David Hines
Mounte banks on parade
By David Hines
A new crusade for politicians is serving the unbanked and the underbanked. These are people who are said to not borrow enough from, or deposit enough into, traditional financial institutions. Advocates say they want to better serve these people. I should like for a moment to take a more cynical view and see what it might reveal.
Banks have taken some public relations hits recently. There was the bankster bailout at taxpayer expense. That soured many. More recently, there was the Cyprus "bail-in," taking depositors' money to shore up the bankers. Though thus far an isolated incident, it has shaken the confidence in traditional financial institutions. Usual incentives to banking have also taken a hit. Thanks to the Fed's quantitative easing, interest on savings is rock-bottom.
Could politicians be doing the banks' sales job for them? Are taxpayers funding the banks' advertising?
It's not as if banks don't have money to lend. Excess reserves exist, parked at the central bank earning a pittance in interest. If qualified borrowers wanted the money the banks have incentive to lend it.
Why might government want more money in banks? Could there be plans for Cyprus-style bail-ins at depositor expense? After all, the bankster bailout was sold as a good use of the people's money, even though it impoverished them. Why not bail-ins under the same rationale?
If you don't trust banks, then what might you do with your money? You could keep cash, I suppose. That's not very safe, either. Forget ordinary thieves. The government considers large amounts of cash to be suspect – and subject to confiscation. Drug money, they figure. Bring in a drug-sniffing dog and have probable cause for asset forfeiture. But you don't do drugs, you say? If you are lucky enough to have a hundred Federal Reserve Notes in your wallet, ninety-seven of them are likely to have traces of drugs on them. In many cases, the cost of proving your money innocent is greater than the value of the money itself.
The risk of contamination can be reduced if you get new bills from the bank. But if you withdraw large amounts of cash, the bank is required to report the transaction, deeming you suspect. If you withdraw smaller amounts so as to avoid such reporting, that is also considered a crime. It's called structuring withdrawals. In a representative case a guy was sentenced to 10 years' incarceration and a half a million in fines for doing so. It applies to deposits as well. Advocates would say that it's used only against true criminals; if so, why not convict them of those other crimes?
Park your money in an exchange-traded fund of gold? You own a certificate saying that you own gold. But who knows whether the ETF has the bullion to redeem your certificate? They probably don't. Redemption would rely upon the ETF purchasing sufficient bullion; any disruption in the gold market could quash the deal, leaving you with a piece of paper and no gold.
Invest in stock? That might work if you are savvy and have a great sense of timing. But you are competing with lots of people with inside information – including members of Congress, who reaffirmed their ability to trade. Those on certain committees have inside info even the giants of Wall Street might envy.
Quantitative easing, rather than fundamental business, has pushed stocks higher. Newly-created money must have somewhere to go; it's going into stocks. A disruption of Fed monetary policy could devalue your investment overnight. Ben Bernanke made a comment recently, and the stock market quickly lost a great deal of value. If you're holding stocks in viable businesses you might be all right; if you're holding stocks merely inflated by Fed money creation, you're on thin ice.
How about commodities, whether as futures or as hoarded goods? They're not safe either. In March the President signed the National Defense Resources Preparedness executive order, giving DHS and other agencies complete control over all resources in the country. If you own too much of something – and the bureaucrats determine how much is too much – they can take it. This is not a recent innovation; it merely reiterates and expands the War and National Defense Production Act of 1950.
In effect, you may be merely holding those resources temporarily for the government. As with coffee and beer, you never really own it; you can only rent it.
There's a lot to be said for sound currency and free markets. Having abandoned these long ago in favor of fiat currency and government-controlled markets, our "leaders" are stuck in the paradigm. They are determined to salvage it even if the patient dies.
So many worries for the person with any resources! There seems to be some advantage to being poor. Our politicians are looking out for us, trying hard to make it so. Relieved of worry, along with our possessions, we can live happily in our socialist Nirvana, just as they did in former communistic nations. They didn't like it much, but we can make it work so much better.
