The banking system has been around for centuries and they interact with people to safeguard their money, give them loans to pursue mainly business, education and housing at given interest rates. Banks accept deposits from people and the main premise is that they will give access to the cash whenever and wherever account holders ask for it. So it is a relationship built on trust.(Barcelona Field Studies Center, 2017). However, banks have betrayed this trust they should afford people in recent times. This paper is a factual examination of the extent of which banks have been allowed to run down the economy, caused inflation, and how people can boycott fraudulent banks and not lose their entire life savings.
The Federal Reserve was created to be in charge of printing and managing currency and the US government usually has to go into debt to the Federal Reserve if it wants more currency to be printed. The Federal Reserve issues currency at a decided interest rate and it also gets US Treasury bonds from the government. The Federal Reserve can sell these bonds or keep them. (Snyder, 2010). Snyder insists that the Federal Reserve, contrary to their admission that they do not make profit and continue enriching the global elite at the expense of the ordinary American, they simply print more currency and do not account for it. With the added revenue from interest payments from the government, the economy is plunged into even more debt. In the recent past this trend has been growing and the economy has encountered inflation.(Acton, 2017). According to Economics Help, inflation is defined as the general price increase of goods and services in the market. This is brought about by more currency in circulation increasing demand for products and services, meaning the value of this currency drops over time. With inflation, a specific amount of money buys less of the same product now than it could a few months or years back. There are cases of hyper-inflation, where inflation is so high until nobody wants to use that currency any more. It is the duty of the government to keep inflation rates low. At the opposite end there is also deflation which is considered more disastrous to an economy than inflation. (Amadeo, 2016). In her article for The Balance, Kimberley Amadeo defines deflation as a general fall of asset and consumer price values. It is brought about by a long term fall in demand due to a lack of currency flowing in the market. Deflation usually happens in an inflation-caused recession, where people lose their jobs, stock prices fall, and the value of their homes decrease. At the centre of this all, are the banks and the Federal Reserve.
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How do banks use inflation to their advantage? Banks have no legal obligation to use the massive deposits they get from account holders for the interests of the society as a whole, but they use this financial muscle to set high interest rates impoverishing customers, they push up house prices to gain higher returns from mortgages and generally ‘inflate speculative financial bubbles’(Positive Money, 2017). The other problem is the power to create money is concentrated on a few people at the top of the biggest banks like Bank of America and JP Morgan Chase & Co. (Thrive Movement, 2017). These people are only tasked with increasing profitability of the bank and are not held accountable for any economy crisis. Third, the banks have exploited a loophole in a democratic verdict not to allow them to create money; in that they now use bank deposits (electronic cash). Electronic cash basically runs the economy and legislators are unaware of this fact that the banks are literally running the economy. According to Panos Mourdoukoutas, the mega banks (a small group of five) directly borrow money from the Federal Reserve with zero interest rate and use it to buy US Government debt. On selling these Treasury Bonds they make even more profit for themselves.
On this evidence, people should boycott banks that serve to exploit customers by giving off massive lending rates, increasing mortgages shutting people out of their homes, closing down small and medium businesses. (Philips, 2012). Centralized banks use consumer deposits to fund environmentally harmful industries such as coal, nuclear power and they also clear logging companies. People are advised to pull their money out of these banks and deposit them in community banks and credit unions that invest in helpful community projects like schools and healthcare. Calling a local Chamber of Commerce, a Local credit union, or simply just gathering peer information from social media will go a long way to determine which banker to trust. Proper bank evaluations should be done, meaning a prospective account holder should ask questions if a bank has loaned more of its money locally or internationally. If the bank has more local ties, then it’s a sufficient and trustworthy entity. If a bank is owned by a bigger bank or there is an intended buy out from a bigger corporation, prospective customers should avoid that bank. The social responsibility aspect of a bank is the most important, such as reputation, how they treat their staff, if their Automated Teller machine services have charges deemed to be favorable and reasonable and if they are committed to humanly values. (Thrive Movement).
In conclusion, the Federal Reserve and mega banks have directly contributed to economic depressions, inflation, deflation and every other financial crisis because of greed (Butcher S, 2013), and a few people at the top wanting profit above all else. The country is in debt because of such unethical practices and thus the people should reject the lure of these banks because they have shown little evidence of ensuring long term prosperity to the ordinary American.
References
Acton, G,(2017), Global Inflation Is Reawakening To Test Central Banks And Markets , Retrieved from http://www.cnbc.com/2017/02/14/global-inflation-reawakening-to-test-central-banks-and-markets.html
Amadeo, K (2016), What Is Deflation? It’s Causes And Why It’s Bad , The Balance, Retrieved from https://www.thebalance.com/what-is-deflation-definition-causes-and-why-it-s-bad-3306169
Barcelona Field Studies Centre (2017), How Banks Work , Retrieved from http://geographyfieldwork.com/HowBanksWork.htm
Butcher, S. (2013), How Banking Can Ruin Your Body And Mind, Retrieved from http://news.efinancialcareers.com/uk-en/131760/how-banking-can-ruin-your-body-and-mind
Economics Help (2017), Definition of Inflation , Retrieved from http://www.economicshelp.org/macroeconomics/inflation/definition/
Inflation. (n.d.). In Investopedia . Retrieved from www.investopedia.com/terms/i/inflation.asp
Mourdoukoutas P, (2016), How Central banks Destroy Global Capitalism, Retrieved from https://www.forbes.com/sites/panosmourdoukoutas/2016/10/06/how-central-banks-destroy-global-capitalism/#3ca3177b483f
Philips, M (2012), Why Won’t The Fed Admit That Big Banks Have Too Much Power In The Mortgage Market? Retrieved from https://qz.com/34374/why-wont-the-fed-admit-that-big-banks-have-too-much-power-in-the-mortgage-market/
Positive Money (2017), Consequences Of Democracy, Retrieved from http://positivemoney.org/issues/democracy/
Snyder, M (2010) , 11 Reasons Why The Federal Reserves Is Bad , The Economic Collapse, Retrieved from http://theeconomiccollapseblog.com/archives/11-reasons-why-the-federal-reserve-is-bad
Thrive Movement (2017), Boycott Banks That Fund Environmentally Destructive Industries , Retrieved from http://www.thrivemovement.com/boycott-banks-fund-environmentally-destructive-industries
