Lakota Bank Update
I received my first shipment of Lakota silver yesterday, and I am very impressed by quality of the minting of my 200+ coins. These
1 Troy oz. .999 coins are produced at the same mint as U.S. Treasury Silver Liberty Dollars, and the same silver blanks are used. They were delivered on schedule directly to me from the mint in New York.
Buying Lakota silver is more than just that. You are buying a currency, a monetary system that is being exchanged by people and merchants now. Their numbers are small, but it is a start, like Ron Paul got started. Silver has intrinsic value, so the exchangeability of this silver may become more important with time. The value is in the coin itself, not what is printed on it. However, this silver has more value than any other silver coin of the same weight.
The reason for this is that the Lakota Bank is keeping an additional 200+ coins of my order in their bank, and I will obtain 7.24% interest tax free and anonymous. This is like a 12-month CD. All transactions into and out of the bank are in silver only. No vault charges are assessed if a minimum of 200 oz. of silver are kept at the bank. I am thinking about this like a Swiss bank account that pays a great deal more than the Swiss do, the silver stays in this country helping our own people, and best of all this is hard currency folks. My account can be assessed by phone or on line.
The product, the bank, and what is offered is all legit.
http://www.freelakotabank.com/loans&investment.php
http://www.freemarketmetals.com/
Contact Rob Gray for more information.
972-872-5499
I have no vested ownership in this bank.
I have an account there, and that is all.
Hmmm
Let's think about this for a minute.
Say you are a 100% reserve all-silver bank. And you also will exchange FRNs for silver.
You will take payments in FRNs and convert them into silver coins at spot plus (presumably) a premium to cover the cost of minting, shipping, a little profit, etc. Fair enough and slightly profitable for the bank but not for the customer. Only slight risk to the customer.
You allow deposits of silver in the bank for safekeeping for a fee. No interest is paid by or to the owner of the silver and the silver is not loaned out or encumbered in any way. Fair enough and slightly profitable for the bank but not for the customer. Only slight risk to the customer.
You allow time deposits of silver that are then loaned out at interest. Now here is where things get interesting. Who BORROWS silver? Like it or not, the amount of business transacted in silver in this country is like one trillionth of one percent or less. So say I go to the silver bank to borrow silver. A prudent bank is only going to loan it to me for a profit-making enterprise. So as the borrower, how do I use silver to fund my enterprise? I almost certainly must convert it to FRNs, spend the FRNs, then when the loan is due, convert FRNs back into silver. But if the price of silver jumps during the time of the loan, I am screwed because I will not be able to buy back the amount of silver I borrowed for the same amount I sold it for. So not only am I taking a risk with the enterprise I am funding, there is also an element of speculation on silver prices in the mix. AND it is speculation on margin. But let's assume that silver prices stay the same, then the borrower must buy back the silver (paying a premium to the seller of the silver) and then give that silver back to the bank plus interest which must be at least 10% in order for the bank to take a profit and still pay over 7% to the depositor. So 10% interest PLUS premiums for converting the silver back and forth so it can be used in commerce for the enterprise, plus the risk of the price of silver going up, plus the risk of the enterprise. Why would anyone do it?
From the bank's perspective, they have promised over 7% interest so they must charge 10% to make their profit. But because they are charging a high interest rate and because the conversion back and forth between silver and FRNs entails transaction costs and commodity price rosk, the loans the bank can make are not competitive. At least they are not competitive for good risks. In order to loan out the silver, the banks would of necessity be forced to take on bad risks because they would be the only borrowers to pay for such expensive loans. There is going to be a high rate of default. And when there is a default, there will be insufficient silver to pay the depositor. The bank will have two choices: pay the depositor out of profits or pay the depositor with other people's deposits. Both lead to disaster.
So I would say that time deposits of silver are at high risk even if the business is run on the level. And I would say that ALL deposits are at risk because the silver time deposits are going to start coming up short as a result of defaults and the temptation will be to cover them with deposits on hand. And then there is a run on the bank
I believe a 100% reserve hard-currency bank can work. But not at 7% interest and not when bullion must be converted back and forth into another currency for every transaction.
Caveat emptor.
Is this bank legit?
The Republic of Lakotah website dismissed it claiming they have nothing to do with the bank.
"Greater than the force of mighty armies is the power of an idea whose time has come"
- Victor Hugo
"Greater than the force of mighty armies is the power of an idea whose time has come"
- Victor Hugo
From the website, and I quote,
"All loans are funded through the Free Lakota Bank General Investment Fund. This fund is a combination of bank assets and depositor holdings. When you deposit with the Free Lakota Bank, you are invited to participate in the General Investment Fund. Simply indicate the number of ounces from your funds on deposit you would like to earmark for the Fund. Currently, any deposit made to the Fund will not be accessible for a period of 1 year. As the size of the fund grows, early withdraws will be permitted with a small fee. Access to withdraw from the Fund is limited simply because we do not participate in fractional reserve banking.
The current annual rate of return for the Fund is 7.24%. Your Fund earnings are deposited in your account in ounces of AOCS silver."
THAT'S RIGHT ...
ZERO LIQUIDITY FOR 1 YEAR.
Only risk your play money folks.
7.24% may be worth the risk, but only with the play money.
I smell a scheme.
By the way, there will be capital gains tax, I have no doubt.