© David Hines
August 24, 2013
A new crusade for politicians is serving the unbanked and the underbanked. These are people who are said to not borrow enough from, or deposit enough into, traditional financial institutions. Advocates say they want to better serve these people. I should like for a moment to take a more cynical view and see what it might reveal.
Banks have taken some public relations hits recently. There was the bankster bailout at taxpayer expense. That soured many. More recently, there was the Cyprus "bail-in," taking depositors' money to shore up the bankers. Though thus far an isolated incident, it has shaken the confidence in traditional financial institutions. Usual incentives to banking have also taken a hit. Thanks to the Fed's quantitative easing, interest on savings is rock-bottom.
Could politicians be doing the banks' sales job for them? Are taxpayers funding the banks' advertising?
It's not as if banks don't have money to lend. Excess reserves exist, parked at the central bank earning a pittance in interest. If qualified borrowers wanted the money the banks have incentive to lend it.
Why might government want more money in banks? Could there be plans for Cyprus-style bail-ins at depositor expense? After all, the bankster bailout was sold as a good use of the people's money, even though it impoverished them. Why not bail-ins under the same rationale?
If you don't trust banks, then what might you do with your money? You could keep cash, I suppose. That's not very safe, either. Forget ordinary thieves. The government considers large amounts of cash to be suspect – and subject to confiscation. Drug money, they figure. Bring in a drug-sniffing dog and have probable cause for asset forfeiture. But you don't do drugs, you say? If you are lucky enough to have a hundred Federal Reserve Notes in your wallet, ninety-seven of them are likely to have traces of drugs on them. In many cases, the cost of proving your money innocent is greater than the value of the money itself.
The risk of contamination can be reduced if you get new bills from the bank. But if you withdraw large amounts of cash, the bank is required to report the transaction, deeming you suspect. If you withdraw smaller amounts so as to avoid such reporting, that is also considered a crime. It's called structuring withdrawals. In a representative case a guy was sentenced to 10 years' incarceration and a half a million in fines for doing so. It applies to deposits as well. Advocates would say that it's used only against true criminals; if so, why not convict them of those other crimes?
Park your money in an exchange-traded fund of gold? You own a certificate saying that you own gold. But who knows whether the ETF has the bullion to redeem your certificate? They probably don't. Redemption would rely upon the ETF purchasing sufficient bullion; any disruption in the gold market could quash the deal, leaving you with a piece of paper and no gold.
Invest in stock? That might work if you are savvy and have a great sense of timing. But you are competing with lots of people with inside information – including members of Congress, who reaffirmed their ability to trade. Those on certain committees have inside info even the giants of Wall Street might envy.
Quantitative easing, rather than fundamental business, has pushed stocks higher. Newly-created money must have somewhere to go; it's going into stocks. A disruption of Fed monetary policy could devalue your investment overnight. Ben Bernanke made a comment recently, and the stock market quickly lost a great deal of value. If you're holding stocks in viable businesses you might be all right; if you're holding stocks merely inflated by Fed money creation, you're on thin ice.
How about commodities, whether as futures or as hoarded goods? They're not safe either. In March the President signed the National Defense Resources Preparedness executive order, giving DHS and other agencies complete control over all resources in the country. If you own too much of something – and the bureaucrats determine how much is too much – they can take it. This is not a recent innovation; it merely reiterates and expands the War and National Defense Production Act of 1950.
In effect, you may be merely holding those resources temporarily for the government. As with coffee and beer, you never really own it; you can only rent it.
There's a lot to be said for sound currency and free markets. Having abandoned these long ago in favor of fiat currency and government-controlled markets, our "leaders" are stuck in the paradigm. They are determined to salvage it even if the patient dies.
So many worries for the person with any resources! There seems to be some advantage to being poor. Our politicians are looking out for us, trying hard to make it so. Relieved of worry, along with our possessions, we can live happily in our socialist Nirvana, just as they did in former communistic nations. They didn't like it much, but we can make it work so much better.
© David Hines
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