Fractional Reserve Banking Is Pure Fraud, Part IV by Jeff Nielson, Sprott Money
Part I of this series explained how most of what we call “banking,” and in particular “fractional reserve banking,” is inherently criminal and fraudulent. What the banks call “business” would be a crime if perpetrated by any other entity in our societies.
Part II of this series noted how after the Big Banks blew up our financial system in 2008 (with their reckless gambling and systemic frauds), both the Big Banks and our corrupt governments promised “never again.” They agreed to reduce the insane “leverage ratio” (i.e. fraud ratio) of the Big Banks back to quasi-reasonable proportions.
What they actually did was the exact opposite. Instead of requiring more than the microscopic capital reserves of the old “Basel II” rules, the new “Basel III” rules effectively allowed this financial crime syndicate to operate with near-zero reserves. “Fractional reserve” fraud has now become no-reserve fraud.
For much of the past decade, Crispin Odey has been waiting for inflation to rear its ugly head. The fund manager has been positioned to take advantage of rising prices in his flagship hedge fund, the Odey European Fund, and has been trying to warn his investors about the risks of inflation through his annual Read More
Why would the tentacles of this financial consortium even want to operate with virtually zero reserves? As they march our markets higher and then lower, these corrupt organizations will absorb some losses onto their own balance sheets. The response of the Big Bank crime syndicate is simple: “who needs reserves when we can steal as much as we want , any time we want?”
What happens when a Big Bank suffers a supposed “catastrophic loss?” It runs crying to one of our corrupt governments for a bail out. Of course, the banks have already looted every penny out of our public treasuries, with the $10s of TRILLIONS they extorted from our governments at the end of 2008.
Now, when the banksters want to steal capital to cover the losses from their gambling and illegal frauds, they demand a bail- in. This is another example of their euphemistic liar-language, which simply means taking other peoples’ property (to which they have no legal claim, whatsoever) in order to cover their own losses.
Part III of this series pointed out the obvious truth that we don’t need any of this. Fractional reserve fraud is not a necessary tool of economic development. Rather, it is a reckless short-cut, guaranteed to sabotage our economic development over the longer term.
Today, attempting to produce a slightly higher rate of growth (through the borrowed capital of fractional reserve fraud) comes with a guaranteed cost: it will lead to lower growth when either the debts must be repaid or the whole system simply implodes ( i.e. Debt Jubilee ). When we attempt to “have more” for ourselves today, we do so by mortgaging the future of our children.
At this point, many readers may be thinking to themselves that it can’t get any worse. We have a financial crime syndicate which sits legally above our governments, dictating the rules of a “system” (i.e. organized crime) which transforms our entire markets and economies into a playground of crime. Here, the criminals fleece their victims with reckless, rapacious impunity because they know they will never be punished – no matter how many times they are caught breaking laws.
Worse still, with a “leverage ratio” (fraud ratio) which is becoming limitless, this crime syndicate can conjure, out of thin air, near-infinite quantities of funny-money to fuel their financial crimes. We see this demonstrated with what bankers call “the derivatives market” : a private, illegal, unregulated, crooked casino, where the quantum of the bankers’ gambling exceeds twenty times the size of the entire, global economy.
However, we still have not seen the pinnacle of this criminalized, financial insanity. In order to make this corrupted system infinitely worse, our governments have allowed the Federal Reserve racketeers to impose an additional element of infinite fraud: 0% interest rates .
There is no such thing as “a 0% loan.” Just ask the Tax Man. Try giving or receiving any 0% loans in your own financial affairs, and before the ink is dry on your virtual tax return, the tax enforcers will be knocking on your door.
They will tell you that your 0% loan is a sham transaction, prima facie fraud. They will tell you that the transaction is legally null-and-void, and that they will treat the so-called “loan” as what it really is: a gift. Yet in the ultra-fraudulent realm of our financial system, once again what is totally illegal for ourselves is just “business as usual” for the One Bank .
When the Federal Reserve claims to have “loaned” countless billions or trillions to the One Bank (we don’t know how much, because it refuses to fully disclose these activities), it has actually been giving these billions/trillions to the crime syndicate. It is free money, in every sense of the word.
Meanwhile, when our local or provincial/state governments need financing to help people survive the economic penury inflicted upon them by the One Bank, every penny of their money is always borrowed – really borrowed, at a real rate of interest.
How do these governments pay the ever-increasing interest payments on this debt? More and more, we see these governments do so by selling off assets: the assets of the People. Generally it is our best assets, and generally the asset-sales are at pennies on the dollar, because these governments are desperate. It is a distressed liquidation .
