You still think it won’t happen to you?
Published on December 2, 2011
Why now? And the reason why you should get into gold now is liquidity. When the ‘run on the bank’ begins, you won’t be able to perform the transaction of ‘taking your money out’ because of the fractional reserve banking system. And it is ‘The Bank’ that decides how and when this happens by adjusting the money supply. There will be no warning.
For every pound deposited, a bank is allowed to lend it back out to a factor of 10. That’s what they mean by fractional reserve banking and yes, that’s how it happens. Look at it backwards – the deposit is a fraction of what is lent out, it’s like double speak. A bank cannot lend out it’s own money because that would be illegal so it lends out the money which you have deposited instead – they run two sets of books. The HSBC current account is now paying 0.00% interest (yes, you read that right, 0.00%) and is charging 19.9% as an overdraft rate. And when it lends your deposited money back out at 4.7% as a mortgage and up to 6.9% as a personal loan, you can understand why the banks have the tallest buildings in town. Because they multiply it by 10, remember! So on what you deposit, they are potentially earning 47% and 69% respectively.
So how all is this going to pan out? Pretty much the same as last time. The money supply will be cut and there’ll be a run on the bank. When this happens and you go to the bank to get your money, you won’t be able to withdraw the physical cash because it will have all been issued. The cash points – the hole in the wall – will be empty. It can only issue – pass out – so much and when it’s gone, it’s gone. But it’s not just the physical cash, that’s only a part of it. A bank can only issue what it has on deposit and there’s going to be 10 other people all looking for the same as you. First come, first served. So it’s not only the cash being taken out of the cash point but what you – and many, many others like you – are going to try to transfer from one bank to another.
Do you remember Northern Rock? The last time this happened, a lot of people lost a lot of wealth (or money, if you prefer) and they were completely powerless, completely unable, to do anything about it because someone had got there first. So if you’re not in gold by now then you really are sailing very close to the wind. It’s happened before and the time before that, and the time before that...
So what’s the solution? Get your wealth into something of substance. You should stop living from day to day, month to month and have a reserve of some kind – it’s just common sense. Of substance because if it is not, then it’s just fresh air and make believe. So what is ‘of substance’? Something tangible, desirable, of value and liquid. Property that feeds you a rental income is good and so is silver. Gold is great. Otherwise, commodities that humans need such as livestock and fuel. But to learn to be a farmer is tough – it’s easier to own gold, which is pretty much the ultimate. Gold? You just buy it!
And even after all this, there are still some out there who think that it won’t happen to them. Are you one? Well i’m old enough to remember bread shortages, the winter of discontent, power cuts and having a bath by candle light. My father taught me well by feeding his family on the produce of his allotment and that’s what I do today. Don’t let it be you.
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Disclaimer – I am a bullion dealer. I do this for a living. What is written here is for your education and should not be taken as ‘advice’. If you act then take some responsibility for your actions. All and everything that is written by David Peers and/or published by Bleyer LLP is subject to copyright.
