{"id":198,"date":"2012-09-01T11:21:28","date_gmt":"2012-09-01T11:21:28","guid":{"rendered":"http:\/\/www.apisbull.com\/blog\/?p=198"},"modified":"2012-09-01T11:21:28","modified_gmt":"2012-09-01T11:21:28","slug":"the-legal-lie-banks-tell","status":"publish","type":"post","link":"http:\/\/www.apisbull.com\/blog\/?p=198","title":{"rendered":"The Legal Lie Banks Tell"},"content":{"rendered":"
Did you know each time you deposit money into a bank, they\u2019re legally allowed to…<\/span><\/div>\n

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* look you in the eye and lie, with a wink and a smile<\/span><\/div>\n
* sell you a line of bull about how your money is kept safe in the vault\u00a0<\/span><\/div>\n
* and give you a kick in the rear on the way out?<\/span><\/div>\n

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We might be kidding about the last one.<\/span><\/div>\n

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We fancy ourselves as adventure-seeking truth-tellers. That means we\u2019ll go places others won\u2019t dare to uncover lies, distortions and old-ways of investing that just don\u2019t work anymore.<\/span><\/div>\n
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And this lie could be the biggest one of all.<\/span><\/div>\n

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It\u2019s not a new lie. It\u2019s been legal since 1913 in the United States. And it\u2019s legal in most other countries, too.<\/span><\/div>\n

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Yet people don\u2019t know about it because politicians only talk about it using big words in wonkish, boring speeches. \u00a0<\/span><\/div>\n

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But when it\u2019s brought down to the human-level – and you realize it\u2019s your money they\u2019re lying about – you just can\u2019t look away from…<\/span><\/div>\n

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The Legal Lie Banks Tell You<\/strong><\/div>\n
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The money you deposit in a bank, isn\u2019t in their vault. It\u2019s not in a vault across town. It\u2019s not in a vault at your bank\u2019s headquarters either.<\/span><\/div>\n

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It\u2019s not in a vault at all. \u00a0In fact, outside of a computer, your money doesn\u2019t even exist.<\/span><\/div>\n

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It sounds weird, but that\u2019s how most banking systems in the world are set up today.\u00a0<\/span><\/div>\n

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It\u2019s called Fractional Reserve Banking and it works like this…<\/span><\/strong><\/div>\n
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When a person deposits say, $1,000, into a bank, that person believes their money is still there. \u00a0After all, their account balance still says $1,000.<\/span><\/div>\n

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But the truth is, the banks are lying to you. \u00a0<\/span><\/div>\n

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They are legally allowed to loan out 90% or more of your deposits to other customers and STILL tell you that your $1,000 is in the bank.<\/span><\/div>\n

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And the Federal Reserve, who regulates the banks, not only says it\u2019s \u201cOK\u201d for the banks to tell you this lie… they\u2019re the ones who made it possible.<\/span><\/div>\n

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They set a number called the \u201cReserve Ratio.\u201d \u00a0And if it\u2019s set at 10%, then banks can re-loan 90% of your money without telling you.<\/span><\/div>\n<\/div>\n

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And This is the Real Scary Part…<\/strong><\/div>\n
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Of that $1,000 you deposited, we know the bank can lend 90% of that to other customers. \u00a0That\u2019s $900.<\/span><\/div>\n

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So say a person borrows that $900 from your bank to buy a motorcycle. The borrower leaves the bank with $900 cash and gives it to the bike owner. \u00a0<\/span><\/div>\n

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The former bike owner, happy to be rid of his bike, then goes and redeposits that $900 cash in the very same bank.<\/span><\/div>\n

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Now two people have deposits – one for $1,000 and one for $900 totaling $1,900 – that came from the same exact $1,000 cash deposit. \u00a0The extra $900 was \u201cBORROWED into EXISTENCE.\u201d<\/span><\/div>\n

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This process…<\/span><\/div>\n<\/div>\n

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Created the Housing Bubble\u00a0<\/strong>and Global Financial Crisis<\/strong><\/div>\n
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When money is created so easily out of thin-air, it leads to bubbles in asset classes.<\/span><\/div>\n

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Since the United States completely left the gold standard in 1971, we\u2019ve had one bubble after another. \u00a0There was the early \u201880\u2019s gold bubble, the stock bubble of the 90\u2019s, and just recently the housing bubble.<\/span><\/div>\n

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The current global financial crisis is in large part due to all the money that was \u201cborrowed into existence\u201d to buy homes at inflated prices.<\/span><\/div>\n

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But when the housing bubble popped, it set off a massive deflationary event. \u00a0<\/span><\/div>\n

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People who were no longer able to make their house payments walked away from their mortgages. \u00a0<\/span><\/div>\n

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And because we have a monetary system where money is \u201cborrowed\u201d into existence, when a borrower refuses or can\u2019t repay the debt, the money simply VANISHES from the system.<\/span><\/div>\n

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It\u2019s called a currency contraction, and that is deflation. \u00a0<\/span><\/div>\n

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At this point, there are only…<\/span><\/div>\n<\/div>\n

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2 Possible End Games\u00a0<\/strong>-\u2014 and Both End Badly…<\/strong><\/div>\n
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In response to the deflation from the housing crisis, the Federal Reserve quickly started \u201cprinting\u201d more money to try and replace all the money that was vanishing.<\/span><\/div>\n

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They literally doubled the money supply in just a few weeks following the 2008 panic. And since then, the money has\u00a0tripled<\/em>\u00a0pre-meltdown levels.<\/span><\/div>\n

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But unfortunately for the Fed and all its victims, the problem seems to be too big this time. \u00a0<\/span><\/div>\n

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The money-printing isn\u2019t working. And If they keep up the pace, we\u2019ll see massive inflation… or even hyperinflation.<\/span><\/div>\n

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Or the Fed may recognize the problem is too great and try something more honest than money-printing. They may decide to default on our debts the honest way, by telling our creditors we can\u2019t pay and restructuring the debt.<\/span><\/div>\n

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This would cause massive deflation as all the money borrowed into existence vanishes.<\/span><\/div>\n

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So those are the two endgames, massive inflation or massive deflation. \u00a0Both of which will make the current global recession look like a walk in the park.<\/span><\/div>\n<\/div>\n

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And it All Could Have Been Avoided<\/strong><\/div>\n
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…had we just stuck with the gold standard. Instead we drifted away starting in 1913 with the creation of the Federal Reserve Bank. \u00a0And we completely severed the dollar\u2019s ties to gold in 1971.<\/span><\/div>\n

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A dollar backed by gold means money can\u2019t be borrowed into existence to cause a global financial crisis. \u00a0And it\u2019s actually written into the US constitution that states are not allowed to use anything but gold and silver as legal tender.<\/span><\/div>\n

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We\u2019re happy to see a major US political party announce that their party platform will call for a gold commission to study the gold standard.\u00a0<\/span><\/div>\n

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In the meantime, there is a way to protect yourself from fractional reserve banking and endless inflation. Right Here.<\/span><\/div>\n<\/div>\n
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