Your Bank Is Robbing You

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Should You Save Your Money or Hide It Under The Mattress?

by Bill Sardi

Recently by Bill Sardi: The American Dream Has Changed. HaveYou?

     

Recently a woman in Sydney, Australia unwittingly baked her family's entire life savings ($15,000 of Australian dollars) that her husband placed in the oven for safekeeping after selling an automobile for cash. While your banked money isn't being burnt to charcoal like this woman in Australia, due to hidden inflation, most Americans should consider their money has been placed in an oven and the temperature set on "slow bake."

Oh, there are a lot of articles planted by the banking industry urging Americans to save more, but all that Americans are doing is recapitalizing their banks for free while experiencing erosion in the value of their banked money. In fact, American banks are so audacious in their back-door robbery of your money that they are rewarding their stockholders with dividends while depositors experience hidden decay of their life savings.

In case you hadn't noticed, most American banks are paying less than 1% interest on savings accounts in the face of a nine-times-higher rate of inflation. Oh Mr. Ben Bernanke, chairman of the nation's central bank — the Federal Reserve – says inflation this year (2012) will fall between 1.2 and 1.7 percent, under its 2.0% target rate. The nation's news media allows this bearded sage of finance to get away with this propaganda.

But according to economist John Williams writing at ShadowStats.com, the way inflation is calculated was altered in 1980 and then again in 1990 to provide a skewed number. If you revert back to the earlier way of calculating inflation, the purchasing power of Americans' saved money is losing value at the annual rate of -9.3%. Over the next five years if nothing is done to correct this, the estimated $10 trillion in so-called time deposits will lose nearly 40% of its value. Americans might as well go back to stashing paper money under their mattress.

Most Americans are oblivious to this slow form of bank robbery. The internet allows savers to search for the best interest rates offered on banked money. However, the most popularly advertised website dedicated to that purpose posts an obscure disclosure which says "This website may be compensated by companies mentioned through advertising, affiliate programs or otherwise." In other words, it is a shill for the banksters.

Interest rates: global comparison shopping

Being curious about this inflation vs. interest game being played at banks worldwide, I searched to determine if better interest rates can be obtained by depositing money in foreign banks. I created the chart below which compares estimated rates of inflation from three different sources against the best interest rate available (average percentage yield or APY) in 31 countries. Only nine of thirty-one countries offer depositors a significantly higher rate of interest than the rate of inflation.

~

Inflation

Inflation

Inflation

Interest

Interest rate exceeds inflation

Source

Trading Economics

Inflation.eu

CIA Factbook

International Deposit Interest Rate Exchange**

~

Period

2012

June 2012

2011

2012

~

Argentina

9.9%

2.2%

22.0%

10.08%

~

Australia

1.2%

3.4%

5.10%

X

Austria

2.2%

4.9%

3.3%

2.00%

~

Brazil

4.9%

6.5%

6.17%

~

Canada

1.5%

1.2%

2.8%

1.40%

~

Cayman Isles

3.4%

0.70%

~

Chile

2.7%

3.3%

5.52%

X

China

2.2%

5.4%

3.50%

~

Finland

2.8%

3.4%

0.15%

~

France

1.9%

2.0%

0.48%

~

Germany

1.7%

2.2%

2.25%

~

Great Britain

2.4%

4.5%

3.75%

~

Greece

1.2%

1.3%

2.9%

1.00%

~

Hong Kong

3.7%

5.3%

0.93%

~

India

7.2%

10.1%

6.8%

9.25%

~

Ireland

1.7%

1.7%

2.5%

3.25%

X

Israel

1.0%

3.2%

1.60%

~

Italy

3.3%

3.3%

2.8%

3.50%

X

Japan

3.3%

0.2%

0.4%

0.30%

~

Mexico

4.3%

4.3%

3.5%

4.55%

X

Norway

0.5%

0.4%

1.4%

3.40%

X

Peru

4.0%

3.4%

3.00%

~

Romania

2.0%

3.1%

4.00%

X

Russia

4.3%

3.6%

8.9%

8.00%

~

Singapore

5.3%

0.35%

~

South Africa

5.5%

5.5%

5.0%

6.15%

X

Spain

1.9%

1.9%

3.1%

1.75%

~

Sweden

1.0%

1.0%

2.5%

2.95%

X

Switzerland (UBS)

-1.1%

-1.0%

0.4%

1.25%

X

Turkey

8.8%

7.8%

9.75%

X

United States

1.7%

1.6%

3.0%

1.17%

~~

~

9.3% ShadowStats.com

~

~

~

~

~

~

** annual percentage yield (APY), best rate available

~

Noticing that India currently offers a 9.25% rate of return on banked money, when traveling in India this year I inquired of a banker there if I could park my money at the Bank of India which is offering this rate. I was informed foreigners cannot place their money in a savings account in India. I wonder about East Indian nationals who live in America, whether they can place their U.S. money in a bank in India and gain higher interest rates than offered in the U.S?

