About That Little Sign At The Bank

By Chris Rossini

We've all seen the FDIC sign at the bank. Perhaps we've never read it all the way through, like the part about "faith," but we're aware that there's "insurance" from the government should our bank head into the land of Lehman.

Why is that sign there? And what's going on behind the curtain?

Well, since we do not have a monetary system of sound money and honesty, there has to be some kind of assurance for depositors in order to part with their hard earned money. That FDIC sign basically says: "Go ahead, your money is safe here. No need to pay attention to this bank. No need to keep an eye on what it's doing, or who it's lending to. Just make your deposit and walk away." 

That's virtually what every American does too. Put the money in, and walk away. Is your money there any time you want it? Well, most people think so. Is it really there? No, of course it's not there.

We're forced to live in a "fractional-reserve" monetary system. In other words, banks only keep a fraction of the deposits that are entrusted to them, and lend out the rest at interest.

Sure, you can withdraw some of your money whenever you want...the keyword being some. Don't even think about withdrawing large amounts though. By law, the bank must report you to the government for such suspicious behavior. Withdrawing large sums of your own money is a no-no in the land of the free.

What about that FDIC sign though? How legit is it? 

Well, it should not come as a surprise to you, but it's all smoke and mirrors. Simon Black tells us:

Last week the FDIC released its annual financial statements, giving the public a glimpse into the financial condition of the organization responsible for backing up the entire US banking system. [...]

For starters, the fund doesn’t come close to meeting the minimum legal reserve requirement that was established by law following the Global Financial Crisis several years ago.

Even more, the FDIC states in its own report that they need TWICE the current reserve balance as “the minimum level needed to withstand future crises of the magnitude of past crises.”

Bottom line, the FDIC has stated in black and white that they are not equipped to deal with another bank crisis.

By the way, part of being forced to live in a fractional-reserve system is that you have to deal with "financial crises". It's baked in. Central planners can't possibly manage something as complex as an entire economy. A financial crisis is basically economic law asserting itself and smacking back those arrogant PhD's. Unfortunately, the vast majority of people get economically hammered during a financial crisis, because they trust the PhD's.

With sound money, and honest banking, the idea of a financial crises that engulfs almost all of the population would be unheard of. We're not there yet. The PhD's must suffer their coup de grace first.

That little sign at the bank? It's only there to make you feel comfortable about putting your earnings into a system run by central planners. That's it. Even FDIC admits that they can't bail everyone out.

The great economist Murray Rothbard summed up the deceit known as "deposit insurance" perfectly: 

"Deposit insurance" is simply a fraudulent racket, and a cruel one at that, since it may plunder the life savings and the money stock of the entire public.

It wouldn't be the first time that people were swindled by their government, and unless we move to sound money and no central bank, it won't be the last.