How The Banking Ponzi Scheme Works

The Banking Ponzi Scheme rips every one of us off for thousands if not tens of thousands of dollars or more each year. To understand how this works may aid you in being able to beat the system and avoid some of its traps.

Banking Ponzi Scheme

Banking and debt is undoubtedly a Ponzi Scheme. In the banking system the only new money created for interest payments is from luring new people in to create new loans. So people must either compete with each other to make the interest payments or lure more customers (including corporations and governments) into the scheme. They lure new customers in by offering guarantees that other investments cannot guarantee or are unusually consistent.  The key is that the scheme cannot continue without new customers or milking more from existing customers.  Since mathematically it is impossible for the scheme to run in perpetuity it must collapse – when this happens we call it a recession.

Early Banking

Banks started out as safekeeping houses for gold and coupons were issued by the bank to redeem your gold.  These coupons became popular and were traded amongst individuals for transactions.  Over time they were seen to be reliable and were the beginnings of paper money in Europe. One banker then figured out that since not everybody comes in to claim their gold at any one time that they could lend it out at interest.

Fractional Reserve Banking

Banks could in fact they could lend out many times the gold that they had in their possession all at interest.  This scheme was highly profitable and still is – just look at the bank profits. This may in modern times be described as a capital ratio – such as 10:1 – where by the bank has made $10 in loans for each $1 in deposits. In 2008 during the financial crisis some banks were deemed to have capital ratios in excess of 50:1.  Fractional reserve banking prints a lot more coupons (dollars) than there is gold to back them.


Although enough there was money created for the value of the loans there was no additional money created to pay the interest – thus the interest payments had to be made with new loans that were created or in competition with other loan holders to get a hold of the additional money to make the interest payments.  Interest is expressed as a percentage and thus is an exponential function. Since there is a fixed (linear or slowly increasing) amount of gold available and the interest to be paid was exponential – at some point the scheme must fail.

Bank Run

With all of these dollar coupons floating around for gold some people got suspicious and withdrew their gold – since there were far more coupons issued than gold in the bank the gold quickly ran out and the bank collapsed leaving many without their savings. One part of a government attempt to halt bank runs is the federal deposit insurance corporation.

Federal Deposit Insurance Corporation

The FDIC was creased in order to “guarantee bank depositors funds” up to a certain amount in order to stop bank runs after the major calamity of the great depression and a large number of bank runs.  The program is funded by banks paying in a small percentage of their deposits to a government guaranteed fund. The FDIC is inadequate for a major bank run and was taped severely in 2008-2009.  The guarantee comes from the government because they own the printing press to create more dollars to return your funds.


A recession happens when economy wide – which may be locally, nationally or globally in modern times when the amount of credit that is used slows down to the point where by it does not create enough new dollars to support the interest payments to the banks and other lenders. Thus in competition for the limited dollars, money is taken from more productive ventures to make interest payments to support the banking ponzi scheme. The result is that the economy slows down to the point where there is a squeeze to find money to make the interest payments. The collapse happens very fast and can be noted in the quickly falling prices in the stock market which are much greater than the usual pullbacks. The conditions bottom out when central bankers drop interest rates, try to stop bank runs and recapitalize banks to adjust the situation so that credit can grow again. The more debt in an economy the more severe the recession will eventually be. There is far more debt today than there has been at any point in the history of the world.

Recessions Under the Gold Standard

Recessions under the gold standard were severe as bank runs would be widespread and wipe out many peoples savings and their ability to pay debts it would often take years for the economy to start to grow again.  The great depression was an example of a recession under the gold standard.  The bank run was initiated by the French which took their holdings of gold from 7% of the worlds supply in 1926 to 27% in 1932


Bankruptcy is the result of an individual or organization unable to pay their debts.  In this case any assets are seized by the banks first and by other creditors or shareholders last. You will notice in the term “bankruptcy” the banks come first.

Fait Money – How to try Keep The Banking Ponzi Scheme From Collapsing

Under the Gold Standard each dollar was redeemable for a fixed amount of gold – but under the watchful eye of the Fed more and more paper money was created than there was gold. This is an attempt to extend the life of the scheme and can extend its life through multiple recessions until the currency looses acceptance and the whole economy collapses. In the US during the great depression the bankers with support from the US government took all the gold from its citizens and then revalued the dollar from $20.67 per once of gold to $35 this was done to entice more lending and devalue old debts so a person could take on more.  This part of the ponzi scheme makes its possible to “find gold” when none exists. Zoom to 2008 and when the ponzi scheme starts to collapse the “Fed” prints more money and gives it to the banks.

Central Banks

Central Banks are organizations set up by bankers privately (The Federal Reserve Bank in the USA) or by governments (Canada) to limit the effects of bank runs when the banking ponzi scheme fails.  The banks are usually in control of issuing currency and setting the prime lending rate (short term interest rates).  In the past, under the gold standard central banks could lower interest rates when a recession starts to try to keep the scheme going. Central Banks also have another tool at their disposal and that is the ability to issue currency at will or to print money in the United States they call this quantitative easing.

Interest Rates

Interest rates are set by central banks to control the amount of lending activity in the banking ponzi scheme. Higher rates curb lending and the central bank raising rates can cause a recession to happen sooner rather than later and the ensuing stock market fall can be quickly profitable to those that run the system. Lower rates are used to increase lending and to increase the amount of credit people qualify for.  To continue the scheme as long as possible until all qualified people have taken the maximum amount of credit in this scenario rates would eventually go to – zero which they have in the United States and Japan and are close to that in most other developed countries. At this point they need another way to milk existing customers.

