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Are All Banks Are Subject to a “Run on Deposits?”
Not the 12 Federal Reserve Banks. Why?
With the exception of the 12 Federal Reserve Banks, all banks are subject to a “run on deposits” because they practice what is called “Fractional Reserve Banking.”
According to Investopidia.com,
Fractional reserve banking is a system in which only a fraction of bank deposits are required to be available for withdrawal. Banks only need to keep a specific amount of cash on hand and can create loans from the money you deposit.
…When you create an account at a bank, in the contract, you agree to allow that bank to use a percentage of your deposits as loans to other bank customers. This doesn’t mean you don’t have access to the money you deposited; it only means that if you want to remove more than the percentage a bank keeps on hand, such as the entire balance, from the account, the bank will need to access funds from somewhere else to give you your balance.
You receive interest as an incentive for keeping money in an account the bank can use to create loans.
…Fractional reserve banking supposedly has its roots in an era when gold and silver were traded. Goldsmiths would issue promissory notes, which were later used as a means of exchange. The smiths used the deposited gold to issue loans with interest, and fractional banking was born.
I am sure that the “Court Factor” who came up with that brilliant stroke of deception was handsomely rewarded by his peers. I take your money on deposit, pay you an interest rate that is lower than the rate I will charge my borrower(s), and as long as you don’t want or need your money immediately back, I can lend it to many others, and earn money on your deposited money that you have trusted me to hold on your behalf, at your request.
To answer the second question, one needs to know that the Federal Reserve Banking System is a group of 12 privately owned Regional Banks that determine the supply of money, and the cost of money (interest rate). The Fed is the Central Bank of the United States of America, and therefore, the world (or at least it used to be).
…The National Bank Act, passed in 1863, imposed 25% reserve requirements for U.S. banks under its charge, and required banks to keep reserves on hand to protect depositor funds from being used in risky investments. In 1913 the Federal Reserve Act created the system of Federal Reserve banks that we know collectively as the Federal Reserve System. Banks were then required to keep reserve balances with the Federal Reserve Banks.
Reserve Requirements for banks under the Federal Reserve Act were set at 13%, 10%, and 7% (depending on the type of bank) in 1917. In the 1950s and ’60s, the Fed had set the reserve ratio as high as 17.5% for certain banks, and it remained between 8% to 10% throughout much of the 1970s through the 2010s.
During the pandemic of 2020, the Federal Reserve reduced the reserve requirements to 0%. On March 26, 2020, the 10% and 3% required reserve ratios against net transaction deposits were reduced to 0% for all banks, essentially removing the reserve requirements altogether.
Consumer panic can cause mass withdrawals and lack of capital. When consumers, investors, and businesses panic about economic circumstances, they tend to run to their banks to withdraw everything they can to prevent further losses. This is called a bank run, and a fractional reserve system keeps them frow withdrawing their capital because the banks do not physically have it.
Before the introduction of the Fed in the early 20th century, the National Bank Act of 1863 imposed 25% reserve requirements for U.S. banks under its charge.
Nobody knows when fractional reserve banking originated, but it is certainly not a modern innovation. Goldsmiths during the Middle Ages were thought to issue demand receipts for gold on hand that exceeded the amount of physical gold they had under custody, knowing that on any given day, only a tiny fraction of that gold would be demanded.
The Board of Governors of the Federal Reserve has the sole authority over changes in reserve requirements within limits specified by law. As of March 26, 2020, the reserve requirement was set at 0%. That’s when the board eliminated the reserve requirement due to the global financial crisis. This means that banks aren’t required to keep deposits at their Reserve Bank. Instead, they can use the funds to lend to their customers.
So when banks such as Silicon Valley Bank and Signature Bank make bad loans that weren’t repaid, those banks lost their depositors funds. When that happened, the banks tried to raise funds to shore up their cash on hand. Then word spread, and businesses ran to SVB and Signature demanding their deposits be returned. Since the reserve requirements had been lifted during Donald Trump’s Presidency, the banks had no cash, or reserves to satisfy their customers, and they were forced to close their doors.
