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Failing: Our Banking System

September 15, 2008

There are too many demagogues out there in the mainstream media and political offices across the country. This is serious, and we can not make the same mistakes again.

There are different reason why banks fail. Depending on the type of bank it is. Usually it comes down to this scenario. You walk into a bank to deposit $20, that bank then has the authority under law to loan $80 dollars of your $20 dollars. So lets say somebody gets this $80 dollars that was lent to them and spends it on groceries, now the owner of that store deposits the $80 dollars, now the bank ‘has’ $100 (the rest of the money is in the form of bank deposits, not actual money(Credit)), when in physical reality there in only $20! So if the people come to take out their $80 dollars the bank will fail, since they really only have $20 dollars. This is called a run on the bank. Now I am talking in very scaled down terms but that is usually how it happens. This is a result of the “fractional reserve” system.

This is the reason why we have the Federal Reserve, to prop up these banks, print them more money, and make sure that on average they have enough ‘hard cash’ for people to withdrawal through the day.  They also artificially lower interests rates to urge people to take out more loans so that they can perpetuate their “credit expansion”  You can see though how these bubbles are created and how you just accumulate more and more debt with this system. This is how inflation occurs, this is why banks fail, when they have so many loans out there the Federal Reserve can’t even save them, so the Federal Government comes in and says, “Oh no you can not fail, that bad credit must stay int he system!” and buys out the bank so the loans can live to see another day. (only making the problem worse and bigger down the road!) This is also why during the early years of our country a Central Bank has been destroyed multiple times before. It is a failed and illegal system.

This is why I urge for the total dissolving of our current monetary system. The Constitution says that only gold and silver be legal tender. If this were the case they could not create gold and silver! therefore no inflation, steady prices, and money would not be used to create loans and debt! Now yea, I mean it would be easier to just swipe credit cards all day long but at least we will have a stable system and more prosperity.

And i didn’t even touch on the mortgage companies….

In Liberty,

Jon Lauro

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