Probably not however this scam is the reality in the US banking system... and across all banking systems in the economies of the West. It is known as fractional reserve banking.
In general, since all depositors do not demand to get their cash back at the same time, the banking industry created a business practice of loaning out somewhere around 90% of the deposits at their bank; leaving 10% available to met the demands of depositors on an ongoing basis.
When the depositors of the banking system, which is essentially all of our population, get spooked or lose faith in the banking system, and all them rush to the bank at the same time and demand their money, it is referred to as a run on the bank… remember the scene with Jimmy Stewart in the Christmas favorite movie, It Is a Wonderful Life?
In order to keep this from happening, a lot of effort is put into “happy talk” and not discussing how bad the economy might be. The rational is that it is better to keep people positive, and their psychology upbeat, so that they do not have fears about losing their money in the banking system.
Another issue that can cause a run on the bank is when banks lend out significantly more than 90% of the deposits in their bank.
As an example, US Bancorp has $248 billion in total customer deposits according to their most recent reporting, yet a mere $6.9 billion in cash... roughly 2.8%.
PNC Bank holds just 1.8% of its customers' $248 billion deposits in cash. And BB&T holds barely 1.0% of its customers' $131 billion deposits in cash.
These figures are indicative of the entire western financial system. Banks hold a very small percentage of customer deposits in cash. The rest is sitting in loans, bonds, and other securities of indeterminable value-- mortgages that are still under water, like shaky commercial real estate deals.
The truth is that nobody really knows what is on their books. Loan portfolios are like a black box, and the liquidity structure doesn't leave a lot of room for error.
As an example, I have a friend who lives and works in a major metropolitan city in the middle of the U.S. He has around $50,000 on deposit in (both checking and saving) accounts in the downtown branch of a major marquee bank. Periodically, he will test the system by walking into the downtown branch and request to withdraw $10,000. He is always told it will be several business days before they will have the funds available for him and that he will need to come back in 2-3 days to pickup the cash. And, he does this during a time when there is no stress in the system or panic on the streets, so to speak.
Think about it. If the slightest thing goes wrong, like a spike in customer withdrawals, a decline in bond prices or commercial real estate, and people get fearful because the “happy talk” stops working, banks simply don't have any rainy day funds set aside to handle it.
And who can blame the banks? The FDIC, one of the US banking system's chief regulators, has a mere $33.0 billion reserve fund to insure $9.3 TRILLION worth of deposits in US banks... a ratio of just 0.35%. And the FDIC is backed by the insolvent US government!
Bottom line, we simply can no longer afford to blithely assume that our bank... our most intimate financial partner... is in good financial condition.
The good news is that in 2013, it's no longer necessary to bank or save within the confines of our home country. It is possible to establish a bank account in a country where the banks are actually well capitalized and liquid.
Singapore is one of those places. In fact, Singapore has ZERO net debt and has never had a banking failure in its history. Plus the banks are swimming in cash.
UOB Bank, based in Singapore, for example, has 33.7% of its customer deposits in cash equivalents. OCBC Bank, also based in Singapore and rated as the world’s strongest bank, holds 35.8%. These banks are literally 10 to 30 times more liquid than their western counterparts.
With a bit of legwork and the power of the Internet, it's possible for both individuals and businesses to open insured accounts at either of these banks and use their Internet Banking services.
The advantages of banking in Singapore are obvious; there is simply no comparison.
If everything goes fine and there are no major hiccups in the world, you won't be worse off for holding some savings at a highly capitalized bank in Asia's most dominant financial center.
Yet the message is clear… if there's another major meltdown like we saw in 2008, or worse... these insolvent Western governments pull a Cyprus... then having funds in Singapore may turn out to be one of the sharpest financial decisions you could have made. This is what those who are savvy with their money, like the insiders do, in order to protect their hard earned money.
What should you do until the U.S. banking and financial system crumbles? Obtain more financial education and learn how to protect yourself during these trying times of massive money printing, fiat currency, and soon-to-be runaway inflation. Purchase precious metals, including gold, to hedge or protect your net worth against the decreasing value of the US Dollar, which is just paper money.
With this in mind, it is a good idea to learn how to be an entrepreneur, become self employed and get self sufficient. Before I leave this topic, I want you to know that at the end of this post, I will introduce you to a top-tier income generating business opportunity where you can earn while you learn. This opportunity will provide access to education, tools, and best practices as well as a community that will provide support to you as you take action. Once you get traction, a whole new world will open up and you will see all kinds of business ideas and opportunities.
In addition, it is a good idea to protect the purchasing power of your money in gold; and there are several ways that may be appropriate to obtain this protection. These include direct ownership in minted coins, use of gold exchange traded funds, gold mutual funds, and junior gold stocks. Many are investigating having part of their IRAs in gold, silver, precious metals, and non-dollar denominated currencies.
For those that truly believe default of sovereign debt is the greatest risk we all face, it is wise to learn how to implement a multiple flag strategy to diversify this risk or provide protection against higher taxes, capital controls, hyperinflation, civil unrest, erosion of personal liberty, and the rise of a police state. With a multiple flag system, you consider taking preparations like, but not limited to, establishing a foreign bank account, purchasing some real estate overseas, seeking alternate sources of income, dual citizenship, and carrying multiple passports.
I will continue to provide examples of things we need to learn, the secrets of the insiders, as part of being savvy with our money, and introduce alternative wealth creating strategies, in future articles and updates at my blog over the next few weeks.
If you are like-minded, be sure and join me here at this top-tier business opportunity as a way to be savvy with your money and get back in the game … Passionate Professionals ... Rebuilding Careers in order to generate top-tier income.
Finally, I want to thank Simon Black, of Sovereign Man, as he was the source of some of the material mentioned in this post.
In closing, be sure to Meet Me at my website, WhoIsMikeFarrell; Learn How to Get Self-Employed, at my HomeBizSocial website; Read about my Internet Marketing Business, at myaspenIbiz site; Obtain Some Tips About Being No 1 on Google, at aspenIbiz My Go-To-Market Partners website; and Learn How to Live Longer, at aspenIbiz My Life’s Advantage Today site.
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