The International Forecaster, Bob Chapman, says that A New System For The Privileged Is Not A Remedy For The Economy
The current financial crisis in the US and around the world was not a failure of capitalism, but an intentional looting of the world financial system by Illuminist crony fascism sheep-dipped in capitalism. Â The old British Mercantilist System that has been surreptitiously adopted in the US via both the Federal Reserve Act (stealth tax on the masses by inflation of the money supply) and the US income tax (direct taxation of the masses) is a freedom-choking system of financial bondage which allows a nation’s economic system to be hijacked by the wealthy and powerful. Â It is anything but free market capitalism. Â This is the very system of financial bondage that our Founding Fathers fought a very bloody and costly war to rid themselves of. Â They are rolling over in their graves.
Regardless of what we hear from the mainstream media, economists and left wing progressives currently in charge of the Legistlative and Executive branches, this is not a failure of capitalism, nor is it the downfall of capitalism. What we are experiencing is what Martin Armstrong referred to as the last throes of socialism in his essay The Collapse of Capitalism or is it Socialism? The government is literally throwing everything it has in the bank at the printing presses at this problem, kind of like they have done with education for the last 30 years. And, what have these billions of dollars spent on education done for us? We’ve been left with a substandard public education system where nearly 40% of American adults are below basic levels of reading proficiency. And, what will the billions trillions of dollars they are throwing at the economy going to do? The results will be similar to that of the education system, but the ramifications will be felt by every single American. This country, and its citizens, will be left totally broke, and we will likely have to default on our foreign debt at some point in the future (or inflate it away).
Chapman continues:
The FDIC is beyond broke. Â They don’t even have enough to cover but a tiny fraction of potential losses, much less to cover the losses from the failure of half of the banks in the entire system. Â Either the claims for lost deposits will not be paid, or so much money will be printed to pay those claims that the money received in payment will be virtually worthless, along with any and all remaining dollar-denominated assets. Â This is going to become a very big problem indeed in the not-too-distant future. Â The solution: Â Empty your bank accounts of all but one to three months of necessary household operating expenses, and buy gold and silver related assets with the rest, along with freeze-dried food, a water filter, and the means to defend your family from malefactors, both public and private.
[emphasis added]
If you, like Mr. Chapman, believe that the economic crisis will continue to worsen, then sitting around and waiting for it to hit you like a Tsunami is probably the last thing you should do. Precious metals like gold and silver will be one of the only traditional investment asset classes that will be able to protect your wealth. And while you’re at it, think about the ramifications of a hyper inflationary scenario and what it will mean for food costs, energy costs, and social stability. Though food, ammo, gas and guns are not traditional asset classes you’re used to, they could very welcome become money in the not so distant future if a scenario like the one described in James Rawles’ Patriots ever plays out, even on a limited scale. Are you ready if a real, sustained collapse happens in this country?
When ANY money comes into my Bank account Like payroll or whatever , I Withdraw it that day ! I pay my bills by Money order or go to the business direct and pay them at the store .  NO CHECKS FOR ME !! No credit cards , NO ATM , Cash or nothing . Also I put money away for things like taxes , Insurance , Cable , Vacations and the like . That way I dont get hit with a big bill all at once . Try it for a few months see how well it works for you .
Mr Chapman is insightful, and certainly colorful if nothing else, but I have to say I find his following statement somewhat curious:
Either the claims for lost deposits will not be paid, or so much money will be printed to pay those claims that the money received in payment will be virtually worthless, along with any and all remaining dollar-denominated assets.
If people were operating their lives on the presumption that the amount of cash they had in the bank was equal to “X,” and then suddenly the banks weren’t able to return that money but instead, the government printed it and gave it to them (the same amount, X)… how would that change either the actual amount of money or even the perceived amount of money in the system??? Â It wouldn’t. Â Could panic cause prices of stuff to skyrocket? Â Sure, but that’s supply & demand, and is totally different.
Don’t get me wrong, I believe big inflation is coming, but this particular comment about printing money to honor FDIC obligations seems rather shortsighted to me.
To follow up Patrick:
STAGE 1:
A deposits $10 into bank
B borrows $9 (bank has 10% – $1 on reserve)
B deposits $9 into bank
C borrows $8.10 (bank has 10% – $0.90 on reserve)
—-etc etc
So out of $10 of real money (now on reserve at the bank) $100 was created in debt
STAGE 2
B defaults
Bank can’t refund A as it’s lent too much and needs 10% on reserve
To save the bank – the govt bails out A by $10
A deposits $10 into bank and STAGE 1 starts again
Now there’s $10 real money and $10 printed money at bank. The money supply is double because B defaulted and the bank couldn’t repay and the govt printed the $10 for A
The bank still has the original $10 + printed $10 to create more loans with.
@HC… if, as you say, at the end there is $10 real money and $10 printed money at the bank, then they could have used that $10 real money to pay back A. Â If they do NOT have the money (as in your example), then there would not be $10 of real money at the bank (as in the last part of your example). Â Please explain.
