Blog/USA Current Events
Posted May 5, 2015 by Martin Armstrong
A lot of people are jumping on board, claiming the problem is fractional banking and the private creation of money, which is somehow wrong, should be handed to government. Money has ALWAYS been private, for it is an agreement between two people to exchange whatever for some common item everyone else agrees to accept. That has been everything from seashells to gold. It has always been the people who decide. Even paper currency cannot circulate without the consent of the people.
Fractional banking has been around for hundreds of years. So why is it only now that this is the great evil? The answer is simply – it is a diversion and not the problem. Fractional banking is taking $1 in deposits and lending it out many times. The new rage is to tout this as the creation of money by banks. Yet banks cannot create this type of money to pay their bills or taxes, because it is not really creating money out of thin air – it is merely leverage.
Being dispassionate always leads to the answer. If fractional banking was the problem, then why do banks have well over $2 trillion parked at the Fed in EXCESS RESERVES? That means, they could lend that money out multiple times and leverage it into even $10 trillion. So why are they not lending?
Welcome to the dawn of TRANSACTIONAL BANKING. If I were to be assassinated for something, it would be for trying to refocus the public’s attention to this new development that is post-1991. Robert Rubin of Goldman Sachs sold the idea of TRANSACTIONAL BANKING, claiming it would make the banks stronger, for they would generate the loans, but then package them and sell them to someone else – i.e. 2007. This was the pitch to repeal Glass Steagall in 1999. If the banks didn’t have these loans on their books, then they would not have the risk when the business cycle turned down. That meant the END OF FRACTIONAL BANKING.
The banks would rather trade with your money (repeal of the Volcker Rule) than lend money out to create jobs (Fractional Banking). So while they have no problem if the people, as is the case in Iceland, demand that the credit decisions be handed to government because from their perspective, they do not give a shit. This is now about trading, not lending.
Of course, the small regional banks will be wiped out in this manner. The big banks that profit from proprietary trading are the ones behind this disinformation. End fractional banking and you will not solve any problems, instead you’re more likely to make matters worse. If we do not deal with the real issue, the wrongful repeal of Glass-Steagall, then we are only going to make the future darker, not more secure.
JPMorgan Chase wants to charge fees to keep money in your account. They have become traders, first and foremost. Open your eyes and pick up the rug. That is where the dirt hides.
Tags: fractional banking, Glass Steagall, transactional banking