Quantitative Easing

Quantitative easing is the fancy term that Ben Bernanke has chosen for printing money.  Under the gold standard you cannot just make more gold but under the Fiat Money System you can just print up a bunch more to steal from all the people that use that currency.  This puts more money into the system to continue making the interest payments to the banking scheme and at the same time reduces the value of each dollar issued proportionately.  They do try to be careful though and try not to create too much or it will end up in a loss of acceptance of the currency.


Inflation is the printing of money whereby each new dollar created reduces the value of all dollars proportionately. For example if you have 1 000 000 dollars in an economy and print an additional 100 000 (1 100 000 / 1 000 000) each dollar is now worth 0.909 cents. In the United States more than 98% of each dollar has been stolen since 1913 through this scheme. To perpetrate the banking scheme to the maximum it works best if the quantity of new money created loses its value at the rate of only about 2% a year which is usually target inflation or targeted devaluing of your money.  Central banks are concerned that the money will devalue at too quick a rate called hyperinflation where there is a loss of acceptance of the currency. This would be damaging to their ponzi scheme.

Official Inflation Rate

The government lies about the inflation rate in several ways.  First they state that the inflation rate is the amount that prices increase – That is not inflation – inflation is printing money and rising prices its result. Second they exclude items such as food and energy in the core rate saying that they are too volatile. What they do use to calculate inflation is mainly based on manufactured goods which do to increasing technology and outsourcing to underpaid foreign workers the prices do fall. Secondly they state that if a product has been improved then the value gained went up and the price in their view has gone down. To see the real consumer price inflation rate go to shadow stats.  The reason for the lie is to keep consumer confidence in the banking ponzi scheme and fiat money scheme.

Why GDP Growth is Important

If the economy grows at a pace that is above the amount of interest payable to the banks then their should be sufficient debt issued (more people with jobs mean that more qualify for loans and when people get raises they qualify for more debt) to pay the interest on previous loans. GDP is also lied about by the government in order to help keep confidence in the scheme.

Fiat Money Collapse

To avoid bank runs the banks have convinced governments to use fiat currency that they can create dollar for dollar for each debt created. So many more dollars can be created with debt than with the gold standard and they can be made at will. For the short term gain of avoiding a painful banking crisis the central bank lowers interest rates until the inflection point where all the debts are as high as possible and interest rates are as low as possible.  At this juncture they cannot lower rates any more and their only option is to hold rates near zero and to print money to avoid a collapse of their scheme.  This will continue until the currency loses acceptance. To protect yourself against fiat money collapse which is happening now – buy gold, platinum, palladium or the best investment silver make sure that they are in your possession and not kept at a bank.

Money Supply

The money supply is the total value of all of the debts created.  Each dollar of the money supply that has been created devalues the value of each existing dollar proportionately. In economic terms this is an elastic money supply while the gold standard is inelastic. This value is absolute but may not be realized in the market immediately because of asset price inflation.

Money Supply Growth in The US

Money Supply Growth

Asset Price Inflation

Since banks can lend out multiples of the cash reserves that they have on hand all of these new dollars need to have a home and no body is going to buy a two thousand year supply of donuts.  So they buy stocks, houses, art, sports teams, commercial real estate and other assets.  This boosts the prices of these assets and with higher prices the borrowers can borrow more. The wealth effect of the asset price inflation is that the rich become richer. The legacy of this is that assets like houses and stocks become extremely overvalued and tend to form bubbles. When a bubble collapses some of that money disappears but the informed people sell. This is where all of that money that has been printed goes. With each bubble that collapses a new one must form (the current one is government bonds) if a new bubble does not form the money will spill into the system causing hyperinflation and currency collapse.

Is the Government Complicit?

Of course they are! They all either knowingly or unknowingly rack up debt and force you to pay it in taxes. So yes part of your tax dollars – a large part goes to help perpetrate a scheme to steal your wealth and for you to pay it in taxes. If you don’t pay your taxes you will likely go to jail.  Think about it – your entire life how much of the money that you have earned have gone towards this scheme?


The use of debt and charging interest creates a mathematically impossible situation and is not sustainable. The debt based banking system is a ponzi scheme and both the banks and the governments are responsible but in collusion. Most bankers and government workers are not aware of this even at some of the highest levels. Recessions are the result of a partial collapse in the banking system and due to the unavailability of new money to pay interest on loans, currency collapse is the inevitable fall of the ponzi scheme. Fiat money was created to milk more money from the system without the general public being aware of what is going on. We are now on the verge of currency collapse in this game. But from its ashes the governments and banks may issue “new dollars” and try to do it all again.

What to do to protect yourself?

To avoid the ponzi scheme you can do a few things to help protect yourself. First buy hard assets like gold and silver (also hard liquor is good for trade) and keep it in your possession to protect your wealth, Gold and silver are not in a bubble – far from it when realized in dollars the prices that these metals will fetch will be many multiples of their current value. Be aware that debt is a trap and is only a ponzi scheme to fleece you of the value of your work. Third you must time the market if you invest or you will be slaughtered.




  1. [...] Debts have interest payments that must be made and in the system there is no new money available for interest payments. The results were recessions and bank runs. this crimped the economy. The solution they came up with was to have fiat money that could be printed at will so that there was money to be given to the banks so that when a bank run happened the central bank could bail them out. This is all part of the banking ponzi scheme. [...]

  2. [...] system is occurring now.  The fiat based money system is in existence to help perpetrate the banking ponzi scheme that fleeces us out of thousands of dollars or more each every year weather we know it or [...]

  3. [...] is certain to default as are Ireland, Portugal and Spain. When these countries and their leveraged ponzi banks default they will take down Banks in France and Belgium – and those banks take down some [...]

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