Who is the receiver of the ever-growing interest payments on these debts? The One Bank. And who is the buyer of most of these choice assets? The One Bank. It buys the best assets of the people (at pennies on the dollar) with its mountains of free funny-money, which starts with the 0% gifts from the Federal Reserve. This is a violent economic violation.
However, we still haven’t reached the culmination of these fraudulent, financial atrocities, which is combining “fractional reserve” fraud with “0% interest” fraud. This is best illustrated through a simple numerical example. We’ll pretend the system is less-fraudulent than it is, and pretend there are less of these Big Bank tentacles than there are, in order to maintain more comprehensible numbers.
Let’s start with the $800 billion or so in new, official funny-money which the Federal Reserve was cranking out – each year – between 2010 and 2014. Every penny of this money was handed, for free, to the One Bank.
Let’s assume that there are only four Big Bank tentacles in this crime syndicate (in reality, there are dozens). Let’s assume that the actual leverage ratio/fraud ratio is the most stringent number officially on the books in the “Basel III” rules: 16:1 (rather than the de facto no-reserve fraud which these Big Banks are actually allowed to perpetrate). To make it even simpler, let’s assume that the Fed hands its entire free of $800 billion to a single tentacle: Big Bank A.
What does Big Bank A do with that $800 billion, all free money, from its 0% loan? It “loans” all of that money at 0% to Big Bank B, except multiplied by the 16:1 fraud-ratio of our fractional reserve system. Suddenly, the mere $800 billion in free crime syndicate money becomes $12.8 trillion in the hands of tentacle B. All loaned at 0%; all free.
What does Big Bank B do with its free windfall of $12.8 trillion? That’s right, it loans it all to Big Bank C, at 0%, except once again multiplied by the 16:1 fraud ratio. Now the $12.8 trillion becomes $204.8 trillion, but why stop there? Big Bank C then loans its $204.8 trillion to Big Bank D at 0%, again multiplied by the 16:1 ratio. What began as a paltry $800 billion of free money in the hands of Big Bank tentacle A has become an insane mountain of free, conjured paper totaling $3.3768 QUADRILLION (or $3,376.8 trillion), in the hands of Big Bank D.
Remember that this ocean of funny-money, in the hands of history’s most-rapacious crime syndicate, would come from just one year of Fed money-printing. This was the subject of a commentary in April called The Multi-Quadrillion Dollar 0% Interest Scam . That commentary drew little reaction at the time, showing how numb people have grown to the rapacious frauds of the One Bank.
As a reminder; the numbers used in the previous hypothetical example were not real. In reality, the One Bank is not comprised of a mere four Big Bank tentacles, but rather dozens. In reality, the current fraud-ratio in our “fractional reserve” system is not 16:1, but rather near infinity. Thus the reality is infinite mountains of free, fraudulent, funny-money.
We have a word for currency conjured out of fraud: counterfeit. Our official “fractional reserve” monetary system, with official 0% lending rates, essentially zero regulation, and literally zero law enforcement is a system of institutionalized counterfeiting . The crime syndicate that sits atop the system is legally allowed to counterfeit all the money it could ever desire to finance its Empire of Crime.
Naturally, conjuring infinite quantities of funny-money can have only one outcome: hyperinflation. This is the near-infinite dilution of a currency, as its corresponding exchange rate plummets to zero. Thus the One Bank isn’t finished. It has declared an unofficial War on Cash , pressuring its puppet governments to “ban cash” in our (supposedly) “free societies.”
In our current system of fraud, we voluntarily “deposit” our wealth into the hands of criminals. They then use that wealth as a financial tool to control and mistreat us, and then they simply steal that wealth. Instead, the One Bank wants a system of absolute coercion. We would all be forced to place all of our wealth into the hands of history’s most-rapacious thieves – except for what we (prudently) protect in the form of “hard assets,” such as gold and silver.
Whatever wealth we choose to shelter in history’s most reliable wealth-preservation vehicles is immune to the banksters’ rapacious, paper system of infinite fraud and infinite theft. This is why the One Bank relentlessly attacks the precious metals market. It attacks these markets with relentless (and illegal) price-suppression. It attacks these markets with relentless (and absurd) propaganda, attempting to discredit these wealth-preservation vehicles to an unknowing general public.
We live in a system of infinite financial fraud: the fraud of “fractional reserve banking,” multiplied by the fraud of 0% lending. The goal of this institutionalized fraud is nothing less than the theft of all of our wealth. The only answer to such infinite fraud is the absolute protection afforded by history’s ultimate safe havens: gold and silver.
A fractional reserve fraud system, in any form, could never be justified in any legitimate society. However, we have today something much, much worse than mere “fractional reserve banking.” Instead, we have a system of infinite debt, infinite gambling, infinite counterfeiting, infinite fraud, and infinite crime. A criminal bankers’ paradise.