Tags: bernie sanders | wall street | president | republicans

Why Bernie Sanders Was Right About Wall Street

Image: Why Bernie Sanders Was Right About Wall Street
(Dollar Photo Club)

By Patrick Watson
Wednesday, 10 Feb 2016 07:17 AM More Posts by Patrick Watson


“The business model of Wall Street is fraud,” said by a Vermont socialist who wants to live in the White House, may have been the year’s most unintentionally accurate sentence.

Bernie Sanders won’t have my vote for president, but he described Wall Street correctly.

Facts are facts no matter who says them. 

This doesn’t mean everyone who works there is a crook. The people who run our banking system are, for the most part, hard-working, honest citizens. They don’t wake up scheming, “How many widows and orphans can I defraud today?” They try to do their jobs and take care of their families, just like the rest of us.

Unfortunately, their jobs are in a fundamentally dishonest business. The banking system is built on a centuries-old foundation of lies. It has operated this way for so long that few recognize it. The deception inherent to their business seems perfectly natural to them.
In fact, it is natural. Dogs naturally bark, fish naturally swim, and bankers naturally lie. They don’t have to think about it. They just do it.

Here’s why.

When you deposit cash in your bank account, the bank promises you can have it back on demand. That is why checking and savings accounts are called “demand deposits.”

This being the case, the bank must safeguard your cash in a vault, right? No. They lend your money to someone else. The interest from those loans is how the bank makes a profit.

Simple question: How can the bank simultaneously 1) promise you can have your money whenever you ask and also 2) loan that same money to someone else?

They can have it both ways because they know only a small percentage of depositors will want to withdraw their cash on any given day. The bank keeps only enough cash to meet that demand.

When too many people want to withdraw their money at once, you have a “bank run.” Deposit insurance and the Federal Reserve as lender of last resort keep these from getting out of hand.

The fact remains, however, that the bank lied to you from the very first moment you became its customer. It promised you something it cannot possibly deliver, absent outside help.

That, like Bernie Sanders said, is fraud.

It’s not fraud in a criminal sense because our laws permit banks (and only banks) to do it. Morally speaking, however, “fraud” fits. That bankers occasionally commit larger frauds should surprise no one. They think that promising the impossible is perfectly normal.

If I were to walk around New York City and sell people tiny shares of the Brooklyn Bridge for $1,000 each, I might get rich but those people would not own the bridge. I don’t have the power to sell it to them. Nor do banks have the power to create money from thin air.

Banks promise depositors their money back on demand, and then render themselves unable to keep that promise by loaning the deposited money to someone else. We would call this fraud in any other context, so Bernie Sanders was obviously right.

I’m not saying Sanders has the right solution, or that he would be a good president.

Nevertheless, he is someone who chooses his words carefully.

He chose the right word to describe Wall Street.

Patrick Watson is an Austin-based financial writer. Follow him on Twitter @PatrickW

To read more of his insights, CLICK HERE NOW.

© 2017 Newsmax Finance. All rights reserved.

1Like our page
2Share
PatrickWatson
"The business model of Wall Street is fraud," said by a Vermont socialist who wants to live in the White House, may have been the year's most unintentionally accurate sentence.
bernie sanders, wall street, president, republicans
568
2016-17-10
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved