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Welcome to the Brave New World of Central Bank Tyranny

19 | By Shah Gilani

Remember when banks used to make it worth your while to deposit cash with them?

Heck, if you’re old enough you probably even remember such inducements as free toasters.

But in a reprehensible turn of events, now you – the depositor – are about to get toasted.

Thanks to U.S. Federal Reserve policies that are holding market rates down near zero, you’re getting just a few basis points in interest (a basis point is one one-hundredth of a percentage point) on your cash deposits – and haven’t been for several years.

It’s bad enough that you’re getting practically no yield on your savings. But now the big banks – those greedy fellows that we taxpayers bailed out from a crisis that they actually caused – are about to start charging you to deposit money with them.

I’m not kidding.

There’s so much money floating around that the biggest banks that are sitting on the most of it and can’t – or refuse to – lend it out for any number of selfish reasons, now don’t want it stuffing their vaults.

So big depositors – who already weren’t earning anything on the savings they’ve asked big banks to hold and safeguard for them – will soon have to pay a fee for that questionable privilege.

There’s a litany of disturbing elements to this tale. But the most galling is this: It won’t be long before you and I are receiving notices of this unseemly new Big Bank tariff.

Welcome to the Brave New World of Central Bank Tyranny!

Sycophant central bankers here in the U.S. and over in Europe (and everywhere else, for that matter) have artificially manipulated interest rates down to nothing. That makes it possible for their masters – the big banks – to rack up record profits: They borrow from each other at one basis point and then go out and buy massive quantities of higher-yielding government bonds, cashing in on the “spread.” The United States, European countries, Japan, China and everyone else is happy, since they can keep running huge deficits.

In that equation, the banks don’t need to make loans to us.

Still, we need a place to park our money.

But now the big banks are saying that they have too much cash and can’t lend it fast enough. Of course, what they’re not saying is that they don’t want to lend it out to us at current low rates because, when rates rise, those loans will be “under water.”

The banks are fat and happy making so much on their risk-free government loans (that’s what them buying government bonds is all about; those bonds are nothing but cheap loans to profligate governments) that the extra money they have on deposit is starting to cost them profitability.

Yeah, you heard that right.

Here’s where it gets a tad technical.

Deposits are “liabilities” for banks. That’s because that depositor cash can be withdrawn at any moment. Loans are “assets” because banks are getting paid interest on them. When big banks’ deposit liabilities get too big they become a problem because they have to keep “reserves” against those deposits. Banks, especially with new banking laws and regulations, have to hold certain “assets” (usually U.S. Treasury bills, notes and bonds) in reserve against all those deposits that could leave in a flash if there is any kind of banking panic.

Big banks don’t have enough U.S. Treasuries to hold against deposits as reserves and at the same time use their stash of Treasuries to lend out overnight to other banks as collateral for overnight loans of more cash, so they can use that cash to buy – you guessed it – more risk-free Treasuries.

And why are there not enough Treasuries in the almost-$14 trillion world of U.S. Treasury securities? That would be because the Federal Reserve has been buying trillions of dollars’ worth of them from the big banks that have been buying them up to sell to the Fed, for a nice profit, thank you. And other central banks around the world have been buying Treasuries, too, for different reasons, but all good ones for them.

So the big banks got what they needed, to get bailed out. And they got what they wanted, to make record profits – yet again. And we all get hosed because the big banks aren’t lending to little people.

And soon enough now, we’ll have to pay them out of our own pockets to hold our money so we can write checks against our deposits and conduct normal banking transactions.

It’s Central Bank Tyranny. It’s the tail wagging the dog. The whole world has become one giant banana republic – with central bankers acting as militant officers enforcing the profitability schemes of the oligarchy of bankers that are the real dictators of our future.

Absolute power corrupts absolutely.

And we’re absolutely toast.

19 Responses to Welcome to the Brave New World of Central Bank Tyranny

  1. John Patterson says:

    Meanwhile dormant HSA’s are charged $4/month for “service” and receive perhaps 20¢/month interest.

  2. Southern Sandman says:

    Save in gold (and silver). It’s completely private, will survive when the fiat paper ponzi comes crashing down, as it mathematically must some day, and you don’t have to pay for the privilege.

  3. Robert in Vancouver says:

    Q.1. Who gave bankers unlimited free money with no strings attached, and told them to do whatever they want to all of us?

    Q.2. Who knew the banks were going to hoard money instead of lending it out to help the economy?