As Senator Elizabeth Warren, Massachusetts (D) said,
“In 2018, I rang the alarm bell about what would happen if Congress rolled back critical Dodd-Frank protections: Banks would load up on risk to boost their profits and collapse, threatening our entire economy — and that is precisely what happened,” Warren said. “President Biden called on Congress to strengthen the rules for banks, and I’m proposing legislation to do just that by repealing the core of Trump’s bank law.” — nbcnews.com, March 13, 2022
The answer to the second question of why the 12 Federal Reserve Banks are not subject to a bank run is simple. They are the Bank, to banks; and a bank can’t run on another bank, only depositors can do that. Anytime the Fed needs money, it has the US Treasury Department print whatever amount it needs to resolve the issue.
I know it is hard to wrap your head around it, but the Federal Reserve Act of 1913 bestows the Fed the right to determine the supply of money in circulation. The Fed doesn’t use customer deposits and fractional banking to make loans. They just have the Treasury Department fire up the printing presses, and magically, new money is created out of thin air. Please see The Web of Debt by Ellen Brown.
The 12 privately owned Federal Reserve Banks don’t take deposits from customers (they do hold the fractional reserves of all banks who are a member of the Federal Reserve System, but not for lending purposes), nor do they borrow money from anyone else. The Fed just has the Treasury Department fire up the printing presses, and for the 4 cents that they pay the U.S. Treasury for each bill ($1, $5. $10, $20, $100, $1,000 bills) that they circulate throughout the economy by lending to the bank customers who are a part of their system.
It may take a while for this to sink in, but once it does, you will understand that the privately owned Fed can’t be run on. The Fed doesn’t take deposits from banks for purposes of relending, and the Fed doesn’t borrow from anyone. They are the BANK.
You were probably warned to “neither a lender nor a borrower be.”
The Fed got half of it correct; they are not the borrower, but they are the Lender, to the entire world. A world indebted to its private bankers.
I have exercised my artistic license to offer what I think Moses, an African, would offer today. With history in his rear view mirror, I believe he would accept my adjustments to Commandments 1–4; while 5–10 being mathematically correct, remain intact. I think we all agree that in today’s dystopic world, there is a dire need for the law enforcement of the 10 Commandments. Every day CHOOSA (Children of Stolen and Sold Africans) bear witness to the paucity of their implementation.
The BOLD print indicates my variation of Moses’s Commandments found in the Old Testament, in the Book of Exodus (The word ‘exodus’ will be dealt with another time). The bracketed is my brief commentary.
1
“Thou shalt have no other gods before me.” — Exodus 20:3
“Thou shalt not have a GOD, much less gods.”
[I offer the following as my commentary regarding ‘God’ and religion.]
“Religion keeps the poor from killing the rich.” — Napoleon Bonaparte
“We have used the Bible as if it were a mere special constable’s handbook, an opium dose for keeping the beasts of burden patient while they were being overloaded, a mere book to keep the poor in order.” — Charles Kingsley, Canon of the Church of England
“When the missionaries arrived, the Africans had the land and the missionaries had the Bible. They taught us how to pray with our eyes closed. When we opened them, they had the land and we had the Bible.” — Jomo Kenyatta
It’s not what you know that hurts you. It’s what you know, that just ain’t so.” — Leroy ‘Satchel’ Paige
2
“Thou shalt not make unto thee any graven image.” — Exodus 20:4
“Thou shalt not make the U.S. Dollar a GRAVEN IMAGE.”
[There is no greater example of a graven image than the fiat currency called the U.S. Dollar. Its worship has created a world of greed, corruption, and evil which humanity has endured for the last few centuries. I think we can all bear witness that it is indeed the root of all of the evil that exists and persists in the world today.]
3
“Thou shalt not take the name of the Lord thy God in vain.” — Exodus 20:7
“Thou shalt not allow the economic paradigm — Capitalism — to exist.”
[The evil of Capitalism is direct disrespect for humanity. My mantra, “economics is the driving force in humanity” makes me laser-focused on the economic paradigm governing our world. Allowing the unethical, immoral, unrighteousness, inequitable, and unjust practice of Capitalism is a CRIME against humanity; and is absolutely disrespectful to Creation/Existence.]
4
“Remember the sabbath day, to keep it holy.” — Exodus 20:8–10
“Remember that every day of your life requires WORK and REST, to keep it real.”
[Human beings require both work and rest for the sustenance of life. In order to sustain ourselves, we must respect ourselves by acting in accord with our nature, which is to be free. “Self-preservation is the duty of each and every living organism.” To practice such means no longer being a slave to the European banking cartels. They have ruled the world since the formation of the British East India Company (December 31, 1600), and the Dutch West India Company (June 3, 1621).]
