"Paper it Over" In an American Bank Run The Fed Would Simply Print Enough Cash To Bail Out Any Depositors Who Want It: Hyper Inflation.
If banks were legitimate, they would be able to meet their contractual obligations , one of which is to ‘pay you, on demand’ your money.
Tom Dennen
If they couldn’t pay you, they would be required to go under and liquidate, just like any other business that could not pay its debts.
(Medieval Plague, the Black “Death”, coming soon to a bank near you?)
If you knew in advance that banks could never pay you without the Fed’s pieces of inflationary paper, you would not invest in them, just as you would not invest in any company that had no assets except paper ‘promises’.
It would be instructive to see how many banks would survive if the massive governmental props were finally taken away.
For private enterprise only works in a business that is legitimate and useful, where needs are being fulfilled. It is impossible to “insure” a firm, even less so an industry, that is inherently insolvent. Fractional reserve banks, being inherently insolvent, are uninsurable.
Only the federal government – and not the states or private firms – can print legal tender dollars. Everyone knows that, in case of a bank run, the U.S. Treasury would simply order the Fed to print enough cash to bail out any depositors who want it.
The Fed has the unlimited power to print dollars, and it is this unlimited power to inflate that stands behind the current fractional reserve banking system.
Putting an end to inflation requires not only the abolition of the Fed but also the abolition of the FDIC and FSLIC.
At long last, banks would be treated like any firm in any other industry.
With profound apologies to Murray Rothbard: His source article here
For when the paper becomes worthless?
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Whistler Blowers, Insiders
I urge every American to to do 4 things if you truly are Americans!
(1) call or write your congressman and demand Department of homeland security be made to turn over 2 billion hollow point rounds and 2700 mraps to the department of defense and or divided among the 50 states national guards units. And if they REFUSE defund them which will close the program
(2) This is an important one! To fight the rothchild banking system which is the hand of satans power on earth do this! Remove your savings and checking accounts from every bank even down to the local credit union and pay with cash or money order! By keeping your money in the banks your supporting the banking system which is all controlled by the rothchild federal reserve system the hand of satan on earth. You will loose every dime in savings and checking anyway when they collapse the stock market and dollar before this year 2013 runs out! Just look what they did to Cyprus and that’s nothing to what’s comming!
(3) remove all your investments from the stock market and investment plans such as 401k plans, bonds any money you have invested get it out and take the tax loss or you will loose it! This is going to be the biggest theft in human history! Why do you think Obama and his illuminati pals has bought 2 billion rounds for department of homeland security and also 2700 mraps also! They have to protect themselves and get away with the heist!
(4) stock up immediately on 1 year supply of food for your family and they are Mormon websites that can help you real quickly on how to do this! Your food storage will not go bad in 10 years if you do the Mormon method food storage!
Good luck folks we have entered the biblical tribulation period! GOD Speed JESUS!
The Bubble thats coming in about a year will wipe out any sort of free market and you will get whatever Obamaville is willing to give ya if you were a loyal servant on record . Servitude comes with the collapse of Liberty so get ready . This story tells how it will start the domino effect of the Collapse of Liberty in the USA and For the First Time Since WW2 and the formation of the dollar as the worlds trade currency will be ended in this Bubble collapse .
The Federal Reserve Exit Strategy may be the Confiscation strategy of Euros out of banks in the EU as there is now talk of this being a Good Model that Cyrus has Introduced as their solution to their financial crisis ….. This will send the EU into a Depression and Hyper Inflation in the USA and the BRICS will have a Opportunity to divide the EU and USA with a Financial alternative to Join the Yuan Bond Market ending the Dollar as worlds Trade currency .
http://money.msn.com/investing/europes-crisis-buys-time-for-fed?page=2
“ But the right crisis here or there could do the job very nicely, thank you. If another turn of the eurozone debt crisis sends the euro back down against the dollar and produces another flight to safety that sees bond buyers snapping up U.S. Treasurys, that would be exactly the kind of demand increase the Fed needs”.
Surely your kidding —- they bail out banks ——————— there is no need to bailout depositors……………but if Euro gets away with it—— don’t think they won’t do it here.
Yes, they will.
I’m running this from Monday as a story when it’s perfectly honed…. Meantime:
The Simple Formula That has Wrecked Two Civilizations, Going on Three…
If You Ask Your Bank for Your Money Tomorrow, You Will Not Get it. Cyprus? No. Downtown USA.
The Case Against the Fed, Chapter 8, “Problems for the Fractional-Reserve Banker: Insolvency.” By Murray Rothbard. (Slightly edited for publication as a separate article – t.d.)