    Q.3. Who pretends to help the little guy while secretly helping the top 1% of the top 1% (eg. Soros, Gore, Buffet, etc) at the expense of the little guy?

    The Obama administration, and all other left wing governments.

    • Glenn says:

      These groups go by different names in other countries federal reserve, FDIC, Nasdaq , NYSE they are the ones who fund the next election. That’s all elected
      politicians are waiting for.

      Kind Regards,

      Glenn in Minnesota

  4. DW says:

    So short of taking all our money out of the bank and stuffing it under the mattress, what’s left?
    Of course, going back to a cash based society might work in the long run, but at the pace the world operates now it would be a train wreck.

  5. RUSS SMITH says:

    Hi!, Patrons Of Wall Street Insights & Indictments Et. Al.:
    Has no one a clue as to the structure of how the banks will charge to keep anyone’s money for depositors? Until we know what they will charge, we are operating presently in the dark as far as following our balances aren’t we? The fact that the big banks have become so greedy that they can’t stand the thought of loaning out their funds to small business etc., should make us all abandon them taking our money with us; except for the inconvenience of not being able to write checks to pay our bills or set up electronic payments for our bills and deposits etc.
    For example, the banks, by loaning to larger corporations huge amounts of cash, give many of those corporations the ability to tool up to produce miniaturized products costing consumers more for less product regards all of their customers. My tuna can has gone from 6 oz. down to 5 oz. plus the price per can has risen but does our benevolent government account for this type of miniaturization whenever it collects its’ data for figuring out the CPI index? Sense the beginning of this stealth tax on consumer products, there is no one who can explain a CPI measurement, because who knows from week to week; month to month or even year to year what size packaging we will receive for OUR money for which we have skin in this game from hard work plus who really cares except we who watch over our declining bank accounts? Evidently the way to beat this game is to eat less and buy less of the items we don’t eat saving on the difference but some will lament that this will only place OUR economy back into recessions. Whose recession ours or theirs is my question? Would a corporate CEO find his income reducing him to a recessionary income, if his income bonus fell from 400 million dollars down to a mere 200 million dollars in a single year for example? Isn’t it time we the people consumers of this nation take a stand against this kind of corporate manipulation which is regressively stunning OUR personal incomes out of the Middle Class life style? Do we the people own OUR country yet today or have we given it over to corporate chiefs who find ways to administer higher prices we are forced to pay including the miniaturization of their units of sale we purchase? From this day forward dear reader(s) please don’t trust anyone’s CPI estimates but instead devise a way to figure out your own right from your wallet and checking account.

    RUSS S, CA. (One Of Our Broke, Fiat Money Corrupt States)

  6. Duane says:

    I’m all for every depositor removing all their deposits from the big banks. Let’s see how well their business models work when they have no money on deposit. They would be forced to shrink the assets side of their balance sheet. Hey, no more speculating using other peoples money. And of course, if everyone began removing their money, the banks don’t have that much money on hand (fractional reserve banking) and would become insolvent. The people could still have the upper hand if they acted in a concerted manner to force the banks to behave. I’m sure the government would take notice very quickly too and maybe begin to regulate banking in an responsible manner.

  7. James says:

    It appears that we have no say in this matter called “Life”.
    Stop paying your mortgages and ask for the original “Note.” Your signature paid for your house at the “Closing.” Why do they call it a closing? You have been had by the Banksters. They loan you ghost poop money, fiat, worthless, and then charge you interest. They pool house Notes and sell them to investors making more money. They can not prove a loss because they hide gains using two recording ledger books. Research and find out what any teenager could do on a computer, you can do also. They have you sign a Unilateral contract, that is not a contract as they have no skin in the mix. Wake up, the dollar is going down. Spend your mortgage payments on food, medicine, a shot gun and boxes of ammunition cause you are going to be your own protector. No money means no Corporate Police. Governments are already “BANKRUPT.” How can you ever pay off interest on a fiat loan? The money is worthless? Banksters create money. That use to be called Counterfeiting, it is my belief that Counterfeiting is still illegal. There is no moral, or legal reason to pay back money that was/is counterfeit. Did you receive any money at closing? Did the Loan mysters deposit money in your Bank account? Did they give you a big wad of cash to pay the owner of the home you purchased? Yet you continue to pay your mortgage, your loan, with your ghost poop money with interest every month. Isn’t that special? The Bank creates money from nothing and they get your payments for free as they have done you a wrong by making you sign a Unilateral Contract which is FRAUDULENT. Research for yourselves, if I am wrong than you can chock it up to a freak on the internet ranting about conspiracy theories. But I am thinking something you read in the rant made your minds eye blink. Go with it, knowledge is powerful. Never make an appeal in the bogus United Nations Court House, never use a lawyer, never sign onto their corporate contracts. Or at least sign under duress beneath your signature. Keep acquiring knowledge of the Bogus Judges, and mystical Lawyers and the oaths to British Bar associations. Smile, and be Happy. Makes for better wrinkles.