Take in the whole picture please.
Not say it is a scheme, but it smells like one.
"Current annual rate of return for the fund is 7.24%"
I would scrutinize the fund with a fine tooth comb.
Investor beware.
WAHOR!!
http://www.dailypaul.com/node/48994
WAHOR!!
http://www.dailypaul.com/node/48994
'7.24% interest tax free and anonymous'
How are they obtaining 7.24% in order to 'pay' you?
If they're paying you, how is it anonymous?
How are they obtaining 7.24%
I'd like to know that, too. Are they loaning out your silver, and therefore increasing the risk of losing it? Are they doing fractional reserve banking, where many people think they have a certain amount of silver in an account there, but there really isn't that much silver there?
I think it would be easy enough for them to add the interest to an account, despite not knowing the owner.
I see that my questions were
I see that my questions were just answered below....
There are no names used, no social security numbers, no tax ...
forms, no forms of any kind are used. This is all accomplished by phone numbers and passwords and forms online. These rates were set by the bank board to attract capital and can change in the future. They lend for projects that produce a return in 6-12 months, so not for long term ventures or mortgages.
So they have lent out your 200 oz.
They are operating as an Savings & Loan then, and do not have your 200 oz in their vault, but have lent it out to someone else. Otherwise how could they earn interest sufficient to pay you your interest.
So as long as you know that you are at risk if they are not prudent lenders, then great. But don't think you can demand your 200 oz and depend on getting it if the loans they make default. They are acting as a financial intermediary between you and those who borrowed your 200 oz, so you are at risk of losing your 200 oz.
I don't know how they avoid the IRS reporting requirements, but if they can get away with it, then more power to them.
"The deepest sin against the human mind is to believe things without evidence." Thomas H. Huxley
I do not believe that there are any taxes on precious metal.
If one buys gold at $800/oz. and sells it at say $2,000/oz. There are no taxes on that transaction. There is no interest to declare on holding precious metal that gains in value, either (you can certainly lose money also.) With this bank your interest is paid in silver, not dollars.
You might want to do a little research on taxes.
I think you are in error about taxes on gold profits. When you sell gold for more than you paid for it, I believe you have a taxable gain. And if you are paid interest in silver, I think the value of the silver you receive on the date you receive it is taxable interest.
As a matter of fact, a coin shop that buys your silver or gold is supposed to get your social security number and file a 1099 form with the IRS to report how much they paid you. I realize many coin shops do not do this, but they are in violation of the law and can be fined for each 1099 they fail to file.
Do your research, lest you get an unpleasant surprise.
"The deepest sin against the human mind is to believe things without evidence." Thomas H. Huxley
You just said several things there that ring alarm bells.
Especially since you said in your OP that they garauntee 7.24% interest.
WAHOR!!
http://www.dailypaul.com/node/48994
WAHOR!!
http://www.dailypaul.com/node/48994
Not sure what alarm bells you mean.
After one year, 100 oz. of silver will grow to 107.24 oz. There are shipping charges for obtaining payment. There were no shipping charges for my silver shipment.
There is no pressure to bank any. You can take delivery on all if you so choose.
Your joking right ....
Let me ask you another question ...
What if you do not invest in the fund and simply have a deposit, is there a return, what is it if any, and how liquid is it?
Because there is zero liquidity for a minimum of one year if you opt for the fund.
What is this fund?
Is there a perspectus?
Is it transparent?
WAHOR!!
http://www.dailypaul.com/node/48994
WAHOR!!
http://www.dailypaul.com/node/48994
That can't be done. Either a one year commitment or..
take delivery of all silver. There is no status for basic deposits without it being a one year CD.
and that is "You're" as in "You are."
That is in complete contridiction to the quote that I ...
provided above from the website.
Did you read it?
What about a perspectus?
Oh, and thank you for the spelling correction, that is not one of my strong suits.
WAHOR!!
http://www.dailypaul.com/node/48994
WAHOR!!
http://www.dailypaul.com/node/48994
new 'banking' model
They obviously (and thankfully) are not following standard banking law. I think I'll just watch and wait for a couple of years on this one.
I still think there's significant risk of the fed shutting them down and confiscating all the assets, just like the Liberty Dollar. I'd like to think not, but I'm not getting caught in the middle.
I wish them all the best.
Sovereign nation
Does any federal agency have an jurisdiction there? Isn't this bank within the boundaries of the Lakotah Nation?
It would be an interest study in Indian sovereignty if they tried to shut it down.
Are you saying you bought the coins by paying in ...
silver?
Not sure I follow.
WAHOR!!
http://www.dailypaul.com/node/48994
WAHOR!!
http://www.dailypaul.com/node/48994
They are accepting dollars now. The price of the silver..
is tied to the kitco silver price. This is much like buying silver from APMEX of other precious metals companies.
Then what do they do with the dollars ...
that can garauntee over a 7% interest ...
It smells funky ...
I hope this is play money.
Try this:
Call them and tell them you want to cash out (silver out in this model of course) and pay what ever penalties there are.
See what they say.
WAHOR!!
http://www.dailypaul.com/node/48994
WAHOR!!
http://www.dailypaul.com/node/48994
Worth knowing about.
Thank you. Where else can you get over 7% right now? How do they do that?
Steve
nice post therefore bump well deserved*))
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