5
“Honor thy father and thy mother.” — Exodus 20:12
“HONOR thy mother and thy father.”
[We must always love and care for those who cared for us first.]
6
“Thou shalt not kill.” — Exodus 20:13
“Thou shalt not KILL.”
[I won’t insult your intelligence by repeating all of the horrors of the Holocausts Europeans have perpetrated. You already know of the most atrocious. The Middle Passage cost the lives of 20–30 million Africans, and the European theft of the Americas cost the lives of over 50 million Native Indigenous Americans. The wars that the European has waged, not only among themselves, but against Africans, Asians, and Native Indigenous People throughout the world have cost the lives of another 20–30 million people. It is an indictment that must, and will be, adjudicated.]
7
“Thou shalt not commit adultery.” — Exodus 20:14
“Thou shalt not commit ADULTERY.”
[The sanctimony of marriage must be respected, preserved, and promoted.]
8
“Thou shalt not steal.” — Exodus 20:15
“Thou shalt not STEAL.”
[Taking anything that doesn’t belong to you is stealing. That is what the European has been doing since Alexander III invaded, pillaged, and conquered Egypt in 332 B.C. The British bragged that, “the sun never sets on the British Empire.” The Banking Cartels may have shifted locations, but they still carry on their work of world domination. North, Central (including the Caribbean), and South America; along with Asia, African, and Australia (including the South Pacific islands) is land that was stolen, and still is presently controlled by these bankers. Their greatest theft is USURY. As Thomas Alva Edison said, “Interest is the invention of Satan.”]
9
“Thou shalt not bear false witness against thy neighbor.” — Exodus 20:16
“Thou shalt not LIE.”
[Honestly, honesty is a Universal Law that must be adhered to. If you lie to someone, you are “bearing false witness,” and may cause harm to yourself and to others. The ultimate penalty could be your death.]
10
“Thou shalt not covet.” — Exodus 20:17
“Thou shalt not COVET.”
[Covet means to be so jealous of something someone else has, that you want it desperately. After living in the hills and caves of Europe for 40,000 years, the Caucasian emerged with a lust and desire for the world that Aristotle, Alexander III’s tutor and mentor described to him. Aristotle talked of a land that the Greeks named and called Africa; a wonderful glorious Continent that he learned from Socrates, via Plato.]
I conclude with two more Commandment that I believe Moses would offer today.
11
“Thou shalt not tell people that I have chosen you as my special people, privileged with Whiteness.”
[First, it is not true. ALL life is chosen from, and emanates from Creation. Our very existence if proof of Creation, an extremely random process favoring no one. Secondly, all that lie does is build up resentment and hatred against you. We are all special creations, with none being superior to others, notwithstanding our cultural differences.]
12
“Thou shalt not practice Usury.”
[The expression, “neither a lender nor a borrower be” is the best advice one can receive. Charging interest, which is a severe burden to the borrower, that need not be, has been forbidden in Christianity and Islam since they were formed. I offer the following for your consideration]
“Debt’s ancient origin is reflected in biblical admonitions [2,000 years ago] about debt, and the interest payments which often accompany debt. So Solomon warns, “The rich rules over the poor, and the borrower is the slave of the lender.
In Exodus, when God specifies the ordinances for the Jewish people, he includes the admonition that, “If you lend to any of my people with you who is poor, you shall not be to him as a creditor, and you shall not exact interest from him.”
Secret Life of Money, Tad Crawford, 1994
That admonition should apply to all humanity, not just European Ashkenazi and Sephardic Jews.
Please offer your thoughts; and let’s talk about specific solutions.
Thank you.
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There Is No Nexus Between Black Nationalism and Marxism: It Is Nonsense To Propose Such!
I have been following the writings of Dwayne Wong (Omowale) since I joined medium.com ten months ago. He has written some though-provoking essays that I have found interesting. Even though he wrote the following essay in March of this year, my jury is still out deliberating on my younger brother (I am 77, so I can call him my younger brother). I do believe he will be acquitted. 🙂
Why I’m Not a Marxist
This is the final in a series of articles that I published on the topic of Marxism in the Pan-African struggle. I want…
Today, he posted an essay that grabbed my attention. My belief that “the driving force in humanity is economics” compelled me to respond.