    • Donald Merritt says:

      I think you exaggerate your point beyond reality. you get a mortgage of say $200,000 which goes to the owner of the purchased property which if the seller wished could get all that money in cash and burn it or buy another property.

  8. warren kapsner says:

    Shah, this article is right on. While campaigning four years ago, Congressman Keith Ellison stopped at my business. He asked if I had any concerns that he could help small business owners solve. At that time it was almost impossible for small business owners to get a loan. I explained that the banks are not lending to us and are getting bail-out money from the government for free and lending it back to the government without risk. I asked him why would the banks lend money to businesses with some risk if the government will borrow it. His response was ” the banks wouldn’t do that, would they? ” I told him to check it out and he will find that is exactly what they are doing. He assured me he would and get back to me. I am still waiting for his reply.

    If the government wouldn’t be soaking up all the money they have created and continue to create we would be experiencing raging inflation or the largest economic expansion in the history of the world right now.

    • Glenn says:

      Warren,

      The politicians don’t know. This is a perfect example of a politician not having a clue. He’s not my rep but I live
      in Eagan i do know of him. I think I saw where he headed some commerce committee.

      Kind Regards,

      Glenn M.

  9. PeterW says:

    Jawboning that interest rates will rise, has is both detrimental and value – both sides of the coin.

    Interest rates cannot go up, no nation can afford to do so.

    Our (the Western) structure insures that the rich get richer and the poor get the bill.

    Thus no economic improvement, so applying more grease (print more money) is worthless or worse. The US and Japan has proven that factor.

    Do not look at the stock market, at it is an illusion, it has nothing to do with reality.

    Reality is on its way!!!!!!!!

  10. Edouard D'Orange says:

    No equivocation on Mr. Gilani’s part. I’m afraid that these policies will end badly, just as they did in the 2000-1 tech crash and 2007-8 financial/mortgage/derivative/ratings agency meltdown. The powers that be say that we must continue the current policies to avoid bad outcomes, like deflation, high unemployment, financial shocks. But something has to give eventually.

  11. Bill McKinney says:

    How ironic. I am in my hotel room working late into the evening and catch a TV commercial about Paul Revere and Sam Adams, Sons of Liberty.

    How much longer will we be able to stuff the frustration?

  12. dom says:

    Hey buddy can you draw me a way to get to Tierra del Fuego? How many people know where this and the mystical land of Pal Uldon can be found?

    Money is just as mystical. Unless one focuses on all it’s attributes from creation to accomplishments to destruction and what could possibly replace it.
    Everyone knows that it takes a man and a woman to make a baby. Both, Government and Banks are self governing institutions, one needs the other for CONVENIENCE so both can function. I dare to admit that money has no value but, why we all accept and live with it and not any other commodity? CONVENIENCE and that is why everyone accepts it.

    It is simply a number on a piece of paper not just any paper or coin or I owe U, but CREATED by the ruling system of a country. and to do that you better have an army to defend from other bullies and have a lot of painters marking the boundaries. Money is the paint like piss is for some animals to mark their territories and we use fences to demarcate our piece of relative freedom we can enjoy.

    BANKS! ??? they are book-keeping institutions and like all book-keepers they need to eat and live as well. This brings me to another value of money with its number on it. It teaches us to count, keep score sort of. it’s an abstract function of our brain which through the use of numbers we quantify everything we do and can relate to. Whether it”s our height weight, family, neighbour, a location on this planet or, the universe. with numbers we also measure what we take and what we contribute to and from society in general.

    Oh !Yes, I almost forgot CAPITALISM. Who would contribute anything under COMMUNISM? So I like to ask all the intellectuals of this web-sight what is in more jeopardy of being eliminated? With economic slow-down, high unemployment, businesses shutdowns, self governing bodies on the rise and a new generation of math illiterate population and I can see the DARK clouds of a renewed AGE.

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