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The blatant lie at the core of banking: "You can get your money back any time." The truth: You can't.
2023 Mar 13, 1:51pm 8,502 views 66 comments
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65
SunnyvaleCA
2023 Mar 17, 3:59pm
Mish Shedlock is proposing a system where people could agree to not get interest payments, but otherwise their banking would be free (no fees) and safe (money not gambled with by the bank): https://mishtalk.com/economics/the-perfect-solution-to-the-banking-crisis-is-to-make-a-truly-safe-bank
66
Patrick
2023 Mar 17, 5:20pm
Patrick
2023 Mar 17, 5:20pm
Mish used to comment on patrick.net: https://patrick.net/user/mish
I would agree to that, but the banks won't like it because it limits their profits. They don't care about risk because they know that taxpayers are on the hook for their losses.
Specifically, we need a bank that puts 100% of its assets in overnight treasuries and makes zero loans. The bank would not need any loan officers or many operational personnel for obvious reasons. There would be no need for FDIC guarantees because there would be zero risk of a run and zero risk of losses. We can still keep the FDIC term in place, but realistically it would not be needed. In essence, we would create a 100% reserve bank.
Such a bank might pay one percentage point less than the Fed 's overnight rate for safekeeping. If the overnight rate fell below 1 percent, the bank would charge a fee for safekeeping. The bank could also do term deposits at a slight discount to corresponding treasury yields. Depositors would be required to hold assets to term.
To prevent runs on existing banks right, we would let every bank participate in this offering. Customers would have a chance to place their deposits into safekeeping accounts at existing banks.
Bank Lending
To make loans, I propose banks would have to attract investment money instead of lending money into existence. They would do so by offering higher than market interest rates on term deposits, but those deposits would not be guaranteed.
As an added benefit, this setup would end fractional reserve lending. We would have a full reserve system, unfortunately one that is not backed by gold, but it would be a huge step in the right direction.
The immediate economic reaction would likely be contractionary, but that seems to be what the Fed wants now anyway to rein in inflation.
I would agree to that, but the banks won't like it because it limits their profits. They don't care about risk because they know that taxpayers are on the hook for their losses.
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Banks lend out almost all of your money to earn interest, duh. Those loans are not for 30 minutes. They often for 30 years.
The bank can't get all depositors' money back instantly. It's impossible. And yet banks promise to do the impossible, knowing full well that they cannot.
When you deposit money in a bank, you are making an unsecured loan to the bank. The bank does not put up any collateral that you can keep, unlike the situation when you borrow money from the bank.
The FDIC exists to reassure people that they can get at least the first $250K back (eventually, not instantly) even if the bank defaults. But even the FDIC has less than 2% of bank assets. If there is a run on more than 2% of FDIC insured deposits, the FDIC itself will fail. They are also lying.
Why the lies? Because the more money the bank can lend out, the more interest it gets. Profit.
The toxxine mandates proved beyond any doubt that the CDC/FDA/NIH are all run by the pharma mafia in the sole interest of that mafia, without regard to public health.
Why would we think banking is any different?
The answer is to openly and clearly mark all deposits as UNSECURED LOANS TO BANKS so that everyone is reminded of this all the time.
https://patrick.net/post/1303173/2017-02-19-patrick-s-platform