Is your money safe in the bank? Harvard Economic Professor says, “NO!”
Terry Burnham, former Harvard economics professor, Goldman Sachs man, and wealth manager took action and moved $1 Million dollars out of Bank of America.? Why? Because the risk he would not get his money back without the bank taking it was too high.
Burnham says that the Federal Reserve has become a “reverse Robin Hood” as they take from the poor (and unsophisticated) and give to the rich (and politically connected).
Burnham points out that the potential cost of keeping his money in a big bank (like Bank of America) is that the bank may be unwilling or unable to return his (and your) money.
Banks will not be able to give everyone their money back concurrently because the banks do not actually have the money to pay you!? Why??
THEY HAVE USED IT BY LENDING IT OUT and do not have the cash on hand to give back to depositors (you and I).? 90% or more of Big Bank deposits are lent out to borrowers. That leaves only 10% or less in cash reserves!
And That’s How the Banks Create Money – It’s called fractionalized lending – a banking system that requires banks to hold only a portion of the money deposited with them in reserves.? Burnham shows that a 10% reserve is a fiscally irresponsible policy that will eventually have disastrous results.
Burnham makes the point that the Federal Reserve’s policies have had a myriad of unanticipated and negative consequences.? Creating new money out of thin air will be disastrous sooner or later.? Big banks are fragile – and vulnerable to bank runs – because the Fed has set interest rates at zero.
Customers wait in line at the IndyMac Bank branch headquarters in Pasadena, Calif., in July 2008. Joshua Lott/Bloomberg News
What will happen in bank insolvencies? The results could very well be a “bail-in” – a strategy for insolvent banks to take deposits from us to balance the ship.
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