The Wall Street Ponzi Scheme Called Fractional Reserve Banking

Bernie Madoff showed us how it was done: you induce many investors to invest their money, promising steady above-market returns; and you deliver – at least on paper. When your clients check their accounts, they see that their investments have indeed increased by the promised amount. Anyone who opts to pull out of the game is paid promptly and in full. You can afford to pay because most players stay in, and new players are constantly coming in to replace those who drop out. The players who drop out are simply paid with the money coming in from new recruits.

The scheme works until the market turns and many players want their money back at once. Then it’s game over: you have to admit that you don’t have the funds, and you are probably looking at jail time.

Welcome to the world of Central Banks!

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