Patrick, there are some great Youtube videos on “fractional reserve banking”. I believe that is what Harbour City was getting at. It is not the easiest concept to understand, but basically what he was saying is that banks can’t give someone their money back if they have lent most of it out to someone else and that someone else defaults on the loan.
@Schaef – thank you for the clarification, I am fully aware of the fractional reserve banking system and how it is used to multiply the money (debt) supply. Â However, my point was not that, but rather that either the banks no longer have the money (it’s been lost on failed investments) and the govt needs to print it to pay the customer back, or the bank does still has the money and they can give it back to the customer themselves.
In their explanation, at least in my opinion, HarbourCity seemed to use a combination of both. Â Meaning, HC said the banks now had $10 real money AND $10 printed money. Â It can’t be both… if they still have the $10 real money, then the govt wouldn’t need to print the $10 to pay back the FDIC customer. Â That’s where I don’t understand their logic.
HarbourCity,
Its crooked! Plain and simple. 15 years ago I stopped keeping any money in the bank. I didn’t want to be responsible for financing their titanic criminal enterprise. I use the bank. They don’t use me. Though I have barrowed some money here and there, I pay it back as fast as I can. To me the “easy payment plan” is simply a way to screw yourself.
I do use a checking account, however, I only put enough in there to pay the bills. I pay cash for as much as I can.
Banksters. Crooked. Greedy. The problem is that at the level of the minor minions, they don’t even know it. I wish there was a way to make loads of cash being honest. Unfortunately, that usually costs money instead of making it.
The banksters have decriminalized forgery, fraud and counterfeiting until there is not enough money left for honest occupations. It has also created high prices so that people that work for a living can’t pay for things they need without credit. Like insurance makes medical proceedure prices skyrocked (inflation x 500%) so has credit inflated everything else. The fact is we are right back where we started: In need of a revolution.
I’ll never fire the first shot. I’m not a leader but I am ready.
Keep your ammo dry and your food hidden. You’ll probably need both before its all over.
🙂
-NR
Comments….Sell California to the Chinese…then go from there.
@Patrick:
I understand what you are saying Patrick, but you are missing the crucial point – the $10 of bailout money is going again start a phase of fractional reserve expansion.
In other words. We started with Person A depositing $10 – which became $100 of expanded money supply.
So, lets say that one loan for $9 can’t pay back – and as a result the bank now can’t return the original depositors $10.
Even though that’s the case, the other $81 of created money is still out there – so we started with $10, which then became $100 – but $9 of it was bad – so it got written off. So we end up with $91 of total money supply ($81 created + $10 original).
Now if the government bails out the original depositor, this cycle will begin again – so that $10 will eventually become $100 in total money. So from a “summary” perspective – that original $10 deposit by Person A is now $191 of total money.
Does that make sense?
The point i would like to make is it doesnt matter how this whole system works. You got a bank in trouble and people want to pull their money. Accounts get frozen while they sort the mess out and get bailed by govt/FDIC if you are lucky. Do you really want that cashflow interruption in your life or the stress of waiting in a bank-run queue to see if you will get any scraps.
I like a stress free life so i will pull my money before the SHTF. I am totally with the first poster, triple Bob. Simplify your life and financial affairs.
You stated: “The government is literally throwing everything it has in the bank at the printing presses at this problem, kind of like they have done with education for the last 30 years.”
I respond, if only this were so. The government should actually print up all this fiat money that they have declared to exist so that some of it actually gets out to the “masses”. This fiat money exists only as binary code in the computers of the banks. It is used only for the banks’ purposes and that doesn’t include putting it into circulation. It is being used to jack up the stock market without justification. I believe a healthy dose of inflation would help the average person now. Then old expensive debt could be paid off with cheap money. Yes, the banks would take a hit. But they should take a hit. They caused this mess.
John, thanks for your comment. I share your views that most of the fiat money being ‘printed’ right now is sitting in bank reserves and it hasn’t yet hit the people on the street in amounts large enough to cause price inflation in everyday goods. Eventually it will hit the system in a variety of ways like more credit, welfare, and even people ‘taking’ those stock market profits from inflated prices. I am not well versed in the velocity of money, so I will rely on the theories of experts like Marc Faber, Jim Willie and Howard Katz.
When I was referring to the example of ‘throwing everything it has in the printing press’ example from above, I was referring to not only bank bailouts and stimulus, but the overall ‘easy money’ that has been slammed into the system and spent by the system for the last several decades. It is this that has basically taken us to the brink of collapse…. Not just consumer debt or commercial debt, but government debt in the public sector, which is the biggest bubble of all. Socialized health care and Cap ‘n trade will probably be the social programs that take us over the tipping point and leave us so debt-ridden that we as a country will no longer be able to service our debt. This is more or less what I meant about the collapse of socialism. It’s been a fun experiment, but it is coming to an abrupt and violent end.
Interesting perspective on this and I was wondering about “Bob Chapman: Empty Your Bank Accountsâ€Â ,  Thanks for tackling this case study.
Great discussion is going on this blog for Bank Account, i’d like to join with you guys and gain knowledge from it.