http://www.positivemoney.org/2012/0...ing-is-fraudulent-or-it-has-to-be-subsidised/
Now for the real fraud perpetrated by FR banks. This is that they offer a false prospectus, and as follows.
For every £X deposited, banks promise (implicitly or explicitly) to return £X (possibly plus some interest and possibly less bank charges). But at the same time, banks lend on or invest the £X in ways that are not 100% safe. Thus it’s a statistical certainty that sooner or later any given bank will go bust, and not be able to return the £X.
Of course the CHANCES of not being able to return the £X (or all of it) can be reduced by having shareholders or bondholders take a hair-cut or lose everything when a bank makes bad lending or investment decisions. But even then, it’s a statistical certainty that sooner or later all three of the above groups, shareholders, bondholders AND DEPOSITORS will make a loss, or lose everything.
Moreover, another certainty (blindingly obvious from the history of banking) is that however well run a bank, at some stage in its history it will end up being run by a collection of incompetents, if not quasi criminals. There again, depositors will probably lose their money.
Now that wouldn’t matter if banks were open and honest about the risks that depositors run. But they aren’t. Has any bank statement ever said in bold print (like the health warning on cigarette packs in Britain) that “this product may damage your financial health”? No way!!
Of course there may be something in the small print in the agreement between banks and depositors which admits that depositors’ money might not be returned. But that is wholly irrelevant. Fraud exists where there is an ATTEMPT TO DECEIVE. For example if a firm says one thing loud and clear in its publicity, and something totally different in the small print, that is fraud. Moreover it is plain unrealistic (or perhaps I should say bl**dy stupid) to expect the less educated, or pensioners with declining I.Q.s to understand the small print.
Source: Bank of England statistical database. Andrew Haldane, The $100 Billion Dollar Question (available at
http://www.bankofengland.co.uk/publications/Documents/speeches/2010/speech433.pdf)
Banks have always kept very quiet about the possibility that depositors may lose. Moreover, this impression is backed by government!! That is, most governments offer taxpayer backed guarantees for depositors.
The message is as loud and clear as it could possibly be: YOU ARE GUARANTEED YOUR MONEY BACK. But that guarantee cannot possibly be kept without a taxpayer funded subsidy.
Conclusion: FR is either fraudulent or it needs subsidising.
There is of course a third alternative, namely that banks come clean and place “financial health warnings” on all the literature they distribute. But that is just fantasy. It’s never going to happen, particularly as governments and their electorates favour a system in which everyone has a right to a 100% safe bank account. And indeed there is a good argument for the latter, namely that it is a basic human right to have access to a 100% safe bank account.
