There are banks everywhere. In small towns, huge cities, and foreign nations. Bankers always seem to be wealthy, ever notice that? The corner bank is really indispensable, and I would never want to eliminate them. However, the way they work, if you wish to borrow money, is pretty amazing. Perhaps 95% of the citizenry have no concept of just how profitable a bank can be, because of its modus operendi.
Want to borrow money or need a mortgage? Fine, go see your local bank’s loan officer. He’ll check your credit rating, and if the loan is big enough, he may want to see your tax returns, will want to know where you work, how long you have been there, and how much debt you have. Fine! Can’t loan money to an unworthy person, can we? Except they have, and that caused the economy meltdown in 2008. But let us continue.
If you obtain the loan, it is considered an “Asset,” on the bank’s books. If you have a savings or checking account, it is called a “Liability” on the bank’s financial statement. That has always sounded ridiculous to me, even though the bank’s explanation is that if you owe them, it is an asset, and if they have your money, it is a liability, because they have to pay you on demand. I guess that’s a satisfactory explanation. You borrow the money, and the bank has you sign a note, or gives you a mortgage which is recorded in the county clerk’s office so that you can’t sell your house unless you pay off the mortgage. If you get a mortgage, the seller must give you a title insurance policy, to be sure previous owners paid for the home in full, and there are no liens on it. If the title is clear and you are approved, after signing dozens of papers and swearing to everything from your grandmother’s birthday to your shoe size, you get the mortgage, and you can move in. If you borrow to buy a car, the car’s title has the bank’s name on it as the owner first, with you second, till the loan is paid in full.
All fine and good, but where did the bank get the money to loan you? In the ‘good old times,’ the bank saved your money for you and paid you interest for the use of it. Their ‘use of it,’ meant that they would loan your money to responsible entities. They’d pay you maybe 3% interest and loan your money at 6%, the profit used to cover the bank’s operating expenses and insurance if the loan went bad and they had to pay you anyway. If the bank acted irresponsibly and loaned your money to the wrong person, didn’t check out the borrower’s credit, job, etc, that loan may go into default. If the bank had enough bad loans, the bank might go bankrupt and you’d have nothing. My Mom and Dad, during the great depression, lost their money in a bank that went bust, even though the bank did all the correct investigations about the borrowers to whom they loaned my Mom and Dad’s money. The depression had the U.S. with 25% unemployment, beggars selling apples on street corners, with churches and charities , helping as best they could with food lines. Millions lost their jobs and were unable to repay loans to banks. Even though banks in the great depression did all the correct things, many went bankrupt, taking their depositors’ money with them. In the good old days, banks loaned their depositors’ money to borrowers, and the interest difference paid the bank’s expenses and gave the bank a profit. Without a profit, nothing works well!
Today, banks create money out of thin air. Ask any banker, and he will admit it. Money having nothing to do with depositors’ money, other than in an indirect way. Sort of like the way the dollar is created, huh? The bank enters your loan as an asset on its books, and your account as a liability. The bank can loan any money to anyone, create it out of thin air, and hope for the best. In 2008, when everything seemed to go bad, most of the calamity was caused by banks bundling their bad loans in into packages of ‘assets,’ and selling them wholesale overseas to gullible investors or financial institutions. The loans went bad, and billions of dollars in loans, or ‘assets’ of packages of bad loans, caused the entire financial system of the world, to almost collapse. An insurance company had insured the loans, which saved the economies, and that insurance company went almost bust, but had ‘help’ from guess who? Banks had made loans created out of thin air, did little investigation of borrowers, because the government wanted to give blacks a chance to own a home, and banks were instructed to loan on homes regardless of credit worthiness.
Ah! But you say, my bank savings account is protected by the FDIC (Federal Depositor's Insurance Corporation). Make you feel OK about your savings account paying you about 1% interest, when we have 2% inflation? Would you like to have your car insurance, life insurance, or home insurance, with a company which had maybe a nickel’s worth of assets for every hundred dollars of issued insurance? Probably not, but that’s what the FDIC has: About a nickel for every hundred dollars worth of insurance. But never fret, because just like the federal debt of $21 trillion, and long term debt of close to $200 trillion, it can all be paid off with monopoly money if the whole thing collapses in a huge pile of worthless paper notes, promises, and sundry guarantees. Will it happen soon? As I said in a previous column, I think not soon, but yes, eventually.
Your gold and silver need no backing or guarantees from any government or anyone, for that matter. The gold and silver you have or should have, has a legitimate ‘Hallmark’ or label from an acceptable, trustworthy manufacturer, which reputation is constantly checked to be certain the product is pure. Your gold and silver can be sold anywhere at any time, to anyone who wants to buy it, and if you bought it from us, we charge a total of $25 when you sell it, and you can see the prices on our web site, which change as spot prices change. There’s no hocus pocus with Colorado Gold; just legitimate, A+ rating by the Better Business Bureau, the business created and operated by the same family since 1977, and operating with a 1% profit over our cost, including delivery to you. – Don Stott – 1-888-786-8822
P.S. there’s a TV advertiser who sells one and a half ounce silver coins. When you to the gas station or market, is gasoline priced at the one and a half gallon price? Are apples priced at the one and a half pound price at the market? What’s the point? Your and my assets are on ounces of gold and silver, not in once and a half. Ounces, pounds, miles, acres, dollars, hours, minutes, volts, amperes, speed, etc., are in whole measurements, not halves!