Another item of interest is the wide variance in interest rates within a country. Here are some examples:

Country Variance in interest rate (annual percentage yield or APY)

Germany 0.90% to 2.25% 2.5 times difference U.S. 0.05% to 1.17% 23.4 times difference Britain 0.06% to 3.75% 62.9 times difference Hong Kong 0.01% to 0.95% 95.0 times difference Australia 3.25% to 5.10% 1.56 times difference Canada 0.65% to 1.40% 2.15 times difference

Source: International Deposit Interest Rate Exchange

Financial literacy

A major problem is that Americans grew up without significant training in how to handle money. This appears to be planned. Ask any American if they know what fiat money, debt-based money or fractional banking is and they are usually clueless. This makes it easy to fleece the public of their wealth.

School curriculums are so pitifully poor in teaching American students about money that most kids getting out of high school have never balanced a check book. And what about putting students through an exercise in filling out a federal tax form or reading and deciphering a home mortgage, all documents they will face in adulthood, before they graduate? The current practice is to leave them financially illiterate.

Oh, the Minneapolis Federal Reserve Bank did conduct a financial literacy test over a decade ago and asked this question: "If your annual income rises by five percent while prices of the things you buy rise by ten percent …

  1. You are better off.
  2. You are worse off.
  3. You are unaffected.

Answer: b. If the prices of the goods and services a person buys rise more than the increase in that person’s income, that individual’s purchasing power, that is, the ability to buy a given quantity of goods and services, has declined."

90% Answered Correctly

But notice the Federal Reserve made no mention about inflation eroding the value of banked money versus the rate of interest gained. It could have asked the question this way: "If your saved money gains less than 1% interest and the cost of living (rate of inflation) rises by 2%…," but it didn't do that. That would dissuade Americans from capitalizing the banks for free.

The Federal Reserve Bank provides an online lesson about savings. It displays a chart showing a $50/month savings plan over 30 years would rise to about $35,000-$75,000 in value @ 4% and 8% rate of interest. Of course, this is not real world. You can't find that high an interest rate these days. But assume you could. Nothing is said about inflation in the document. Nor is any mention made of taxes that are due.

So if you saved $50/month for 30 years beginning in 1982 to 2012 you have placed $18,000 in savings that would, in the Federal Reserve example, gain interest to $35,000, but over that time it would have eroded in value (purchasing power) by more than 8-fold! (To calculate this on your own go to Tom's Inflation Calculator and select under "options" the ShadowStats price inflation estimate.)

And while your $18,000 invested would rise to $35,000, for an imagined gain of $17,000, assume you paid federal taxes at the rate of 20%, so you would also need to deduct $3400 from that paper entry gain. So, no, your saved money did not increase in value relative to the cost of goods and services, it only rose on paper.

The Federal Reserve is misleading American kids in online curriculums it provides. American kids may be tech savvy, internet adept, and connected at Facebook, but they are sitting ducks when it comes to financial matters.

Raise Interest Rates Or Savers Will Be Ruined

Unless Congress instructs the independent Federal Reserve Bank to raise interest rates on money it lends to banks (it currently provides near-free money to lenders — 0.00 to 0.25%) to let's say 9%, and the lending banks then lend that money out for home loans and other purposes at 11%, and therefore can offer their depositors 9% interest and keep the 2% difference as profit, savers will not be spared from the quagmire of inflationary attrition. Yes, home buyers would have to pay 11% interest compared to the less than 4% loans now being offered, but this low loan rate has not brought the real estate market back from the grave and only threatens to drag savers into inflationary quicksand.

Have you heard the White House or any Presidential candidate other than Ron Paul talk about this bank robbery of the American savings class? Since the Federal Reserve obviously represents bankers' interests over the public's interests and continues to hide behind its Congressionally-mandated independence to perpetuate this fraud and is therefore not directly accountable to the public, the only way to put a stop to this thievery-by-banker is to end the Fed. Not just audit the Fed, get rid of it. Eliminate the bankster class, save the savers.

Five more years of this and what little wealth Americans have saved will have evaporated. American bankers will then wake up to the fact they are holding trillions of dollars of saved money in reserve that has little or no value. They are firing a slow bullet at their own head. Ron Paul pleaded for fiscal sanity, but Americans somehow had other Presidential candidates foisted upon them who are obviously bought off and do not even address this issue. In the light of the life savings of Americans being put at risk while Presidential candidates argue over comparably irrelevant issues, Americans need to protect their savings by pulling the plug on The Fed.

Bill Sardi [send him mail] is a frequent writer on health and political topics. His health writings can be found at www.naturalhealthlibrarian.com. His latest book is Downsizing Your Body.

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