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How the Banking Industry and Government Steal Your Money

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When we think of theft, the notion automatically conjures up a seedy image of a crime. Illegal operations that take place beyond the confines of the law. Perhaps the image of a burglar comes to mind, or even the image of a sophisticated ring of organized criminals or hackers. But as we know, theft goes well beyond such levels.

For instance, there are plenty of white collar criminals out there. There are professionals or businesses, many of whom don’t match our image of the common criminal, whose sole aim is to steal your money by means of fraud. Take for instance Bernie Madoff, a Ponzi expert who may have even dwarfed Charles Ponzi himself, the original fraudster after whom the now-famous pyramid scheme had been named.

You know you’ve been duped by a Ponzi-scheme when your profits, most of them as outrageous as 50 to 100%, consistently materialize with little to no loss. Such a high rate of returns with no loss defies the rules of mathematics. Unless someone cheats.

If you’re not familiar with Ponzi schemes, it goes like this. The first set of investors put up a certain amount of money. Profits are then advertised or marketed. After that, having heard about these immense profits, a new set of investors invest money into the fund. And these new funds are used to pay off the first set of investors. This goes on and on until it finally collapses. By the time Madoff’s fraud was discovered, investors had lost possibly up to $65 billion (total amount is not yet entirely known).

Legal Theft Is a Different Ball Game Altogether, and It Exists.

Paper money, now mostly digital, is in itself a form of theft. If you think this sounds outrageous, then you probably haven’t detected it yet. Let’s suppose you have $500,000 of cold cash stashed away in a safe. And let’s suppose you’ve been holding it since 2008, a 10-year period. How is it possible for that money to be stolen?

To buy $500k worth of goods in 2008 dollars, you would now need $585,196 as the price of goods have now become more expensive, your purchasing power has been diluted. In short, you just lost $85,196 of purchasing power from your $500k.

Every new dollar that the government puts into circulation is weakening your dollar. Like the first investors of a Ponzi scheme, government and banks benefit from this newly created money. But over a long period of time, the average individual “pays the price” by literally having to pay higher prices because their purchasing power has been slowly diminishing.

Banks Participate in This Scheme As Well

The banking industry knows that “fractional reserve banking,” or creating credit through lending more money than what they actually have in their deposits benefits them the most...up until a bank run on deposits exposes the money that they do not have to back their depositors’ funds.

Just because a bank has the power to “create” money doesn’t necessarily mean they “have” the money to back up what they had created.

Here’s the Federal Reserve explaining how it works:

“The fact that banks are required to keep on hand only a fraction of the funds deposited with them is a function of the banking business. Banks borrow funds from their depositors (those with savings) and in turn lend those funds to the banks’ borrowers (those in need of funds). Banks make money by charging borrowers more for a loan (a higher percentage interest rate) than is paid to depositors for the use of their money. If banks did not lend out their available funds after meeting their reserve requirements, depositors might have to pay banks to provide safekeeping services for their money. For the economy and the banking system as a whole, the practice of keeping only a fraction of deposits on hand has an important cumulative effect. Referred to as the fractional reserve system, it permits the banking system to “create” money.”

And their explanation regarding reserve deposits:

“Reserve requirements are the amount of funds that a depository institution must hold in reserve against specified deposit liabilities. Within limits specified by law, the Board of Governors has sole authority over changes in reserve requirements. Depository institutions must hold reserves in the form of vault cash or deposits with Federal Reserve Banks.”

In other words, a bank with under a million in capital can “lend” up to, say, $9 million by creating money on a screen. You can’t even call it lending because they don’t have nearly enough of that money to back up the loan. It’s simply money created out of thin air.

And by charging interest, the bank profits a significant amount by lending out money that never existed. But should you default on your loan, say a home loan, the bank can repossess your property. This may sound like business as usual, but don’t take your eyes off the fact that you take all of the risks, while the bank risks very little.

The Federal Reserve Also Plays This Game But At A Much Larger Scale

The Fed is the bankers’ bank. Like most banks, the Fed too “creates” money which is then loaned to banks. But at the scale in which they lend, the Fed’s monetary schemes are much more insidious as they drive up inflation.

Remember the example at the beginning of this article? Remember how $500,000 is not worth the same amount today as it had been ten years ago? That’s what the Fed does. It saps your purchasing power.

Does inflation hurt your wallet? Do the rising costs of goods affect your household, having to pay higher prices for fewer goods? Where did your wealth go? How is it that your purchasing power had been diluted over time, slowly, surely, and a manner that you had barely noticed?

Make no mistake: inflation is the “perfect” and most “perfectly legal” crime par excellence!

So How Can You Protect Your Purchasing Power From Theft?

We covered this in a previous article. Gold and silver are the only forms of money that can withstand this theft of purchasing power. Take gold, for instance, From 1972 to 2018, the dollar’s purchasing power had decreased by 84%. Gold’s purchasing power, on the other hand, increased by 394%!

Gold and silver do not pay dividends. They do provide growth, but that’s not their main purpose. Gold and silver are forms of money. They are used to preserve wealth. And when it comes to the dilution of the dollar’s value, the perfectly legal crime of creating more money, a crime that only banks and government are authorized to put into operation, only gold and silver can withstand their negative effects on the economy.

To learn more about protecting your wealth using gold and silver, contact one of our representatives now for a free consultation.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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