Today’s banks are insolvent by nature: if their customers lose confidence in their holdings and decide to cash out, they cannot.
Any loss of confidence is always fatal because, by the very nature of fractional-reserve banking, no bank can honor all of its contracts.
A bank has two “customers”: people who make the initial deposit of cash and those who borrow the bank’s issue of warehouse receipts against its deposits or ‘reserves’.
The fractional-reserve process works because the law treats a deposit of cash in a bank as credit rather than a ‘bailment’ or a loan to the bank.
A transfer of custody, not ownership.
A deposit is a loan, and you expect a return of interest on it.
Assume that I set up a Rothbard Bank, which adheres strictly to a 100-percent reserve policy. Suppose that R20,000 is deposited in the bank. Then, abstracting from my capital and other assets of the bank, its balance sheet will look like this:
Assets Equity & Liabilities
CASH Warehouse Receipts to Cash
R20 000 R 20 000
So long as Rothbard Bank receipts are treated by the market as equivalent to cash, and they function as such, the receipts will work as cash. So if Mr Ndebele has deposited R3,000 at the Rothbard Bank, buys a painting from an art gallery and pays for it with his deposit receipt of R3,000, it’s valid.
The art gallery need not bother redeeming the receipt for cash, trusting its promised value.
So neither the cash itself nor the bank’s receipt for it circulates as money. As long as deposit banks adhere strictly to 100-percent reserve banking, there is also no increase in the money supply; only the form in which the money circulates changes. Thus, if there are R2 million of cash existing in a society, and people deposit R1.2 million in deposit banks, then the total of R2 million of money remains the same; the only difference is that R800,000 will continue to be cash, whereas the remaining R1.2 million will circulate as warehouse receipts to the cash.
So, the Rothbard Deposit Bank decides to create R15,000 in warehouse receipts, unbacked by cash, but redeemable on demand in cash, and lends them out with interest in various loans or purchases of securities. Now the Rothbard Bank’s balance sheet looks like this:
Assets Equity & Liabilities
CASH Warehouse Receipts to Cash
R20 000 R 35 000 (plus extra interest on R15 000)
IOUs from Debtors:
R15 000 (plus interest)
TOTAL TOTAL:
R35 000 R35 000
Something very different has happened in a bank’s lending operation. There is an increase in warehouse receipts circulating as money, and a relative decline in the use of cash, but in this case there has also been a total increase in the supply of money because warehouse receipts are circulating that are redeemable in cash but not fully backed by cash.
Thus, if the society starts with R800,000 circulating as cash and R1.2 million circulating as warehouse receipts, as in the previous example, and the banks issue another R1.7 million in ‘fractional’ warehouse receipts, the total money supply will increase from R2 million to R3.7 million, of which R800,000 will still be in cash, with R2.9 million now in warehouse receipts, of which only R1.2 million is backed by actual cash in the banks.
Suppose that the Rothbard Deposit Bank decides to make a quick killing and go all-out: upon a cash reserve of R20,000, decides to print unbacked warehouse receipts of R10,000,000, lending them out at interest to various borrowers?
Suppose it lends out these receipts to the Ace Construction Company, which is not going to borrow money and pay interest on it without using it as quickly as possible and so pays out these receipts in exchange for various goods and services. If those who receive the receipts from Ace are all customers of the Rothbard Bank, then all is fine; the receipts are simply passed back and forth from one of the Rothbard Bank’s customers to another.
But suppose, instead, that the receipts go to people who are not customers of the Rothbard Bank, or not bank customers at all, who pitch up at the Rothbard Bank demanding R10 000 000 when there’s only R20 000 there?
Obviously an abuse of trust has occurred.
Have banks yielded to this temptation? Do they create warehouse receipts that exceed cash on hand, and lend these receipts out?
Yes. And the strictly separate functions of loan and deposit banking, of ownership and custody become muddled; the deposit trust is violated and the deposit contract cannot be fulfilled if all the “creditors” try to redeem their claims on the ‘extra’ warehouse receipts at the same time.
That is fractional-reserve banking, a discovery made over three thousand years ago and every time ir reared its head, it was crushed and its perpetrators exiled, as from Rome around AD 27 and from England in 1285… or jailed as in Iceland last year, the only nation today with the courage to do so.
Once embarked upon, there is no reason – other than a run’s exposure of insolvency – not to increase the amount of receipts, but trust must also remain for the system to work – and that only dissolves when the amount of fractional lending is exposed or gets out of hand as it has now… and not only in Cyprus.