Blog 40

2009-July-17

Overheard At The Bar

Banker

Want to make lots of money for virtually no work and minimal outlay?
Want 100% return on your reserves per annum?
Want someone else to put up all the cash?

Punter

Eh?

Banker

No, you don't have to rob a bank, all you have to do is set one up.

First acquire a suitable building, preferable high rise and made of glass and stainless steel, now install counters, all the latest electronic equipment, hire an automaton staff, a few computers and  and stick a sign outside that says"
 "The Deposit Your Money Here Safely Bank". [sic]

Next, contact your national central bank and apply to join the International Cartel of Bankers [ICB]. Now, for every dollar the public gives you for safe keeping you can lend it back to the public and charge 10% interest per annum.

You now give the depositor 2% interest and pocket a net profit of 8% per annum.

Punter

Yes, that's all very well, but you said I could make 100%.

Banker

Ah, well here comes the clever bit.

Because you're now a member of the ICB club you can now lend to the public an amount up to ten times the amount you have received in deposits from the public, in other words 10 times more than your total reserves.

Punter

But how can that be possible? Sounds like it must be illegal.

Banker

No it's not illegal and not only is it possible it's encouraged by central banks and believe it or not it's also condoned by Governments. It's called 'Fractional Reserve Banking' and it really is a license to 'print money'.

Punter You mean you actually 'print' money?
Banker

No, no, that's just a figure of speech, we don't actually print money, the additional money you lend doesn't actually physically exist.

The checks and credit card transactions your debtors make against the loans you grant them end up being processed by other members of the ICB. Conversely, some checks and credit card transactions issued on loans set up by other banks end up with you, so at the end of each rolling accounting period all you have to do is swap checks and resolve electronic balances.

No actual money exchanges hands, you just start receiving real money plus interest from your debtors, for the most part on money that never existed. As long as people keep borrowing and spending it's like a giant 'funny money' merry-go-round that spins off 'real money' that drops straight in to your coffers, ad infinitum.

It's one of several ways we bankers have of stripping the real wealth from those who create it. And the best part about it is this; they [the gullible public] are all so busy creating wealth they don't see, understand or even care what we're up to. And because the amount of additional money lent is ten times more than the amount deposited, you net 10% interest on an amount that's ten times more than what you have in deposit receipts [your total reserves] each and every year.

In other words, for an absolutely minimal outlay - just rented bank premises, computers, software and staff costs - you can set yourself up to receive an annual income equal to the amount of money deposited at your bank, in other words 100% per annum on money that's provided in the first place by your depositors.

It's nothing short of exquisite.

Punter

It's outstanding!

But wouldn't that cause intrinsic inflation on all goods and services because an element of interest payments would be an integral part of every product cost? It would be over and above the 'standard' inflation created by government as their own final top-up tax. It would drastically reduce the purchasing power of real money, create a nation of unnecessary debtors and be damaging to the social system overall.

Banker

Well yes, but the people who create all the wealth and those who help them are so busy creating it they don't have the time [or the inclination] to worry about our little scheme. Besides by creating mountains of almost unlimited credit people buy more thus stimulating the economy and we can continue to live in the lifestyle we bankers have become accustomed to.

Punter

But what happens if you lend so much money that you say 'doesn't actually exist' and commit so many people to so much debt that they can't pay and the whole system collapses? 

Banker

Well, I have to admit this does happen from time to time, but over the years we have developed safeguards that 'kick-in' during times of financial meltdown.

We have ingratiated ourselves into the whole social system to such an extent that a collapse of the banking system would have socially unbalancing consequences for society as a whole, so grave in fact that no government would now allow it to happen.

Governments are obliged to come to our aid with help in the form of bail-out packages and the like that see us through the re-occurring crises. When the economy starts to pick up we just buy back the Governments holdings at knock down prices. It's win-win all the way to the bank [he chuckles].

And the beauty of it all is that Governments borrow the 'bailout money' from the banks using the wealth creation prospects of future generations as collateral, so not only are we stripping the wealth from the current generation we're now stripping it from future generations.

Punter I'm in.

 

 

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