Controversial Characteristics of Fractional Reserve Banking

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Chances are, if everyone at your bank decided to withdraw the entirety of each of their bank accounts, the bank would not have enough money at its disposal to meet the demand. This is because banks commonly operate under a fractional reserve banking system. In other words, the bank uses your money however it wants, banking (ahem) on the fact that its account holders won’t protest. Unfair? It sure sounds like it. Stealing? The banks prefer to call it “borrowing.”

What Is Fractional Reserve Banking?

Many people believe that when they deposit money into a bank, the bank keeps all of their money on hand, in a vault, in cash. But this isn’t the way most banks work. According to Investopedia.com, fractional reserve banking refers to a system where banks only back a fraction of bank deposits with actual cash on-hand, available for immediate withdrawal.

This means only a fraction of the money you deposit into your account is required to be available for withdrawal at any given time. For most banks, that fraction is a mere 10 percent of your deposit. So, instead of putting $100 into the vault when you deposit a $100 check, only $10 goes in. That $10 is known as “reserves.”

Surprisingly, many banks are not required to even keep 10 percent on hand — and some aren’t required to keep any reserves at all. Any bank with less than $15.2 million in assets is exempt from keeping any reserves, and those with assets between $15.2 million and $110.2 million are only required to keep 3 percent. 

There is an incentive, though, for your bank to keep more of your money in the vault: The Federal Reserve pays out interest on all reserves and excess reserves. The interest is called IOR (“Interest On Reserves”) or IOER (“Interest On Excess Reserves”), and since 2009, it pays out 0.25% at an annual rate.

The Money Mafia with Paul Hellyer

Is Fractional Reserve Lending a Game of Musical Chairs?

If only a tiny portion of your money is available after you deposit it, then what does the bank do with the rest of it? Much of it is given to other people, in the form of loans.

Simply, banks lend money that they don’t have. They use your money and lend it to someone else, in the hopes that you don’t ask for your money back at the same time that all their other customers ask for theirs. Many consider this to be a fraudulent way to do business, because it would be unheard of to do this at a personal level. It is considered fraud in most states for someone to write a check when they know their checking account does not have sufficient funds to cover the amount. But why isn’t it fraud for a bank to write a loan when payees do have sufficient funds in their accounts to back that loan? 

Most banks, even if they are required to have 10 percent reserves on hand, won’t necessarily have it available for you to use — because they’re already lending it out. And so, theoretically, if all of a bank’s customers asked for 10 percent of their account balances, the bank wouldn’t be able to pay that money either. There’s even a term for it — “a run on the bank,” which sounds more like the bank was played a bad card when it’s actually the bank customers who are denied their money. 

In essence, if too many customers made a run on the bank, the bank’s attitude would be, “Sorry, but we lent your money to that person over there, and we don’t have it to give back to you.”

In Defense of Fractional Reserve Banking?

Fractional reserve banking is often defended by the argument that the system is the very nature of banks. To quote Forbes, “It’s certainly true that banks could maintain 100% of funds deposited, but if so, they wouldn’t be banks. Instead, they’d be warehouses for money, and those warehouses would charge depositors a fee for the right to deposit with them. Basically money saved would decline day after day and year after year; essentially compound interest in the reverse. Banks would routinely ‘break the buck.’”

Forbes goes on to say that even though a bank may not have enough cash on hand to pay out a demand, they can borrow the amount from another bank. And if that option falls through, the Federal Reserve is there as a last resort. 

But the bottom line, for those in favor of fractional reserve banking, is that banking is a business, and so it functions through interest — and that interest is garnered through borrowing and lending money from one party to another. Perhaps the system is imperfect, especially if it experiences bank runs, but such circumstances are considered rare though its a risk most customers are unaware of.

More likely than not, barring any errors made by a teller, your money will be safe in your banking account, ready for you to withdraw as you please. But if you are concerned about an impending national crisis, perhaps you’ll want to take pre-emptive measures by closing your account, cutting a slit in your mattress, and stuffing all your dollar bills inside (preferably in small bills, so that you don’t need to exchange the big ones for bite-sized cash somewhere along the line).

Of course, financial experts would say that this would be an imprudent way to handle your money, and you’d only be hurting yourself — especially in the event of a natural disaster or a robbery. Plus, how else would they be able to gamble with your money and generate exorbitant profits for themselves if they weren’t keeping it “safe” for you. 

Inner Workings of the Federal Reserve

Black Knight 13,000-Year-Old Satellite Mystery Decoded?

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Space debris or a 13,000-year-old satellite? A mysterious object, dubbed the Black Knight, orbits the Earth, puzzling scientists of the past and present. Some, like inventor and scientist Nicola Tesla, claim to have received radio signals from the orbiting figure. Astronaut Gordon Cooper was adamant that, in 1963, he saw it from his own spacecraft. The documented history of the existence of the Black Knight continues to mystify scientists.

