Nov 24th Post 2024 (End of Fractional Banking)
If the GCR was to happen now or in the near future, it can be assumed that, in some fashion, we would have to utilize the current banking system. So I looked at how much banks make and how they make it. Looking at Wells Fargo, Bank of America (BofA) and J.P. Morgan Chase.
In 2023 Chase had $134.4 Billion in revenue with a net of $48.3 Billion. Wells Fargo had $89.4 B in revenue with a net of $19.1 B. B of A had $96.5 B in revenue with a $26.5 B net. In 2019(prior to the pandemic) Chase had $36.4 B net, BofA $27.4 B net and Wells Fargo $19.6 B net.
Banks primarily generate money through several activities: Interest Income: Banks lend out customer deposits in the form of loans, charging interest. They earn by maintaining a gap between the interest paid on deposits and the interest charged on loans. Fees: Banks charge fees for services like account maintenance, overdrafts, wire transfers, and credit card usage. Investments: They invest in financial instruments such as bonds, equities, or real estate. Trading & Advisory: Larger banks earn from trading securities and offering financial advisory services.
What I didn’t know was in March 2020, the Federal Reserve eliminated reserve requirements for banks. (Don’t know how this conflicts with Basel 3.5) This effectively ended the traditional practice of maintaining a minimum reserve percentage or Fractional Reserve Banking. With Fractional Reserve Banking , banks were required to reserve a portion of deposits for every dollar they loaned .With a $100 deposit the bank could loan out $90. Now, with no reserve amount required, the banks can loan out all of its deposits. Keep in mind when I say “deposit”, that’s your money they are loaning out.
From March 2022 to July 2023, the Fed increased rates 11 times, raising the federal funds rate from near zero to 5.25–5.50%—the fastest pace of hikes in decades. The question is, how come the banks’ net profit increased substantially during and after the pandemic? Theoretically raising interest rates curbs inflation. But the banks made more money with the higher rates? It’s called Increased Net Interest Margin (NIM). Banks earn money by lending funds at higher interest rates than they pay on deposits (your money).When the Fed raises rates, the interest banks charge on loans (like mortgages, credit cards, and business loans) typically increases faster than the interest they pay on customer deposits. This widens the NIM, directly boosting profitability. The banks are making a fortune on the suffering of the rest of us. And the Fed is complicit.
All that being said, if the GCR was to happen now, the massive funds deposited into the banks would follow this scenario. The banks would basically have unlimited discretion what they can do with your money. It all points to the need for a new, completely different, financial system for the GCR to engage. Until we see that, we won’t see a GCR.
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Some Humor
A woman awakes during the night to find that her husband was not in bed. She puts on her robe and goes downstairs to look for him. She finds him sitting in the kitchen with a cup of coffee, and he appears to be in deep thought, just staring at the wall. She watches as he wipes a tear from his eye and takes a sip of coffee.
What’s the matter dear?, she whispers as she steps into the room. Why are you sitting down here this time of the night? The husband looks up from his coffee, Do you remember 20 years ago when we were dating, and you were only 16? he asks solemnly. Yes, I do she replies.
The husband paused, the words were not coming easily. Do you remember when your father c****t us in the back seat of my car making love?. Yes I remember, said the wife, lowering herself into a chair beside him.
The husband continued. Do you remember when he shoved the double barrel shotgun in my face and said, “Either you marry my daughter, or I’ll send you to jail for 20 years.” Yes I remember that too. She whispered softly.
He wiped another tear from his cheek and said,
“I would be getting out today”!