“…So the lineage of capitalism passes naturally from the earliest Babylonian merchants through the medieval burghers to the early bourgeois and finally to the industrial capitalist.” — The Origin of Capitalism; A Longer View, Ellen Meiksins, 2002
Economics matters. Everything that one does each day, hour, minute, and second, is precisely determined by the economic paradigm that governs one’s life. I hope that he will not be offended by my assessment of his piece that my headline addresses. I certainly welcome his assessment of mine.
The Ideological Debate Between Black Nationalism and Marxism
The ideological debate between Black Nationalism and Marxism has been a topic of discussion and contention for decades…
I disagree with his statement that, the ideological debate between Black Nationalism and Marxism that has shaped the discourse on liberation and justice within the Black community, “is not an either-or situation, but rather an opportunity to embrace the strengths and insights of both ideologies.”
It is absolutely an either-or-situation.
There is not contest. Black Nationalism is the winner. (Similar to the ass-whooping (70–20) that the Miami Dolphins administered on the Denver Broncos last Sunday.)
There are NO strengths and insights in Marxist ideology that support African Liberation. Marxism is an eco-political European ideology that, by our brother’s admission, “does not directly address racial oppression.” Marx and Engels published their “Communist Manifesto” (1848), to address the issues facing European/Caucasian people, not us.
Just because Marx was an opponent of Capitalism, it does not make him an friend or advocate for the liberation of our people. Both Capitalism and Communism perpetuate our enslavement; and must be understood as an anathema to COLONIZED Africans, Asians, and Indigenous Americans worldwide. (As quiet as it’s kept, the Earth is a “Company Town” operating under European hegemony.
The Colony Called America: Company Town 3.0
How dare I call America a colony, much less a company town? The truth is the truth. I assume you will agree with me…
Brother Dwayne correctly points out that, “Padmore, initially a communist, abandoned the Communist Party after realizing that white communists were not fully committed to African liberation. He became critical of the racism within the communist movement and praised Garvey for his understanding of white communists’ racism.”
My brother goes on to say that Garvey, “identified as a self-professed capitalist but was critical of exploitative practices within capitalism.” Rest assured that Garvey’s definition of capitalism was quite different than Adam Smith’s definition. Brother Garvey meant making use of Land and Labor to produce Capital (goods and services necessary for the growth and development of society) was his objective, as it should be for anyone wanting to live in a productive civilized society.
Adam Smith’s Capitalism, which began when Alexander III invaded and conquered Egypt in 332 B.C., advocates the ownership of “private property,” including the ownership of human beings, salaried or otherwise. Garvey did not.
As Brother Omowale said, “Black Nationalism is an ideology that emphasizes racial unity and self-determination for the Black community.” He also astutely observed that, “Garvey, a Jamaican-born activist, advocated for the establishment of a separate Black nation and the repatriation of Black people to Africa. He believed that economic empowerment was the foundation for Black liberation and encouraged Black people to be proud of their African heritage.” I am in 100% agreement with Brother Marcus, one of my icons and mentors.
Brother Garvey’s call for separation and repatriation of American Africans to Africa is the only opportunity we have to achieve Liberation and Freedom. Marcus’s thoughts are African centered. Marx’s thoughts are Eurocentric. The two ideologies will never coincide, correlate, nor coexist together.
The ideological debate between Black Nationalism and Marxism, is “a ship that has sailed.” There is no longer a debate. Black Nationalism, as defined by the Honorable Marcus Garvey, must be our life work. It is certainly my life work.
Adam Smith, Karl Marx, and Me; Capitalism, Marxism, and Equism; Black Folk Need To Know
On February 11, 2023, Rustam Seerat, posted the following essay on medium.com. It is an AI-generated imaginary…
Please offer your thoughts; and let’s talk about specific solutions.
Thank you.
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What Does INTEGRATION Mean? Mathematically It Is The Truth; Racially It Is A Lie; Culturally It Is Critical to the Survival of Humanity.
The Merriam-Webster Dictionary offers several meanings for this transitive verb integration. The importance of each meaning is critical to understanding my answers to the question posed in the above headline.
1: to form, coordinate, or blend into a functioning or unified whole : UNITE
2 a: to incorporate into a larger unit
b: to unite with something else
3 a: DESEGREGATE integrate school districts
b: to end the segregation of and bring into equal membership in society or an organization
I begin with #1, the mathematical definition of integration. “To form, coordinate, or blend into a functioning or unified whole: UNITE” is the whole truth, and nothing but the truth. “Mathematics is Truth.” The concept of unity is acceptable to everyone. Folk would agree that there is strength in UNITY.
