The Big Steal – How Banks are Stealing your Savings

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The big steal – how banks are stealing your savings by diluting the money supply without telling you

Analysis and Report by Matthew Dowling of Dowlingkim.com

The big steal:

We all like to joke about bankers and their exorbitant fees, however what they don’t tell you when they sign you up to become a depositor, is that they actually create money every time they issue loans to people to buy a house, buy a car, or every time someone uses one of their credit cards. This matters because by having the ability to create money (by simply keying in numbers in their computer as an IOU), they have the power to dilute the money supply. Every time the money supply expands, your holdings of currency which you call savings are diluted and go down in absolute value by the proportion of money that has been created to the quantum of money in the overall economy that formally existed– and it is the commercial banks who are directly responsible for 97% of this money expansion in the economy.

What does the money supply trend look like on a graph?

You may be aware that prices are going up (some people call this effect inflation) as your favourite drink is either getting smaller every few years or you are having to hand over a larger size note than you did 5 or 10 years ago. Well the cause of this price increase is chiefly due to the dilution of the money supply by the banks – they keep bringing money into existence which means that existing money becomes worth less over time. On a graph it looks like this :

Commercial loans australia

Data: APRA; Dowlingkim.com

The graph clearly shows that the commercial banks are increasing their outstanding debt year on year at an ever increasing rate. They are growing their loan book at a much faster rate than they are getting paid back. To be exact, the commercial banks have increased the money supply 3.26 times during the last 12 year period from $600billion to $1.9trillion. And if you remember what I was saying before about every dollar of new debt being an increase in money supply by the same amount, what we see folks is some serious dilution of the money stock.

What does this mean to the every day guy with a savings account?

This means that the banks would have had to have given you a 10.89% continuous savings rate over 12 years to simply tread water with each dollar you invested 12 years ago. I am told that the average rate given by the banks during this period has been closer to 5.5%.

Most believe that the 3% rate they are currently getting on their savings is a ‘risk premium’ for lending out their money to the banks for them to lend to other people. In reality, if you factor your assumption that your interest rate is a deserved reward for lending out your money into my analysis, you should be getting a 13.89% return on your savings (at least) if the banks continue to increase money supply as they have done in the last 12 years.

Just to make this clear – if you invested $10 in a savings account in 2002, it would be now worth about $19 when it really should be at $51 if the banks had paid you your 10.89% for money supply dilution as well as your 3% risk premium. Yes, they have shortchanged this savings account the difference.

Who are the banks responsible for this?

 The big 4 banks – CBA, Westpac, ANZ and NAB are the major culprits in diluting your savings as attested by the below graph.

Data: Apra, Dowlingkim.com

Data: Apra, Dowlingkim.com

Now you know how wealth transfer happens before your very eyes by institutions who have rigged the system against people who WANT TO SAVE. They have made saving the quickest and easiest way in which to get robbed blind.

I ask myself, shouldn’t we be demanding that our politicians attend to this problem immediately?


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3 comments to The Big Steal – How Banks are Stealing your Savings

  • david

    Excellent, original article. Well done!

  • Bob

    You claim that “the commercial banks have increased the money supply 3.26 times during the last 12 year period”.

    What legislative controls exist to rein in the banks? Isn’t this a responsibility for the government rather than profit-seeking commercial organisations?

  • Matt

    David – Thanks for your feedback. I’ll continue to post on this issue as it hasn’t been covered in mainstream press.

    Bob, the legislative control over the banks is limited to Basel 2 and 3 reserve ratio requirements, which stipulates minimum amounts of reserves that banks need to have on their books of which there are many workarounds. That profit seeking institutions are allowed to create money and lend it out rather than actually have to have it to lend it out is one of the biggest acts of deception I have ever witnessed. I would be more comfortable when the average Joe on the street knows that this is how the system works, because until then, you have asymmetric understanding of how the money and markets function – which is a gross undermining of capitalism and the market system.

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