BullionStar News
Writers Torgny Persson, Koos Jansen
& Hong Kang See

Gold or Fiat? That is the question...

Tuesday the 14th of April 2015
What happens when you deposit money at the bank?

Most people don't think much about it. The bank probably safekeeps the money in their vault. Then I can come to the bank to withdraw my money any time. Right?


When you deposit money at the bank, you immediately relinquish your ownership to that money.

The bank will not only loan out "your" money, they will use it as as reserves to loan out even more than what you deposited in the first place. The justification for this is simply that you probably won't claim "your" money back any time soon anyways. If you were to claim it back together with only a few percent of the other depositors, the bank would go bankrupt.

When you deposit money at the bank, you give up the ownership of it and instead get a claim on the same amount. The bank vice versa has a liability.

This is called fractional reserve banking, the banking system practiced worldwide today.

Safekeeping Your Money?

If you rent a safe deposit box, you have to pay rent. If you however engage the service of a bank depositing money, they are supposed to pay you interest.

Think about it like this. If a bank deposit was for safekeeping only, how can it pay interest?

The only reason a deposit pays interest is that the claim is inherently worthless. You are paid interest as compensation for the risk of giving up the ownership of your money in return for a claim.

By paying you interest, the bank is telling you that your money is inherently worthless. Fiat's only value stems from it serving as medium of exchange and that's not worth much.

To summarize:

1) If you deposit money at the bank, you lose ownership of the money and only hold a claim.

2) If you try to get smart and withdraw your money and you're lucky enough for the bank to have any currency to hand to you, you get inherently worthless paper money.

= You're screwed either way.

Negative Interest Rates

As we all know... Continue Reading
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