* * * Understanding The Banking System - How to Decipher an Honest Bank * * *
Understanding The Banking SystemHow to Decipher an Honest Bank
There have been many explanations of the banking system seeking to make it easy to understand. While I do not wish to demean these explanations, I would like to try my hand at explaining the banking system so that even a child can understand it.
There are natural laws of economics that we must give heed to, or we will pay the consequences, and banking is no exception. We all labor to earn a profit and make money for a living by doing so. It comes down to trading our labor for payment therefrom. This is logic so very easy to understand. However, when we seek to change this elementary rule, we naturally are headed for disaster.
Would you pay your boss just so you can say you have a job? Absolutely not! That would be insane. We must apply this very same logic to your local bank.
Why do seek out the services of a bank anyway? The theory is that you do not want to maintain the risk of keeping your wealth in your home under your mattress, or in the ground in your backyard. Someone may break into your home while you are away and steal all your wealth, therefore, you would rather hire the services of a bank who has a very secure vault to keep your money. After all, banks have alarms and security guards to keep your valuables safe.
So we deem the services of hiring a bank beneficial to our own interests. So economic logic tells us that you owe your bank for his services of keeping your wealth safe. If a bank were honest, he might say that it will cost you 5% of your wealth deposited with him for his services. This would be an honest payment for an honest service, which makes honest economic sense.
However, this is not the way the "banking" system works. Instead of charging you his services, he offers to pay you to keep your money safe. Such defies economic sense.
Suppose you are my next door neighbor and I come over to your house and offer you $15 if I can cut your lawn. You would wonder if I had slipped a cog. After like manner, suppose I offered you $10 an hour if I could come to your house and wash your dishes and clean your house.
This is precisely the same logic that runs our entire banking system when they offer you 5% of your deposit to keep your money safe. You say, "This doesn't make sense." No it doesn't. But this is the explanation of our banking system made easy. Why are the banks willing to pay you for their services of keeping your money safe? There can be only one answer, and that is, they do not keep your money safe. They gamble with it. They are involved in risk-taking with your money, and hoping to win on your buck without you getting a cut of the win, if there is a win.
I don't know about you, but if I am going to lay my money on the gambling table, I would rather be present and do it myself, and not being paid a measly 5% commission on the risk of my own money. After all, if the banks win, they are going to keep 100% of the winnings, and not share any of that with me. They are only on the hook for the 5% they agreed to pay you. But what if they lose on the risk? They will just take the other guy's money whom they also agreed to pay 5% and pay you just to shut you up, and then hope the other guy will not come into the bank wanting his money. What the banks fear worse is a run on the bank, i.e., everyone wants their money at the same time, because they don't have it.
In other words, the banks exist on a giant Ponzi scheme. They are all effectually involved in a Bernie Madoff type deal. They are all alright so long a not everyone comes into the banks and want their money out.
Banks are only required maintain a very small percentage on the deposits to cover those who want to make a withdrawal. That amount is approximately only 3%. This means that banks they can only account for $3 for every $100 you placed in their banks. It is a shell game which can go on forever until they are made to turn up all three shells and reveal what is under them.
Allow me to make another illustration of what is going on in the banking system. I have a vehicle storage yard to keep people's vehicles safe. It would make sense if I charged each of my customers $60 per month for them to store their vehicles in my storage lot. But applying the above banking principles to this storage lot, I might offer to pay each customer who stores their vehicle in my lot $5 per month. You can't believe the deal I am offering to keep your vehicle safe. It just sounds to good to be true. But then you you investigate what is really going on.
I am leasing out everyone's vehicle to strangers and charging them $20 per day, plus mileage, to use your vehicle, and placing all that money in my pocket. Every month I reach into my pocket and pull out a $5 bill and give it to each customer for keeping their vehicle safe. This is what is going on within the banking industry.
We just experienced a major banking bailout to save the banks. What happened? The banks took risks with your money and lost. The debt came due and they did not have the money you placed in their trust, and therefore the entire banking fraud was about to revealed and collapse.
But due to the generosity of your U.S. Senators and your Congressmen, they voted to bail out (cover) for the banks fraud with your money, otherwise known as that which you entrusted to your public servants in what is commonly called taxes.
Of course, this money given to the bankers to cover their risk, is going to have to be replaced. And just who is going to have to replace it? Not the bankers. They gave themselves bonuses of millions and even billions. You, your children, and your children's children are on the hook for the gambling losses of these bankers, which will last for many years to come. Meanwhile, these bankers are home free living high on the hog.
With this information, you know can understand our current banking system. But I have one last tip to share with you. I wish explain how you can to identify an honest banker. An honest banker will tell you that his security services of protecting your money is going to cost you. If you come upon a banker who is willing to pay you to keep your money safe, grab your money and run. Find one who is going to charge you for his services.