But what is the purpose for unity? Are the KKK, the Proud Boys, and the Oath Keepers good purposes for unity? For Europeans, the answer is yes. For Africans, Asians, and Indigenous Americans living in European colonies, the answer is no.
Number 3 is where the ‘rubber meets the road.’ “DESEGREGATE, integrate school districts” and “to end the segregation of and bring into equal membership in society or an organization” speak directly to “Race Is a Lie.” Race, the false narrative propagated by the European is a man-made construct called that has deliberately divided humanity since its inception and is still in effect and in force today.
The belief that race accounts for differences in human character or ability, and that a particular race is superior to others, and that discrimination or prejudice based on race is justified by law is a total human fabrication. Scientifically, no valid fact regarding human behavior can be drawn from the melanin content of a human being’s skin. Melanin is a pigment — meaning color, nothing more, nothing less.
Human beings are shaped by our genetic heritage (bio-chemical package), our parents’ lessons, the “schooling” we receive, our own personal experiences, and “the proverbial environment” as we traverse ‘life’; also, learning from the experience of others who have already gone before.
The hatred, animosity, and divisiveness engendered and promulgated by Race are threatening human survival. The exigent circumstances that we face today demand immediate attention, and immediate action.
I will end with #2, which offers, “to incorporate into a larger unit” and “to unite with something else.” “…Culture is critical to the survival of Humanity.” What does cultural integration mean?
I am very clear that humanity’s survival is dependent on the mutual cooperation of its inhabitants. We absolutely need to incorporate into a larger unit, but caveat emptor. The man-made economic, political, and religious ideologies that perpetuate the hegemony of the ‘ruling elite’ cannot, and will not be carried forward by us.
Africans, Asians, and Indigenous Americans must, and will discard Capitalism, Democracy, and Monotheism in order to survive and thrive. “To unite with something else” is mandatory. That ‘something else’ is a new paradigm, an African centered paradigm.
I have no interest in overturning Capitalism or overthrowing Democracy, much less trying to stamp out Monotheism. If that is what folks want, I say, “let them have at it.”
Humanity wants and needs something different than what we experience today under European rule. Our present dystopia should be proof enough for you.
Capitalism, which has continuously evolved since Alexander III invaded Egypt (Africa) in 332 BC, established and articulated the reasoning for the European collecting and controlling all of the human and natural resources necessary for the production, distribution and consumption of the goods and services essential to the growth and evolution of an organized people.
It was both purposeful and deliberate. And it was concomitant with the Europeans having stolen lands and peoples. Capitalism works for Europeans. It does not work for 99% of humanity. European Capitalism created the problem humanity faces today.
“A problem cannot be solved by the consciousness that created it.” — Albert Einstein
Pope Francis’s recent statement is further proof.
“An economic system that is fair, trustworthy and capable of addressing the most profound challenges facing humanity and our planet is urgently needed.”
Pope Francis and I agree.
Democracy, the political philosophy, was developed by Cleisthenes in Athens in 507 B.C. After less than 100 years, ‘democracy’ had reared its ugly head sufficiently for Plato to voice opinion. Founder of the Academy in Athens, “the first institution of higher learning in the Western World” — Wikipedia — and considered the founding father of political philosophy, Plato, was taught by Socrates, an African, and in turn, Plato taught Aristotle, Alexander III’s tutor, and mentor.
Plato believed that the democratic man was more concerned about his money over how he could help people. “He does whatever he wants whenever he wants to do it. His life has no priority.” [Capitalism in its infancy.] Plato did not believe that democracy is the best form of government. Plato’s Republic presents a critical view of democracy through the narration of our brother Socrates (a Greek African):
“…foolish leaders of Democracy, which is a charming form of government full of variety and disorder and dispensing a sort of equality to equals and unequaled alike.”
Monotheism is a tool.
“Religion keeps the poor from killing the rich.” — Napoleon Bonaparte
Here is a more telling message.
“We have used the Bible as if it were a mere special constable’s handbook, an opium dose for keeping the beasts of burden patient while they were being overloaded, a mere book to keep the poor in order.” — Charles Kingsley, Canon of the Church of England
And one more, from an African centered perspective.
It’s not what you know that hurts you. It’s what you know, that just ain’t so.” — Leroy ‘Satchel’ Paige
Please offer your thoughts; and let’s talk about specific solutions.
Thank you.
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