The Gangsters and the Banks

Let me help you understand the deal recently announced between the central banks of America, Europe, and Japan.

My father was a prosperous business man. He was employing about 5 managers for the different business units.

Every 3 months, he would balance the units accounts and proceed with inventory. Knowing the predictable cycle of the quarterly account balancing and inventory, two managers who were deficient in their management, put into place a system to lend each other money from their treasury in order to hide their losses.

When my father would be doing the account auditing with one, the second will transfer the first one money to hide his losses, and vice versa.

Regardless of the losses of their units, my father always find their account perfect. It took, someone to tip my father to uncover these two managers scheme.

The new system the central banks of America, Europe, and Japan just put in place is exactly the same.

If a country bank system won’t have enough money to cover its banks losses, the other central banks would step in to give it enough money to cover their back, in order to avoid panic and a bank run (a bank run occurs when many clients withdraw their money from a bank, because they believe the bank may fail in the near future.)

The Central banks alliance is playing the same game like the two indelicate managers of my father business units. They cover each other knowing very well the fundamentals are broken.

The loss are still there, but having each other back helps prevent panic and bank run which will make the whole system collapse.

I’m tipping you!

Only the middle class keeps its asset in liquid. They are at the mercy of volatility.

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