The Destructive Force Of Bank Credit

By Alasdair Macleod – Re-Blogged From GoldMoney

Commentators routinely confuse the deflationary effects of a contraction of bank credit with the inflationary effects of central bank policies designed to offset it. Central banks always ensure their stimulus is greater, so inflation, not deflation, is always the outcome.

In order to understand bank credit, we must enter the mind of a banker and understand how it is created, why it is expanded and why expansion is always followed by a sharp contraction.

But we have now moved on from a simplistic credit cycle model, given the global economy was already facing a tendency for bank credit to contract before the coronavirus drove supply chains into the greatest global payment crisis in history. The problem is now so large that to maintain both economic stability and price levels for financial assets the central banks, led by the Fed, will have to issue so much base currency that fiat currencies will become almost worthless.

Continue reading

Ancient Dollars And Gold Bullion

By Gary Christenson – Re-Blogged From Gold Eagle

Consumer price inflation is real. It sneaks into every facet of life. Bags of coffee shrink from 16 ounces to 12 ounces and then to 10 ounces. “Shrinkflation is policy. That Snickers candy bar is smaller but costs the same or more.

But don’t blame the candy industry, coffee distributors or automobile manufacturers. Fiat currencies create the problems.

Continue reading

Safety In Banking

By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com

There was a time when banks acted as custodians of their customers’ money. Indeed, keeping a person’s money and using it as if it belonged to you without their agreement is fraud in common law. A banking license legally exempts banks from charges of criminality in pursuing the normal course of fractional reserve banking business, by making it clear that you, the customer, agree to being a creditor of the bank instead of the bank acting as custodian for your money.

Continue reading

Neutralizing the Bank Free Reserves Time Bomb

cropped-bob-shapiro.jpg   By Bob Shapiro

The US Money Supply is about to soar. Since general price levels in the US Economy, as measured by the CPI for example, are a direct consequence of Money Supply changes, Americans are in for a bout of high inflation over the next few years.

To understand why, we must look at one way that the FED works. The FED tries to contol the Money Supply by influencing Interest Rates. It does this mainly by buying and selling various securities, mainly short term US Treasuries.

If the FED buys these Treasuries, using newly created electronic Dollars, the Treasuries go on its balance sheet and the new Dollars make their way onto Bank balance sheets. New “demand” for the Treasuries push up their price, which causes the effective interest they pay to go down.

Continue reading

Could Zero/Negative Interest Rates Be The End Of The Fractional Banking System

With negative interest rates deposit holders might opt for paper money (notes) instead of digital money (digital wallet, bank account)! Which could bring down the fractional banking system because as we know of every $100 you deposit in the bank $90 is subsequently loaned on. US Federal Reserve sets a Required Reserve Ratio of 10%, but applies this only to deposits by individuals! Banks have no reserve requirement at all for deposits by companies! Go figure.

Anyway the Required Reserve Ratio of 10% means that only a fraction or $10 of the $100 you have deposited at the bank is available for cash withdrawal. Your $90 that is loaned

Continue reading

Markets Restrain Bank Fraud, But Central Banks Enable It

Re-Blogged From Silver-Phoenix500.com – By Frank Shostak

Originally, paper money was not regarded as money but merely as a representation of a commodity (namely, gold). Various paper certificates represented claims on gold stored with the banks. Holders of paper certificates could convert them into gold whenever they deemed necessary. Because people found it more convenient to use paper certificates to exchange for goods and services, these certificates came to be regarded as money.

Continue reading