Archive for February, 2008

Bank Failures? No big deal, says CNN

Friday, February 29th, 2008

I really enjoyed reading this article, although I think would be much better suited publisher.

Here are some excerpts:

Banking experts say there is one thing that will save your money if your bank goes under. That’s FDIC insurance. “It’s the gold standard,” says banking consultant Bert Ely. “The FDIC has ample resources. It’s never been an issue,” he says.

As loan delinquencies rise, and bank failures increase, the FDIC is shoring up its reserves.

That’s fascinating, because last I checked (about five minutes ago), the FDIC had in its assets about 1.2% of the deposits it claims to “insure”.

If your bank bites the dust, there’s nothing to fear according to the FDIC. A healthier banking institution normally buys the failed bank according to Barr. “There is little or no interruption to the consumer,” he says. “If you go to bed one night as a customer of a bank, and you wake up as a customer of a new bank, there is nothing you have to do.” Your checks will still clear, you can still use your ATM card.

See? Bank failure isn’t even a bad thing!

Legalize Real Money!

Thursday, February 28th, 2008

I’ve been asked what Ron Paul fans mean when they say, “Legalize real money!” To answer this, see for yourself what the constitution says and compare it to current federal law:

Article I, Section 10, Clause 4 of the United States Constitution:
“No State shall … coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;”

(Note that on every unit of paper money the U.S. government asserts without apology: “This note is legal tender for all debts public and private.”)

Title 18, Part 1, Chapter 25, Section 486 of United States Code:
“Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both.”

So there you have it… The Constitution says gold and silver are the only valid forms of legal tender. The Congress now says, use gold or silver as money and go to jail. How could it get any more black-and-white than this?

The founding fathers understood that giving the government power to print money out of thin air was a bad idea. They knew it would lead to incredible inflation at the expense of almost every American, which it has. They knew the government wouldn’t be able to fabricate gold and silver out of thin air, so they made it law that legal tender must be in the form of gold and silver.

US Banks Jumping Without a Reserve?

Thursday, February 28th, 2008

So in America, banks are required to keep 10% of deposits on hand.  That is, when you deposit $100 into your savings account, they’re required to hang onto $10 and they’re allowed to lend out $90 of that to others.  The $10 they keep is their reserve.  This is called fractional-reserve banking because the bank only keeps a fraction of the money they promise to give you when you try to make a withdrawal.  There are many, many problems with this, but for now let’s concentrate on those reserves.  The idea is that if there were ever a crisis so huge that more than 10% of the customers wanted their money, the Federal Reserve could print more money out of thin air.  This obviously screws everyone who has US Dollars because printing new money causes prices to go up, which means the money you already worked for becomes less valuable.

But that probably won’t ever happen, right?  I mean… we’d have to be in pretty bad shape.

Well, check out this graph…

Non-borrowed Reserves = Total Reserves – Money Borrowed from the Fed.

Notice how the latest tick is at -3.9.  This means that, for the first time since the Fed started publishing this data series, the banks’ reserves are made up mostly of money they borrowed from the Fed.  How do you feel about your bank having to borrow money just to maintain a 10% reserve?

Thanks to Dr. Mark Thornton for pointing this out and to Dr. Randall Holcombe for explaining it to me.

Diebold Accidentally Leaks Results Of 2008 Election Early

Tuesday, February 26th, 2008

Diebold Accidentally Leaks Results Of 2008 Election Early
Click here if you can’t see the video.

Is John McCain Electable?

Tuesday, February 12th, 2008