Bailouts: The Path of Least Resistance

by D. James LaSalle on June 10, 2012 in Featured, Most Read, Opinion

The Spanish people are losing faith in their digital money and they are currently trying to get their collective hands on what they do trust – Government issued (Fiat) currency. This is what happens when there is not enough to go around. What would happen if they realized they never had real money to begin with?

What is a bank run?

When more than 10% of a bank’s customers withdraw their funds at any given time it overwhelms the supply and results in a money shortage. This is not inherently dangerous in and of itself, in fact, it is simple to correct. It just takes time to appropriately distribute existing reserves or print more money. Telling the people they can’t have immediate access to their money may be a far more risky matter, altogether.

The Path of Least Resistance

Most of us do not understand the system that we have placed our money in. In being given the choice of ignorance or knowledge, the path of least resistance is ignorance. So we simply accept things the way they are. That is why so few men and women understand something as fundamental to our daily lives as the Fractional Reserve Banking (FRB) system.

It is taken for granted. So, when people are told they can’t have their money they will, again be faced with a choice – reason or emotion. In this case the people of Spain and Italy have chosen the path of least resistance and the basest of all emotions – fear.

When people choose to manifest from a position of fear it can have very dangerous consequences.

What is normal?

The fact that their physical fiat currency is as worthless as their digital currency has not occurred to them – and it may never. I mention this because it’s sad that another generation will pass on willfully uneducated about our banking system. A little light reading would show that a bank run was the cause of our last depression here in the U.S. (I reserve the term ‘Great Depression’ for what is coming).

Emergency

Philosophically the Spanish people are confused. Confusion can be an uncomfortable experience, but it can also be a wonderful place to find yourself. I mean that literally. At the root of confusion is the acknowledgment that we do not know what to do. We then openly question or at least we hope we do.

The full spectrum of options is open when a man questions and knows that he does not know. The organic act of seeking gives the solution he arrives at all the more power, for he has chosen it himself and is ego-involved with the decision.

Panic is also a decision. Many men and women are currently panicked and will do anything to get things back to normal, but how many will question what normal really means.

They are asking for a return of the status quo, that inevitably means diluting the finite value of the world’s wealth as more paper money is printed to return Spain to her illusions of normalcy. They use the word euro and we use the word dollar, but it is the same water flowing from a drying spring. We will all be poorer for the effort.

Emergency Funds.

If a bank run happens here (again), chances are high there will not be a polite note on the door of your bank telling you that it will be closed until further notice.

Every journey begins with the first step. Many financial planners suggest their clients save 3 to 6 months of living expenses in case of an emergency. The path of least resistance would suggest that most of us do not have such a reserve, much less a written documentation of your expenses. If that is you – START NOW.

Even if it takes a year to save three months worth of expenses, you will have more money than most of the people in the world. If you already have cash reserves, it may be wise to keep a portion outside the FRB system. This means in your safe or wherever you deem appropriate.

Going forward.

Once you understand the FRB system, then learn about the Federal Reserve (FED). You will quickly understand the role of gold and silver in the world. Please remember if you don’t hold it, you don’t own it. Physical possession is key in the big picture.

The interest rate on a standard savings account is less than 1%. You have nothing to lose by keeping some spare cash on hand, but you will gain peace of mind in knowing you are covered in case of ANY unforeseen emergency.

“Banking was conceived in iniquity, and born in sin. Bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of a pen, they will create enough money to buy it back again. Take this great power away from them, and all great fortunes like mine will disappear. And, they ought to disappear, for then this would be a better and happier world to live in. But if you want to continue to be the slaves of the bankers, and pay the cost of your own slavery, then let bankers continue to create money, and control credit.”

- Abraham Lincoln