Posts Tagged Banking

Paper money and the presidents on it

The pictures of (mostly) former presidents on US currency implies the false notion that these presidents supported paper money, when in fact, they did not. Nor did the constitution.

United States Constitution – Article One, Section Ten

No state shall… coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts

The principal author and “Father of the Constitution” James Madison agrees.

Paper money is unjust; to creditors, if a legal tender; to debtors, if not legal tender, by increasing the difficulty of getting specie. It is unconstitutional, for it affects the rights of property as much as taking away equal value in land. It is pernicious, destroying confidence between individuals; discouraging commerce; enriching sharpers; vitiating morals; reversing the end of government; and conspiring with the examples of other states to disgrace republican governments in the eyes of mankind.

George Washington

Paper money has had the effect in your State that it ever will have, to ruin commerce–oppress the honest, and open a door to every species of fraud and injustice.

George Washington letter to Jabez Bowen – 9 January 1787

Thomas Jefferson

Paper is poverty,… it is only the ghost of money, and not money itself.

Thomas Jefferson letter to Colonel Edward Carrington – 27 May 1788

Abraham Lincoln

No duty is more imperative on the government than the duty it owes the people of furnishing them with a sound and uniform currency.

Lincoln during the Log Cabin campaign – 1840

Alexander Hamilton

To emit an unfunded paper as the sign of value ought not to continue a formal part of the constitution, nor ever hereafter to be employed; being, in its nature, pregnant with abuses, and liable to be made the engine of imposition and fraud; holding out temptations equally pernicious to the integrity of government and to the morals of the people.

Alexander Hamilton – Resolutions - June, 1783

Andrew Jackson

In reviewing the conflicts which have taken place between different interests in the United States and the policy pursued since the adop tion of our present form of government, we find nothing that has produced such deep-seated evil as the course of legislation in relation to the currency. The Constitution of the United States unquestionably intended to secure to the people a circulating medium of gold and silver. But the establishment of a national bank by Congress with the privilege of issuing paper money receivable m the payment of the public dues, and the unfortunate course of legislation in the several States upon the same subject, drove from general circulation the con stitutional currency and substituted one of paper in its place.

Andrew Jackson -  Farewell Address – 1837

Thanks to Lawrence Parks and his lecture for the idea.

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Peter Schiff v. James Bullard and Alan Blinder

Peter Schiff says that, “Ben Bernanke has never gotten anything right”  while on a panel with St. Louis Fed President James Bullard and former Fed Vice Chair Alan Blinder.

Alan Blinder then claims that “Ben Bernanke got a lot of things right”. When prompted by Schiff to name one thing that Bernanke got right, Blinder says that he doesn’t have enough time. That’s right, not enough time to name one.

Schiff then rattles off that,

he [Benanke] said that there was no housing bubble, and then that even if we have a decline in the housing market its not going to have a meaningful impact on employment. He said that the subprime mortgage problems were contained, that we didn’t have to worry about it. I can’t think of one thing that he got right. Not only was he wrong, he was as wrong as you can possibly be on a grand scale.

In this short video, Schiff also explains the effect of savings in China on spending in the US, a response to Bernanke’s Global Saving Glut.

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Our Enemy, The State

Albert Jay Nock’s “Our Enemy, The State” is as relevant now, as it was when it was published in 1935. It’s especially relevant today, as the government starts taking over the health care industry. Below are a few of Nock’s insightful perspectives that can be found in the first few pages of the book.

To read the whole book… buy it online | read it for free

Our Enemy, The State
by Albert Jay Nock, 1935

If we look beneath the surface of our public affairs, we can discern one fundamental fact, namely: a great redistribution of power between society and the State.

It is unfortunately none too well understood that, just as the State has no money of its own, so it has no power of its own. All the power it has is what society gives it, plus what it confiscates from time to time on one pretext or another; there is no other source from which State power can be drawn. Therefore every assumption of State power, whether by gift or seizure, leaves society with so much less power; there is never, nor can there be, any strengthening of State power without a corresponding and roughly equivalent depletion of social power.

Every positive intervention that the State makes upon industry and commerce has a similar effect. When the State intervenes to fix wages or prices, or to prescribe the conditions of competition, it virtually tells the enterpriser that he is not exercising social power in the right way, and therefore it proposes to confiscate his power and exercise it according to the State’s own judgment of what is best.

The process of converting social power into State power may perhaps be seen at its simplest in cases where the State’s intervention is directly competitive… It is obvious that private forms of these enterprises must tend to dwindle in proportion as the energy of the State’s encroachments on them increases, for the competition of social power with State power is always disadvantaged, since the State can arrange the terms of competition to suit itself, even to the point of outlawing any exercise of social power whatever in the premises; in other words, giving itself a monopoly.

Thus the State “turns every contingency into a resource” for accumulating power in itself, always at the expense of social power; and with this it develops a habit of acquiescence in the people. New generations appear, each temperamentally adjusted–or as I believe our American glossary now has it, “conditioned”–to new increments of State power, and they tend to take the process of continuous accumulation as quite in order. All the State’s institutional voices unite in confirming this tendency; they unite in exhibiting the progressive conversion of social power into State power as something not only quite in order, but even as wholesome and necessary for the public good.

In the last section of the book (page 38), Nock makes one of, what I believe to be, his most simple and insightful statements.

It is a curious anomaly. State power has an unbroken record of inability to do anything efficiently, economically, disinterestedly or honestly; yet when the slightest dissatisfaction arises over any exercise of social power, the aid of the agent least qualified to give aid is immediately called for.

Nock continues, making reference to the banking industry,

Does social power mismanage banking-practice in this-or-that special instance – then let the State, which never has shown itself able to keep its own finances from sinking promptly into the slough of misfeasance, wastefulness and corruption, intervene to “supervise” or “regulate” the whole body of banking-practice, or even take it over entire.

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Citibank – Seven day advance notice for withdrawals

According to the Citibank’s client manual (see the last paragraph on page 23),

Withdrawal Notice
We reserve the right to require seven (7) days advance notice before permitting a withdrawal from all checking, savings and money market accounts. We currently do not exercise this right and have not exercised it in the past.

After receiving a lot of attention online, Citibank confirmed the notice with the following comment:

When Citibank moved to unlimited FDIC coverage in 2009, we had to reclassify many checking accounts to allow for immediate withdrawals in order to ensure all customers qualified for the additional coverage. When we moved back to standard FDIC coverage with most major banks in 2010, Citibank decided to reclassify those accounts back to make them eligible again for promotional incentives. To do so, Federal Reserve Reg D requires these accounts, called NOW accounts, to reserve the right to require a 7-day notice of withdrawal. We recently communicated this technical requirement to our customers. However, we have never exercised this right and have no plans to do so in the future.

While Citibank claims to have no plans to enforce this rule, its good to know that it exists.

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Bank failures 1/2010

Here’s an update on my previous post on bank failures.

 

Since the end of October there have been 40 more bank failures (9 in November, 16 in December and 15 in January).

 

With 15 bank failures in January, it’s still too early to tell if we’ll break 2009′s record of 144 failures, but my money is on yes! We might even break the 181 bank failures of 1992. Going any further back isn’t a fair comparison because multi-branch banking wasn’t nearly as popular.

 

6 month trend

Although there was a small drop in the 6-month trend in January, the trend is still upward.

 

Failures by state

Georgia (34), Illinois (26), California (24) and Florida (24) combined now account for a slight majority (51% or 108/212) of bank failures across the country.

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