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Originally published March 17 2015

World's greatest pyramid scheme: How banks plot to seize your property and life

by J. D. Heyes

(NaturalNews) Here at Natural News, we have often advised our readers to diversify their assets, because in a time of economic crisis, it just doesn't make any sense to keep all of your financial eggs in one basket.

One of the ways to accomplish diversification of your portfolio is to not put all of your assets into a bank. There are several reasons for this, not the least of which is because, when times get tough, desperate governments raid bank accounts, as our editor, Mike Adams, the Health Ranger, has documented in reporting on the beginning of the Greek economic collapse a couple years ago.

Another reason to keep some assets out of banks is because the banking system is fraught with risk -- risk that becomes more pronounced when governments go rogue, currencies devalue and economies crash.

As the Modern Survival Blog noted regarding "fractional reserve banking" methods used by the big financial institutions:

The bank begins the pyramid scheme by taking your deposit (which you might think goes into the vault) and they loan most of it out. In fact, generally, with some variation, for every $1 dollar that you deposit, the bank will loan out approximately $10. In other words, the bank uses your deposits to loan out more (way more) than they have in reserves in order to make big profits. This is 'Fractional Reserve Banking.' The banks only keep a fraction of the overall money on hand.

Cyprus-like "bail-ins"

The scheme works as long as there are no runs on banks, with tens of millions of Americans demanding all of their deposited money at once.

What's more, the site notes in a separate report, new banking rules adopted by the G20 group of rich nations last fall make your deposits even more risky:

During the next banking crisis, any 'money' that you and I have in the bank will be 'bailed-in' after a financial collapse. And if you think that your money is protected with your bank account's FDIC backing, think again.

During the recent G20 meeting (mid-November), the member nations decided that your bank deposits will become property of the bank if a crisis takes it down.

Language contained in the new agreement describes "bail-in," as opposed to traditional "bail-outs."

A bail-in is essentially a bank apportioning some or all deposited assets in order to prevent its failure:

[A] bail-in, which is a statutory power of a resolution authority (as opposed to contractual arrangements, such as contingent capital requirements) to restructure the liabilities of a distressed financial institution by writing down its unsecured debt and/or converting it to equity. The statutory bail-in power is intended to achieve a prompt recapitalization and restructuring of the distressed institution. [emphasis added]

Statutory power

It's important to define a few things and a few terms, such as "unsecured debt." Deposits make up the largest class of unsecured debt in any bank. So, an insolvent bank will be made solvent (or at least put back on a path to solvency) by turning deposits into equity, or bank stock that could become worthless on the market or be tied up for a long time in resolution proceedings.

This is a statutory power, so Cyprus-style bank confiscations will become the law of the land -- and the costs of such will be borne by depositors.

The Federal Deposit Insurance Company, or FDIC, is supposed to insure deposits up to $250,000, but in the context of a systemic monetary meltdown or market fiasco, there is no guarantee that the federal government will have the funds to make good on its promise (especially when our own economy could be done in by the massive amount of debt that the government has incurred in recent decades).

The IMF "staff discussion note" from 2012 is available here.[PDF]


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