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The Big Banks Are Recklessly Gambling With Our Money & It Will Cause The Global Financial System To Collapse
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Have you ever wondered how the big banks make such enormous mountains of money? Well, the truth is that much of it is made by gambling recklessly. If they win on their bets, they become fabulously wealthy. If they lose on their bets, they know that the government will come in and arrange for the banks to be bailed out because they are “too big to fail”. Either they will be bailed out by the government using our tax dollars, or as we just witnessed in Cyprus, they will be allowed to “recapitalize” themselves by stealing money directly from our bank accounts. So if they win, they win big. If they lose, someone else will come in and clean up the mess. This creates a tremendous incentive for the bankers to “go for it”, because there is simply not enough pain in this equation for those that are taking the risks. If the big Wall Street banks had been allowed to collapse back in 2008, that would have caused a massive change of behavior on Wall Street. But instead, the big banks are still recklessly gambling with our money as if the last financial crisis never even happened. In the end, the reckless behavior of these big banks is going to cause the entire global financial system to collapse.
Have you noticed how most news reports about Cyprus don’t even get into the reasons why the big banks in Cyprus collapsed?
Well, the truth is that they collapsed because they were making incredibly reckless bets with the money that had been entrusted to them. In a recent article, Ron Paul explained how the situation played out once the bets started to go bad…
The dramatic recent events in Cyprus have highlighted the fundamental weakness in the European banking system and the extreme fragility of fractional reserve banking. Cypriot banks invested heavily in Greek sovereign debt, and last summer’s Greek debt restructuring resulted in losses equivalent to more than 25 percent of Cyprus’ GDP. These banks then took their bad investments to the government, demanding a bailout from an already beleaguered Cypriot treasury. The government of Cyprus then turned to the European Union (EU) for a bailout.
If those bets had turned out to be profitable, the bankers would have kept all of the profits. But those bets turned out to be big losers, and private bank accounts in Cyprus are now being raided to pay the bill. Unfortunately, as Ron Paul noted, what just happened in Cyprus is already being touted as a “template” for future bank bailouts all over the globe…
The elites in the EU and IMF failed to learn their lesson from the popular backlash to these tax proposals, and have openly talked about using Cyprus as a template for future bank bailouts. This raises the prospect of raids on bank accounts, pension funds, and any investments the government can get its hands on. In other words, no one’s money is safe in any financial institution in Europe. Bank runs are now a certainty in future crises, as the people realize that they do not really own the money in their accounts. How long before bureaucrat and banker try that here?
Unfortunately, all of this is the predictable result of a fiat paper money system combined with fractional reserve banking. When governments and banks collude to monopolize the monetary system so that they can create money out of thin air, the result is a business cycle that wreaks havoc on the economy. Pyramiding more and more loans on top of a tiny base of money will create an economic house of cards just waiting to collapse. The situation in Cyprus should be both a lesson and a warning to the United States.
This is an example of what can happen when the dominoes start to fall. The banks of Cyprus failed because Greek debt went bad. And the Greeks were using derivatives to try to hide the true scope of their debt problems. The following is what Jim Sinclair recently told King World News…
When people say that the Cypriot banks lost because of being in Greek debt, what was one of the Greeks’ greatest sins? They used over-the-counter derivatives in order to hide the real condition of their balance sheet.
Depositor money, brokerage money, and clearing house money have been tangled up in the mountain of derivatives as the banks have used this cash to speculate in an attempt to make huge bonuses for bank executives.
2013-04-03 15:06:10
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