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Daily Missive

The Great Bank Heist

Loading ...Lau Vegys

October 24, 2024 • 4 minute, 33 second read


The Great Bank Heist

The Great Bank Heist

Lau Vegys, Doug Casey’s Crisis Investing

Remember when your parents told you there’s no such thing as free money? Well, they clearly never ran a bank during the Federal Reserve’s high-interest rate era.

New data shows that for the past two and a half years, U.S. banks have been gorging themselves on a feast of free cash, courtesy of your friendly neighborhood Fed.

How much cash, you ask? Oh, just a cool trillion dollars. That’s right, with a “T”.

Pocketing the Difference

As you may recall, in 2022, the Fed made a sharp turn, slamming on the brakes with aggressive rate hikes to fight inflation (which, of course, they’d caused in the first place with their money-printing spree).

Between March 2022 and July 2023, Chair Powell and his merry band of money manipulators cranked the federal funds rate from a rock-bottom 0%-0.25% all the way up to 5.25%-5.50%.

As the Fed jacked up rates, banks started raking in higher yields on their deposits at the Fed.

In tandem, however, they decided to keep the interest payments for depositors—like us—shockingly low, pocketing the difference.

Recent data from the Federal Deposit Insurance Corporation (FDIC) shows that by the end of the second quarter of 2024, the average U.S. bank was paying depositors a mere 2.2% in annual interest.

Now, 2.2% might sound pretty good if you’ve gotten used to the near-zero rates we’ve had for the last decade. But remember: during that same time, these banks were collecting a fat 5.5% from the Fed.

Do the simple math, and you’ll see that banks were pocketing a nice 3.3% for themselves. Roughly speaking, of course, since those rates fluctuated, but you get the idea.

But hold on, it gets worse.

If you happened to have your money with the big guys like JPMorgan Chase (JPM) or Bank of America (BAC), you were really getting the short end of the stick. These banking giants were only paying out a paltry 1.5% and 1.7%, respectively, to their depositors.

Now, here’s where the heist part comes in…

It turns out those low payments to depositors generated an eye-popping $1.1 trillion in revenue for the banks. And when I say “eye-popping”, I mean it’s completely unprecedented in excess interest revenue. In fact, it’s roughly half of the total money banks made during that same two-and-a-half-year period.

The Rigged Game

Now, you might be thinking, “So what? Banks are private financial institutions and have the right to set deposit and borrowing rates. It’s free market capitalism, right?”

Wrong.

The whole fractional reserve banking system, with the Fed at its forefront, couldn’t be further from free market capitalism. And, as this story shows, the banks are essential beneficiaries and accomplices of this rigged game.

It’s actually a perfect storm of financial manipulation.

Think about it. You have the Fed paying banks interest on the money they keep parked at the central bank through something called “interest on reserve balances” (IORB).

Traditionally, banks are supposed to make money by lending out deposits to businesses and individuals. You know, actually contributing to economic growth. But why deal with all that hassle when you can simply rake in a risk-free 5.5% from the Fed?

That’s how the Fed encourages banks to hoard money instead of lending it out to grow the economy. This means less money available for businesses to expand, for entrepreneurs to start new ventures, or for you to get a reasonably priced loan. 

All in the “noble” effort to fight their own self-inflicted inflation, of course.

Okay, so it’s definitely a big problem, but it wouldn’t be so bad if you could at least get some of that money back in the form of interest on our deposits, right?

Unfortunately, as this story shows, you just don’t.

While some banks raised rates on certain savings accounts in line with the Fed’s hikes, reports show that more than 4,000 U.S. banks just kept the extra cash for themselves to boost their profit margins.

The result? The staggering $1.1 trillion in excess profits for banks I mentioned earlier.

That’s money that could have been in your pocket or fueling economic growth. Instead, it’s lining the vaults of banks—with the Fed’s stamp of approval.

What Can You Do?

While banks were raking in billions, what were you getting on your savings account? Probably an amount that wouldn’t even cover a bag of groceries by the end of the year.

So, what’s an everyday investor to do in the face of such blatant cronyism? Here are a few thoughts:

  1. Don’t be a sitting duck: If your money is languishing in a low-interest savings account, it’s time to shop around. Online banks and credit unions often offer much better rates than the big banks.
  2. Consider alternative investments: With banks playing these games, it might be time to look at other options for your money. Gold, silver, and other hard, unprintable assets can be a good hedge against both inflation and financial shenanigans.
  3. Stay informed: The mainstream media might not be telling you the whole story, but that doesn’t mean you have to remain in the dark. Knowledge is power. And in a world where the deck seems increasingly stacked against the average person, being informed is your best defense.

The game might be rigged, but that doesn’t mean we have to play by their rules.

 ~~ Lau Vegys, Doug Casey’s Crisis Investing


Europe Just Entered Rare Earth Panic

July 16, 2025 • Lau Vegys

A European version of Trump’s March 2025 Executive Order—which used emergency powers to fast-track domestic rare earth mining and processing—isn’t coming anytime soon.

There’s no mention of boosting local mining or processing in the draft EU Commission document I mentioned.

Classic Brussels. They want the benefits, but none of the mess.

And with Europe’s layers of red tape, strong NIMBY sentiment, and only patchy refining capacity so far… good luck. Just look at the Norra Kärr project in Sweden—stalled for years over environmental protests. Or here in Spain—where I happen to be at the moment—the Matamulas deposit continues to face ferocious opposition, despite being one of the most advanced rare earth projects in Western Europe.

Trust me, Europe won’t be mining or refining rare earths in any meaningful way anytime soon.

Europe Just Entered Rare Earth Panic
One Reason to Bet on a Sideways Summer

July 16, 2025 • Andrew Packer

Given how closely that markets have followed a similar path to the dotcom boom, a few months of sideways trading appears to be in store. That also fits in with usual seasonal patterns of a market trending lower in August and September, before rallying to close the year.

Yesterday’s news that Nvidia would be allowed to sell advanced chips to China sent shares back to all-time highs. However, given the extent of the market bounce from its April lows, it may be prudent to trim back some portfolio positions now.

Doing so will allow you to take advantage of the high yields in cash – especially with 30-year bond yields back to 5%.

One Reason to Bet on a Sideways Summer
The $2.5 Billion Blunder That Could Get JPow Fired

July 16, 2025 • Andrew Packer

It’s not the trillion-dollar paper loss the Fed is currently sitting on that may get Powell out of office before his term expires next spring. That’s business as usual.

Instead, it’s a problem that’s less than 3% of the Fed’s massive losses with no real plan to address its balance sheet.

But the larger problem remains: Powell is a figurehead. He’s a voice in a chorus. An important one, yes. But you’d need to replace more than Powell to get a Federal Reserve ready to follow Trump’s suggestions. 

The $2.5 Billion Blunder That Could Get JPow Fired
Smart States Are Embracing Gold And Silver

July 15, 2025 • John Rubino

It’s nice that states are separating themselves into “smart” and “stupid” categories so Americans can tell where and where not to live. The issue of sound money, in particular, is indicative of a whole range of other likely tax/spend/regulate policies that affect quality of life.

Smart States Are Embracing Gold And Silver