Phillip Tilley

Banks stop loaning money

January 13, 2008 |  36 comments
Image Credit: sxc.hu Don’t get your knickers in a knot, it didn’t happen yesterday. The push for a cashless society has been upon us for some time. Some people believe it is OK for banks to charge high interest on certain individuals because they pose a risk. What does the bank risk that justifies this practice? First a look at Consumer Economics 101. Not so long ago in a land formerly known as a Free America, people prospered and had money left over after their monthly expenses were met. They would deposit that extra money in the Bank for safekeeping. The Bank would loan that money out to individuals or businesses so they could buy a house or expand a business venture.

The Bank charged an interest rate of 4% to the borrower. The Bank then paid depositors 2% interest on their deposited money and kept 2% to cover operating expenses and earn a small profit. It was a good deal for everyone involved. In this system the depositor is an investor and the money in the bank is an investment. The interest they receive is a dividend. The Bank acted as a broker on the deal insuring the safe return of the money loaned out. The borrower was happy to get a loan with a reasonable interest rate.

With a modest interest rate and a modest return there was modest growth. But there was some risk. The investor trusted the Bank not to lose their invested funds. If the borrower defaulted on the loan, which happened less then one half of a percent of the time, the Bank was still responsible to return money to the depositors. Too many bad loans and the Bank wouldn’t earn a profit, or might go out of business entirely. Everyone was risking something and everyone had an interest in the success of all involved.

Then things changed when the banking industry as a whole stopped using “money” and switched to Federal Reserve Note currency. Because it happened slowly, nobody noticed and no one seemed to care. Federal Reserve Notes, in spite of having no value of their own and backed by nothing of value, were declared by the Government to be legal tender and were treated as such. Now the risk factor was gone! Fewer people had leftover funds to deposit in banks and reserves dwindled. So the Government allowed Banks to “extend credit”, which is allowing people to go into debt which is a negative thing. Now credit could be extended to a borrower without the risk of losing depositors money, since depositors no longer had money anyway, only worthless Federal Reserve Note currency. The Government insured the safety of the returned debt through FDIC. This means they would return worthless Federal Reserve Notes to replace any worthless Federal Reserve Notes that were not paid back.Now the depositor has nothing at risk, the Bank has nothing at risk, and if the borrower defaulted, the Government would extinguish the debt that had been created. Each time someone borrows from a Bank they are not loaned money, they are extended credit. Any banker worth their salt would never say they loan money because that would be a lie. They will say they will extend your credit.

The new system however created a new risk for the Banks. With all of our currency as debt currency, borrowed into existence when someone is extended credit, the funding to pay back the debt has to come from somewhere. This leads to sustained debt to pay an ever increasing debt. This cannot go on forever and it drives up interest rates and default rates until the entire system implodes upon itself.

If you haven’t been paying attention, the implosion point is nearly at hand. Perhaps you are too poor to pay attention. There is no money so Banks stopped loaning money a long time ago. It is one of the mechanisms of the money matrix. Some people are waking up though. In the video game Silent Hill 3, on a stone wall it says: “Thus one’s life turns to riches: What was a bag of silver coins is now the number in a book. Yet faith hath no price… Ah, but do people know this?”

Wake up people, the money matrix has you.

Phillip Tilley is the author of The Money Matrix of the New World Order and other articles. Comments (36)

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