WHY SAVERS ARE LOSERS AND WHERE IS YOUR MONEY?

Preface: I wrote this article two years ago under the nickname "Stupid Cactus", therefore I claim all rights. It is not copy of a third party and please treat is as such!

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How much of your saved currency would you get, if everybody was going to the bank today and withdraw all of the funds?

They say, that money doesn’t grow on trees. But the truth is, that the modern banking system creates currency far faster than trees can grow. Most of the people have no clue how currency is created. Economists and bankers makes it sound so complex that people think they can’t understand it.

It all starts when politicians promising that after the election they provide more free stuff than their opponent. But there is nothing for free. Governments and politicians always spend more than their country’s income. This is called a deficit spending.

Sure thing, it has to be paid off. Therefore, the treasury borrows currency inn order to issue the bonds. Bonds are nothing more than IOU’s. It is simply a piece of paper with numbers printed on. A promise to pay an interest at predetermined intervals and returns the principal on the maturity date, which ending that loan.

What you need to understand is that the treasury bonds are the national debt. This glorified IOU’s will be paid back by you and me, our kids along with next generations — all through taxation.

our government just keep borrowing into existence and never pays a dime. Therefore, when the government issues the bond, it steals prosperity out of the future so it can spend it today.

Are you frustrated already? There is more…
To quote from the Boston Federal Reserve:

When you or I write a check there must be sufficient funds in our account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.

The Fed then hands those checks to the banks and at this point currency spring into existence. What is that check you may ask? It is also IOU. You just handle it to your banker in exchange for cash. So, the bank is simply used as a middle man to exchange the IOU’s between the Treasury and the Federal Reserve.

Before Nixon took us off the gold standard in 1971, you could go to the bank and exchange your currency for a piece of gold. Today, however, the currency is only a claim check, receipt on IOU.

So, it is really nothing but a supply of numbers.
And now this may be a shock to you, but when you deposit the currency with the bank, you not actually depositing it into account to be safely held in trust for you. Instead, you are loaning to the bank your currency.

Bank can do anything with that cash. This includes gambling in the stock market and loaning it out. At the profit, of course!

And here the Fractional Reserve Landing coming into play. It is exactly what it says. The banks are allowed to reserve only a fraction of your deposit and loan the rest out.

Reserve ratios may vary, but it is safe to pick 10% reserve ratio as an example. If you deposit $100 in your account, the bank can legally take $90 of it and loan it out without telling you. The bank must hold $10 of your deposit in reserve, just in case, you would want some of it.

These reserves are called vault cash. So why is your bank account still says that you own $100? Because the bank left IOU’s created, called bank credit in its place.

Let’s see it black and white from Federal Reserve Bank of New York:

Commercial banks create check-book money whenever they grant a loan, simply by adding new deposit dollars in accounts on their books in exchange for a borrower’s IOU.

So now, after you deposited your $100, there is a $190 in existence!

Now, the reason why people are taking loans is to buy something. They are going to buy a house, car or pay for their holiday. So, the borrower takes the $90 which the bank loaned to him from your account. He pays the seller of the item, then the seller deposit that currency in his account, and his bank loans 90% of that. Now there is $271 in existence.

This process repeats and repeats. The result is that the expansion of the currency supply by the banks is far greater than an example given here.

SO, TO ANSWER THE MAIN QUESTION: HOW MUCH OF YOUR SAVED CURRENCY WOULD YOU GET, IF EVERYBODY WAS GOING TO THE BANK TODAY AND WITHDRAW ALL OF THE FUNDS?

Today, for every dollar that you have in the bank there is actually 0.00061 dollars available. In other words, there are 6 cents for every $100 dollar of deposit that you have at the bank. No matter the country or currency. All of them works in the same fashion.

So next time, when you plan to deposit cash in your bank account — think again.

IRONICALLY, IT WOULD MAKE MORE SENSE TO KEEP THAT CASH UNDER YOUR PILLOW. I WOULD RATHER INVEST.