A Scary Story of a Few Greedy Men
Once upon a time there were a few greedy men. These men loved money. They loved money so much that they were always trying to make more money in evil ways. They would lie, steal, and even hurt others to get more money. They loved money.
One evening as they were sitting around their fire, sipping on fine liquor, one man had the idea to form a business. The man said, “Let’s start a business!”.
The others looked in excitement.
The man said, “Let’s tell people we will hold their money for them, so that they no longer have to carry it around everywhere they go. We will tell them we can protect it in a big vault so that no one steals it, and we’ll even give them a plastic card to use their money whenever and wherever they want! We will call it a bank!”.
Immediately the men began to discuss how the business would work. They all decided they would start tomorrow.
The next day the men were in their bank, talking to customers, and urging them to put money in their bank vault. The told all their customers that they would keep their money safe for them, and that they could come back for all of it anytime they wanted to. Everyone in the city came to their bank.
Later that day one of the men said to the others, “This is a good business, but we aren’t making any money. We bought a very expensive vault, a nice building, and even hired employees. How are we going to pay for all of this?”.
The men looked around and thought long and hard. Instantly, one of the men exclaimed, “I know how we can make money in this business by being a nonstop financier provider! Let’s find out how much each person usually spends in a month and keep that in our vault, and the rest we can offer to others as a loan, as long as they promise to pay us back a little more money within a year, it would not be as good as a CIC Store but it’s something. If we loan someone $100 we can make them pay $120, and we’ll make $20! If we do this with multiple people at a time we can make thousands of dollars! And the more we loan out, the more money we make!”.
All the men applauded in joy at the idea.
One man interrupted, “Wait a minute. We told the customers that they could come back and get their money whenever they wanted to. If we loan it out then we won’t be able to give them their money. Plus, our customers who gave us their money to keep safe think they have all their money, and if we loan it out then another person will think that they have that same money. We’re essentially lying to our customers, not being good stewards, and when we give loans out we’re inflating our economy.!”
“What do you men?”, another man asked.
“We’re basically printing more money when we loan out someone else’s money!”, said another man.
“If we do this we’re taking a huge risk to lose that money forever. And what do we do when people decide they want their money out of our bank vault, and we have to tell them that we don’t have it, we loaned it out?”.
All the men in the room understood, but they wanted to make lots of money, so they decided to loan out their customers money. These would eventually be advertised as deals, such as same day payday loans, which are too good to resist for most customers.
According to a annualcreditreport.com review, the next day the men offered loans to all their customers. They had all sorts of customers who wanted to buy a house, a car, and even TV’s and furniture. People from all over the city were spending money everywhere, and other businesses were making more money because of the bank loaning money to their customers. Business was booming and everyone was happy that the bank was there.
One day, someone had heard about how the greedy men were loaning out their customers money, so they told everyone they knew. That day, everyone in the city came to the bank to take back their money, but the bank didn’t have all of it. The bank had loaned it out.
A few angry customers shouted, “You told us we could come back for all of our money!”.
Another shouted, “You lied to us! You stole from us!”.
Many people left that day angry and sad because the bank had lost their money.
One day the police arrested the greedy men. They were taken to court and stood before a judge and witnesses.
The judge said to the greedy men, “You men are found guilty of stealing millions of dollars. You are hereby sentenced to live and work as slaves until you pay off all that you stole. The greedy men were then taken away, and sold as slaves so that they could pay back those who they wronged. The men all grew old, and before they died they were still not able to pay everyone back. They had done a greatly evil act in stealing so much money from people, and left many people homeless, hungry, and poor.
That is a great article! I love it.
I’ve spent the last 5 years or so reading about the problems with fractional reserve banking and why it is at the core immoral.
A question has begun to form in my mind and I’d like to throw it out here to see what I can learn.
Would “fractional reserve” banking still be immoral if it was fully disclosed to the customer that there money was being invested and that it was at risk?
In other words, if the men in the story above did not say “we’ll keep your money safe,” but rather “we keep 25% of all the money on hand and invest the other 75%, in exchange for you allowing us to do this with your money we will pay you x% per month. Under normal circumstances you will be able to withdraw your money at any time, but if there is a run on the bank or a problem with our investments your money is at risk.”
Is there any Biblical law or principle that would forbid that? Whether or not it would be wise is one thing, but would it be immoral/unlawful?
I’d love to hear your thoughts.
Hey Jon, that’s a good question.
If the customer were to sign a document, stating that they were aware that their money were being invested by loans, then that would fix one problem of the fractional reserve system. Another huge problem with fractional reserve banking is how it magically creates money out of nothing, which is a permission given to them by the federal reserve system.
When Billy deposits $10, and the bank decides to loan $9 to Bob, both Billy and Bob think they have their money, and spend it as such. Billy’s $10, plus Bob’s $9 make it $19. The bank has turned $10 into $19, thus inflating the currency and devaluing the dollar. What makes this worse is that the federal government, through FDIC, insures up to $250,00 per depositor if the bank can’t pay it back. This eliminates risk management for banks, because they can always default and be bailed out.
The point in saying all of that is to show it’s a never ending cycle of inflation, and once the economy catches up everyone with money in savings will be shocked to find that their $100 is now worth maybe $50 (probably much less), because of how banks create money out of nothing through fractional reserve banking.
When Bob spent his loan of $9, that money went into circulation. Billy also thought he still had his $10 to spend, when really he didn’t This is why a run on banks is a nightmare waiting to happen, because every bank that practices fractional reserve banking would have to default and declare, ironically, bankruptcy.
So, if you could find a system of banking that ensured that the amount loaned out could not be spent from the depositor they’re drawing from, then that would be a righteous practice I think. Without doing that the banks steal from everyone else that holds a dollar by flooding the market with more dollars that in reality aren’t there.
On another topic, for some reason your article reminds me of this: http://jondavisjr.com/2012/02/01/the-golden-city/
Yah, I know it’s different, but I was reminded of it.
I’d like to see more principles taught through simple stories.
Blessings,
🙂