individuals and see how the sheeple fall over themselves. Don’t think it can happen. Remember the door to door home ‘invasions’ of police during the Boston Marathon bombing.
Regarding the gold, silver, cash absolutely be out of debt. In addition remember in times of great upheaval small gold coins have been a means to bribe your way to safety. Black markets for essential goods will arise and pre-65 US coinage may allow you to make purchases. Just be sure of those you do business with are not agents of the government.
Please be aware of events around the world. The price of apathy can be death. Preparation must take into consideration even the unthinkable.
have to disagree, people will not be so willing to give in so easy
undergrounds will be formed,
“the banks, and the federal reserve brought us the greatest prosperity the world has ever known”
sure they have
Greece Says ‘No’ To Fake Bail-Outs
http://www.zerohedge.com/news/2015-02-11/greece-says-‘no’-fake-bail-outs
In the article it says the Federal Reserve prints money. This is done by the US Treasury Department through the Bureau Of Engraving And Printing.
Every US dollar in circulation is printed as Federal Reserve Notes which can be seen at the top of every US dollar.
The US Treasury is obligated to print money at the demand of the Federal Reserve.
The U.S. Treasury is NOT obligated to print money at the demand of the Federal Reserve.
The 12 Federal Reserve Banks place orders with the Comptroller of the Currency. After reviewing the requests, the Comptroller forwards them to the Bureau of Engraving and Printing. The Federal Reserve Banks then distributes the new currency for the U.S. Treasury Department.
I just woke up to realize how big of a Ponzi scheme the banking system is. It’s a debt driven society perpetrated by the federal reserve. It’s design is to keep the government and individuals in debt forever. So the government gets money from the federal reserve that it has to pay back with interest, then in order to pay back the original interest it has to borrow more. Sounds just like the payday loan schemes. Then there is fractional banking so the banks lend out money it don’t have.
I say F the elite and let WE THE PEOPLE withdraw the money from the banks and watch this diseased corrupt temple fall to its knees. Since 90% of the money in the bank actually does not exist. And NO there will be no borrowing money to bail out the banks for money that never existed. As if no I am filing chapter 7 and will never go in debt again.