I have warned about this for some time, this is not positive news, especially for the poor and middle class. Citibank announced recently that they will no longer allow depositors to withdraw more than a $100,000 per month. So Citibank has taken first position on your money. Not a good time to keep money at a bank. also, not a good idea to keep savings in US Dollars..i recommend ETF’s in gold, silver, austrailian $, swiss franc, commiodities. Even if the return isnt high, these are great inflation hedges. if the dollar falls 5%..you just lost 5%. if the Fed keeps inflating the money supply as reported below soon inflation will eat you alive.
Thursday, January 24, 2008
Banks have NEGATIVE reserve ratios
The Federal Reserve published on Jan. 17, 2008 the bi-weekly report Aggregate Reserves of Depository Institutions and the Monetary Base. I encourage you to review this report to see the actual numbers and trends.
The Federal Reserve published on Jan. 17, 2008 the bi-weekly report Aggregate Reserves of Depository Institutions and the Monetary Base. I encourage you to review this report to see the actual numbers and trends.
A bank’s reserves is equal to the sum of borrowed and non-borrowed reserves. Because the Federal Reserve acts as the lender of last resort the Federal Reserve system acts as one bank.
So, where are the required reserves coming from? The Federal Reserve is printing the money out of thin air as shows up in ‘Term auction credit’.
Dec 11,613
Jan 2 30,000
Jan 16 40,000
This combined increase in one month of 81,613 compared to the monetary base of 820,331 is about 9.9%, or 119% annually, of the total money supply. This is very serious inflation.
The Bottom Line
Instead of holding $18 of non-borrowed reserves the average bank in the US owes $1.70 to the Federal Reserve for every $1,000 to meet the required reserve ratio. To continue meeting their required reserve ratio the banks are borrowing about $12.5B per week that the Federal Reserve prints out of thin air increasing the money supply by 10% per month.
Note:
After deeper research this is the first time ever in the history of the Federal Reserve that the non-borrowed reserves number has ever gone negative. The Fed has always been in control over the individual banks and held moral suasion over them which prevented them from borrowing to meet their required reserve ratio.
Bernake has said the ‘loans’ will go on as long as necessary and he has been increasing the size of them.
What makes you think the banks would ever want to repay these loans? They are a cheaper source of capital than anywhere else. The banks have now shifted the cost of their reserves onto the Fed who is then printing the reserves out of thin air. Because the Federal Reserve system functions like one big bank (whose required reserve ratio is now being printed out of thin air every week to prevent a bank run) and because the Fed has lost all control, they no longer have any moral suasion power, therefore hyperinflation is the only option to a bank run.
We’ve now officially entered the Weimar Germany phase.
