In an interview with The International Speculator, Doug Casey, a renowned economist and international investor, stated that all of the banks in the world are bankrupt because they are all based on a fractional reserve system.
Fractional reserve banking can be considered institutionalized fraud as this means that the banks can essentially lend out money that is supposed to be there for depositors to withdraw at any time. The banks are only required to keep a small percentage of the deposits available (generally less than 10%) for depositors to withdraw.
This means that in a fractional reserve banking system the banks are basically insolvent. A sound banking system would have 100% reserve requirements, at least for demand deposits. Timed deposits would not need such a requirement since in this transaction a depositor is agreeing to lend the bank their money for a specific length of time and it is understood that the money will not be available until that time ends.
According to Doug Casey the crisis in Cyprus was compounded by an extreme over-leveraging of the financial system. But the crisis could spread to other nearby regions in Europe. Casey recommends people withdraw whatever cash they have in European banks to avoid being victimized as the Cypriots were.
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