What the Federal Reserve is doing to banks will end badly. It always does. We’re talking about creating “money” from thin air or, in other words, the Fed is now paying banks in reserve balances, which aren’t really balances at all, but rather numbers sitting on a computer screen somewhere waiting to be transferred.
Some estimates say that up to 10% of American bank balances are made up of unreal money from the Fed. This should be scary stuff to us all. Here are a few examples of where this policy has been tried in the past.
1. Weimar Republic – This liberal democracy was established in Germany in 1919 to replace imperial rule. Failing miserably, especially in the area of fiscal policy, it led to the rise of Adolf Hitler and we all know how that ended.
2. Argentina – from 1975 to 1991, this country went through a spiraling cycle of inflation – hyperinflation actually – brought about by a government ignorant enough to believe it could print enough money to stop the economic slide. Sorry, it doesn’t work that way.
3. Zimbabwe – ditto for Argentina.
The end result is that American banks have replaced protecting themselves through direct liens placed on real economic assets to standing in line with hat in hand waiting for the government to repay them. Don’t hold your breath for that. One thing the government is really good at is breaking promises. At Empowered Investor Network, we’re working to teach investors how to reach the land of financial freedom in spite of government stupidity.
The Creating Wealth Team
FreeDigitalPhotos.net / Grant Cochrane
