The Banker's War For Your Cash - Part One

The War for Your Cash – Kind of has a nice ring to it if you say it a few times, but make no mistake, banks view your cash (and perhaps even You) as the enemy. Your cash might stand between them and their next fix. You and your cash are effectively the concerned family intervention on their profit addiction behavior, and they are digging in for a fight, wrestling control away from you.

Let's examine the reasons why banks are doubling down on eliminating cash. Just as important, we’ll explore what you can do to protect yourselve and your assets in the wake of this trend.

TRUTHpo!nt One– Banks as Political Beneficiaries. The first idea we need to discuss is that banks have evolved into creatures that do not resemble their predecessors in past generations. Each of us has a mental picture of what a bank should be, related to trust, honesty, integrity and solidity. This image evolved over generations, and there is a good chance that your concept of banks and banking came from your parents or grandparents. Such is the way that we learn about money. Banking has changed, however, evolved into drunk partygoers instead of conservative teatotaling bow-tied chaperones. The problem, for us, is that banks have not changed their name to fit their changing standing. First Trust Bank isn’t suddenly renamed Risk, Bet, Merger and Wager. So read or listen to this post, just so that you stay abreast of changes in the industry. As always, do your own thinking and see where you personally weigh in on these issues. As an aside and disclaimer, these are my opinions, and these ideas apply more to the top US 5 or 6 mega banks ( JP Morgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs) than your local credit union.

I would argue that the Federal Reserve, (privately conceived by bankers on Jekyll Island, Georgia in 1910) is a privately held banking cartel. I presume that it is common knowledge that the banker owned Federal Reserve “is as Federal as Federal Express” and is not an arm or agency of the U.S. Govenment. (For more information on this topic, I recommend the 1994 book “The Creature from Jekyll Island” by G. Edward Griffin). The Fed is interlaced with the government however in contractually printing our currency debt, Federal Reserve Notes. As such, it is uniquely positioned to outwardly stabilize the U.S. economy through currency creatiion and setting interest rates. Inwardly, however, it has the incentive, as does any cartel, of promoting the interests of its member banks, and the banking industry, in general. Outwardly, everything they do is for the people, the common good, the country and for you and me and jobs and motherhood. Inwardly, their decisions are motivated to serve the banking industry. That is what cartels (and lobbyists) do. We ought to be clear on that.

In this way, banks benefit from riding the financial waves created by the actions of the Federal Reserve. They also benefit from policy dictated by this Central Bank, such as the 2008 idea of bail-outs for banks deemed “Too Big to Fail.” Every company or industry, by necessity, feel s that they are important, but the banking cartel insisting that their members are more important than the aggregate self worth of U.S. citizens, is a bit much. Ask the prople in Iceland who, when faced with a similar bailout proposal, said “no” and threw the bankers in jail. After a year of recovery, they are doing just fine.

The 2008 TARP bailout money amounted to an $800 billion cash infusion for Wall Street and bank balance sheets. It rescued them from gambling losses in the highly speculative derivatives and sub-prime mortgage lending business, which, by the way were rated and established to be risky by definition ($800 billion, by the way, was an amount equal to all cash in circulation at the time, effectively doubling the currency supply, or more accurately, diluting the value of U.S. currency through inflation.) Like an impulsive, impetuous teenager with ten bucks burning a hole in his pocket, on a mission to spend, banks found themselves currency heavy, and with an unlimited credit line at near 0%. In this way, banks became benficiaries of the Fed’s policy and of political and economic circumstance. So banks changed their character. There was free money to invest, profits they didn’t want to leave on the table, even if it was officially outside of their chartered activities.

I’ve met a few people whose lives were changed by fate and fortune, a lottery windfall, or an unexpected inheritance. At first, these people reaffirm to friends and family that the money won’t change them. But the potential of the newfound windfall is like a Siren call to the indulgent senses, an addicitive drug luring the user to seek evermore profit, leaving logic and restraint aside. No longer content to earn money the old fashioned way on small stuff like interest margins, banks yearned for the easy big money payouts of the speculative futures and derivatives markets. And, frankly, why wouldn’t they? If I let you loose in a casino with a bag full of markers and the assurance that you could keep your winnings, but that taxpayers would cover your losses, why not gamble and let down your guard, do a little partying, put aside your inner accountant conscience and live a little.

Magnify this initial $800 billion 2008 infusion with the 3 rounds of Fed Quantitative Easing (QE) money printing that totaled $3.2 trillion, and you can see how well stocked the punch bowl is at that particular industry party. The one thing that I’ve never witnessed with addicts or people entrenched in delusional spending is Self-Limiting behavior. Casinos know this. Comp the room, throw in some free liquor, free food, pump in some oxygen and pump up the music and bright flashing lights, the taste of free money and people stay at the tables. There is no reason to leave the fun. Our painful (to taxpayers footing the bill) bailout in 2008 solved the problem, but the costly infusion from us never had strings attached for them to close down the lifestyle and party mentality that bankers on Wall Street had embraced as normal. The bailout was an infusion of drugs and a payoff of drug debt, not an intervention. So, the party continued and rev’d up. Bottom line, we never solved the source problem behind the 2008 crisis.

The Fed turned on the printing presses, and gave $3 trilion to their bank agents to “distribute” the windfall into the economy. Except, in the fog of the party, they didn’t do such an equitable job. Seems that bank bonuses went up to the sky, and bank profits and assets rose. I never did meet anyone on Main Street that received any of that boom “trickle-down” money that Keynesian economics promises when money is intrudiced at the top of the funnel. I personally think that $800 billion could have been better spent bailing out tens of millions of upside down mortgage Holders, instead of the Lenders. Then again, maybe I just live in the wrong small town. But, I suspect that the party stayed on Wall Street.

Bottom line, though, banks got a taste of living high, and the thought of trading down and leaving the dream didn’t sit well with them. Unlike a professional gambler who “knows when to hold, when to fold”, banks are still drinking in the after-party (spiked) kool-aid. Sunrise will come, the party will end, but they’re eagerly waiting for the last call at the Titanic Bar. In barely over one generation, the government and the Fed turned one of the most conservative industries into greedy street criminals who will do or say anything to worship their newfound addiction to profit.

Digital money is the drug, and physical cash is a legacy, old world annoyance, that slows banks down and takes them away from the party. Bitcoin and crypto currency, also, ruin the fun for banks. More on that is Part Two...

I appreciate your comments and upvotes! Mark D