What Is Money?

Part 4: Bait and Switch

by Gary North, October 8, 2009

Bait and switch is the heart of all fractional reserve banking. Bankers knowingly promise more than they can deliver to every depositor. The history of commercial banking has been the history of bankers' attempts to transfer liability for bank failures to the government, while maximizing income from making loans.

That was what the banking crisis of September and October 2008 was all about.

You might think that Congress would eventually catch on. It never does. Congress is busy making far greater promises that will be reneged on. It has no time to pay attention to such arcane matters as these. It is easier for Congress to pass a bill to bail out the banks than it is for Congress to go the voters in the month before the Presidential election and say, "We did nothing. The largest banks are no more. Sorry about that."

Congressmen knew that the public would re-elect most of them, despite the big bank bailout. They were correct.

Lenin said that in order to make an omelet, you must break a few eggs. What is the omelet? The desire of Congressmen and Senators to be re-elected. What are the eggs? Your plans for the future. [MORE]