Saturday, February 25, 2012

Fractional Reserve Banking Makes Bank Robbing Full Time Job

The same twenty-something St. Catharines woman is suspected to have held up three separate Scotiabank branches in the course of the last month. Local talk radio station 610 CKTB reports that no one was hurt in the first two robberies. Her third attempt got her nabbed by Niagara Regional Police.

It's difficult to believe that anything other than the prolonged economic downturn of the past four years was the young woman's motive for her acts of desperation. As an entrepreneur in the pallet recycling industry I have a unique opportunity to feel the economic pulse at any given time. As such, I have found little consolation in the proclamations that Canada has not been as hard hit by this recession as was the US. Nor do I find any comfort in the fudged "dropping" unemployment figures coming from Washington. My experience tells me that business is still down by at least 25-50% compared to early 2008. This string of bank robberies, however, makes perfect sense.

That said, when I heard of the second, and then third robbery, the first thing that sprung to my mind was: she should have taken a class in ECON 101 first. Over the years, and in particular during recessions the "independent" central banks have kept lowering the percentage of reserves banks have to hold on hand. In turn, this has allowed banks to hold no more than a few hundred dollars in a given branch: talk about making money out of thin air. So, it's not that this lady was greedy, it's far more likely that she has given the world an insight into how much an average branch holds on hand--enough to live off for a couple of weeks. No wonder you don't see security guards in banks anymore.


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