Nicola Tesla and the Black Knight

Although Nicola Tesla’s inventions changed the way people live today, back in 1899 his peers viewed him as eccentric and somewhat of a mad scientist. When he built a laboratory and a 210-foot tower in Colorado Springs in order to experiment with electricity and record electromagnetic disturbances, his colleagues did not take him seriously. When he reported that he had received signals from extraterrestrials, the newspapers of the day mocked him.

Despite the ridicule of his peers, Tesla was excited about the signals he received, and came to fervently believe that he “had been the first to hear the greeting of one planet to another. A purpose was behind these electrical signals.” Researchers now believe the signals Tesla received likely came from the Black Knight.

Modern History of the Black Knight

Although there were some reports in the 1930s of astronomers around the world receiving strange radio signals, in 1954, the St. Louis Dispatch ran an article titled, “Artificial Satellites Are Circling Earth, Writer on ‘Saucers’ says.” The referenced writer was Donald E. Keyhoe who wrote about unidentified satellites orbiting the Earth. He claimed the government knew about them and was trying to discover their source.

Keyhoe later wrote a book, “Aliens in Space: The Real Story of Unidentified Flying Objects,” where he documented his knowledge of UFOs including what he knew about the Black Knight. Gaia’s Deep Space series discusses some of his work.

Scientists and astronomers reported seeing the satellite as it orbited the Earth. In 1953, a professor at the University of New Mexico saw a “blip of unknown origin.” In 1957, Dr. Luis Corralos, with the Communications Ministry in Venezuela, was taking pictures of the Russian satellite, Sputnik II, as it passed over Caracas. The Black Knight showed up in his photographs. This was the first known actual picture of the object.

In 1960, an American satellite showed the object following Sputnik 1, which was still orbiting the Earth. The UFO was in a polar orbit. At that time, neither the U.S. nor the Russians were capable of putting a satellite in that type of orbit. The object also appeared to be much larger and heavier than anything either country could launch.

In the 1960s, TIME magazine, as well as other news publications, reported on the Black Knight and referred to it as possibly having an extraterrestrial origin. Some North American Ham operators had detected signals coming from the object. Some even reported receiving coded messages. On September 3, 1960, the Black Knight showed up on radar for the first time. People on the ground viewing it with the naked eye could see it for about two weeks. The government reportedly established a committee to investigate the object, but no report was ever made public.

In 1963, Astronaut Gordon Cooper was orbiting the Earth when he said he saw a “glowing green light” ahead of his space capsule. At the same time, a tracking station in Australia, over which the spacecraft was orbiting at the time, reported seeing the object on radar. The evening news reported on Cooper’s sighting, and for the first time, the object was referred to as the Black Knight Satellite. The name stuck, but Cooper’s report did not.

NASA soon debunked Cooper’s UFO sighting, claiming there had been a malfunction in the space capsule which caused gases to emit what appeared glowing light. The result, said NASA, was that Cooper had a hallucination and did not see a UFO. Cooper later confirmed that he had definitely seen a UFO on his 1963 space orbit and that NASA had prohibited him from discussing it. Until his death in 2004, Cooper claimed that he did not have a hallucination in the spacecraft, but saw a UFO. He was very vocal during his lifetime about his belief in the existence of extraterrestrial life and his frustration that the U.S. government continued to cover up evidence of alien contacts.

In 1998, astronauts on the space shuttle Endeavor, on their way to the International Space Station (ISS), took photographs of the object. NASA again disagreed with the astronauts and claimed what they saw and photographed was not a UFO, but instead, just space debris, most likely a thermal blanket.

Black Knight Communications with Human Beings

Influential people and highly respected authors, movie producers, and directors and members of secret societies have claimed to receive communications from alien beings including signals from the Black Knight. Gene Roddenberry, the creator of the Star Trek television series and movies, is almost a household name. In 1973 to 1974 he was reportedly associated with a secret society called “The Council of Nine.” The Nine, in brief, were a group of prominent people who believed that the channeled messages received by their leaders were actually messages sent by extraterrestrials. Roddenberry allegedly based his Star Trek episodes on what he learned from the Nine, including the giveaway title he chose for a post Star Trek series called, “Deep Space Nine.” Many believed the source of the channeled messages was the Black Knight.

Author Philip K. Dick claimed to have communications with alien beings. The way he described his first encounter with the being in February 1974 is consistent with some of the captured coded messages from the Black Knight. Dick’s VALIS trilogy was, according to those who knew him or researched him, really a fictionalized autobiography and not science fiction. It pulled from his communications with an alien entity, which were likely from the Black Knight.

Is the Black Knight still with us?

Two separate people in different parts of the country who were each photographing the Blue Moon on July 31, 2015, captured what they believe is the Black Knight. The object was once again passing by the ISS. Is the Black Knight an ancient alien vessel? Could it be a satellite from somewhere in deep space that is trying to communicate with humans on earth? Or, is simply a piece of space debris left behind by spacecraft made by Earthlings? You decide.

Want more like this article?
Don’t miss Deep Space on Gaia for more on the long and hidden history of Earth’s secret space program.

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