The End of Pretend?
I will not bore you with how fractional reserve banking works. Let's leave it at the fact that none of your money is really at your bank. Banks are required to keep minimum reserves to meet things like withdrawals and banking losses. The losses part is a drag because, well, of all the money the banks have lost in real estate loans. This kills earnings and limits lending.
Of course in the new age of taxpayer backed speculation, Ben Bernanke wants to up the ante and allow the banks to lend out not $8-$10 dollars for your every one at the bank, why not lend out infinity? Why bother carrying cash to cover losses when losses are the sole responsibility of the US taxpayer? Why indeed?
I thought this was a joke but it is a real story (Hat tip The Economic Collapse:
Money Out Of Thin Air: Now Federal Reserve Chairman Ben Bernanke Wants To Eliminate Reserve Requirements Completely?
Key footnote line:
That simply does not make any sense. But it is right there in black and white on the Federal Reserve's own website....
The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
I guess this is the logical extension of our situation. Maybe the pretend is over, just do whatever you want.
I think I want more gold and silver.
Have a good night.