The Reason Banks are Trying to Discourage Cash Withdrawals

Great explanation below, now I am convinced it is best to get my money out of the bank.

Banks keep reserves like their own checking accounts with the Federal Reserve bank and currency (Federal Reserve Notes) in their vaults. These reserves are the base from which they create new checking accounts out of thin air; you borrow from a bank by signing a note to them which becomes their asset, and they create a checking account out of thin air for you, their liability. Notice they earn significant interest on the new loans, but pay little or no interest on the checking accounts, which is the whole reason for this scam banking system. Ordinarily they do not need to pay but a fraction of these checking account liabilities each day, and since these are settled out of their reserves, they only to keep small reserves (hence the term fractional reserve banking).

If you force them to draw down their reserves by getting currency in exchange for your checking or savings accounts, then you inhibit their ability to create these new checking accounts out of thin air. This means that they cannot as easily make new loans and they do not get the corresponding interest income. Credit conditions become very tight; getting a loan becomes more difficult.

It is not as much a problem for the banks to get currency to meet a possible run. They can convert their checking account at the Federal Reserve into currency; they can borrow currency from the Federal Reserve Bank, and in an emergency the Federal Reserve can buy loans from your bank in exchange for currency. Also remember that when you hold currency instead of a checking account you are still holding bank debt; it is just "safer" debt to hold when your local bank is on the road to insolvency.

Ultimately if you take currency from the banking system and banks lose the ability to make new loans, then the economy comes to a halt; economic activity under this debt based money system is dependent on a continuously increasing money supply. This is really a vicious contraction cycle, once it gets going. Once the banking system loses the ability to expand the money supply, the whole house of cards falls and we have a 1930's style event. Many people think that printing currency to fund bank runs is inflationary, but it is just the opposite. The money supply does not change in total, because the checking account component of the money supply goes down equal to the increase in the currency component. Not only do the banks without reserves or with reduced reserves lose the ability to expand the money supply, but people hold onto as much currency as they can so the velocity of money circulation goes way down; people do not spend; businesses fail and jobs are lost; asset prices go down.

What is happening in the economy today is highly dangerous. The financial institutions in their most recent binge of expansion accepted very low quality debt and entered into other complex transactions that are now increasingly subject to default. During this expansion, the price of real estate was driven to values all out of proportion to reality by easy credit. This real estate is security for loans, many of which were to people and businesses with inadequate ability to pay. The contraction in real estate values is just beginning and already the losses being suffered by financial institutions are unmanageable. Not just real estate loans are in question as the losses ripple through the system. Debt is now a four letter word. Insolvency is now a plague facing the financial system. Big name institutions like Merril Lynch, Citigroup and Bear Stearns have been in the news as examples of those in trouble.

After I learned about the fractional reserve banking system and how the federal reserve is really run here is what I did.

-Removed all savings from my bank
-only keep enough cash in my checking account to pay bills and gas purchases
-To fight inflation I put all my new acquired cash into silver
-Every paycheck, just enough goes to pay bills (growing weekly now though) and the rest goes into more silver.

It is great because it protects my money, I am actually making (well, fighting inflation very well) money on the silver and I am protesting the fractional reserve banking system. It also forces me to save more. When all my money is in silver it is impossible for me to make on the fly purchases that I would later regret.

My wife just completed a FULL withdrawl/closure from our CHASE accounts and they issued her, at my request, a cashiers check for the large sum and cash for the smaller amount. They asked if she wanted ALL cash and the figure was relatively substantial, but they indicated they would have honored that much cash, however dangerous it may have been to carry around.

It was a series of reasons why we closed it (low level of quality & incompetent service) but the activity I see today sure helped solidify my actions.

Keep in mind that pulling your money out of the banks isn't enough. You will still be raped by inflation. If you want to protect the value of your money, you need to convert it to something that has intrinsic value, namely gold and silver. I recommend purchasing locally. Keep enough FRN dollars on you to purchase what you need, put the rest into gold and silver or even open up an account with a service like GoldMoney. Whatever you do, don't put your eggs all in one basket and don't trust the Federal Reserve Note or you will get burned.

In the early 90's in Brazil people would get their paychecks and immediately go to the market and buy food and other goods. If they waited and spent the money only at the end of the month it would only purchase 50% of what it could at the beginning of the month. Salaries of course were adjusted for inflation on a monthly basis. This could happen if dollars begin to return to the American economy. What is preventing this now is that countries are still required to have a reserve of dollars for purchasing internationally. Especially to purchase petroleum, which China is currently doing since they had a difficult winter and also to increase their reserves of petroleum. But if Iran manages to eliminate the middle man (Federal reserve dollars) and trade directly with other nations without the dollar, the dollar will become basically worthless on the international market and have real value only in the States. Now if people begin to withdraw dollar as cash, this increases the amount on the market, because banks do not hold the dollars as computer digits. Cash can flow from one person eliminating the need for banks.

issued by a bank that goes under, as most banks will not give out much cash at one time? To add to that question, if the FDIC runs out of money
to pay everyone.

It is true that the Fed can print more money, but they don't produce or hold anything else. So the best thing to do is to buy durable food products, gold or silver before the run really gets started. When money is taken out of investments people need to spend it somewhere, since it would be stupid to put it under your mattress. As more money is taken out of reserves the price of goods goes up. You just have to be smart and not use credit, cause this will just eat up any value you have purchased.