Is the Banking System on the Brink of Failure?
What is fractional reserve banking?
Fractional reserve banking is a system where banks keep only a fraction of their deposits as reserves and lend out the rest. This system has been in place for centuries, and it has allowed banks to make loans, create credit, and stimulate economic growth. However, this system is on the brink of failure due to banking over-leveraging.
Over-leveraging happens when banks lend out more money than they have in reserves. This creates a situation where the banks are essentially creating money out of thin air, which can lead to inflation, asset bubbles, and financial crises. In recent years, banks have been taking on more and more debt, and this trend is likely to continue unless something is done to stop it.
The risks of over-leveraging are significant. If a bank cannot meet its obligations, it can lead to a run on the bank, which can quickly spread to other banks and create a financial crisis. This is what happened in the 2008 financial crisis, and it could happen again if banks do not take steps to reduce their leverage.
Taking Practical Steps to Prevent Personal Financial Failure and lessons to learn from the banking system being an example for us.
While the risks of fractional reserve banking and over-leveraging are significant, there are practical steps that individuals can take to prevent personal financial failure. Here are some tips:
Live below your means: One of the most important things you can do is to live below your means. This means spending less than you earn and saving the rest. By doing this, you can build up a buffer against financial shocks and emergencies.
Diversify your investments: Another important step is to diversify your investments. This means spreading your money across different asset classes, such as stocks, bonds, and real estate, personal banking, Etc.. By doing this, you can reduce your risk and increase your chances of long-term success.
Pay off debt: Debt can be a major source of financial stress, so it’s important to pay it off as soon as possible. Start by paying off high-interest debt, such as credit card balances, and then work your way down to lower-interest debt, such as student loans and mortgages.
Build an emergency fund: Finally, it’s important to build an emergency fund. This is money that you set aside for unexpected expenses, such as medical bills or car repairs. Aim to save at least three to six months’ worth of living expenses in your emergency fund.
In closing fractional reserve banking and over-leveraging are serious risks to the global financial system. While these risks are beyond the control of most individuals, there are practical steps that you can take to prevent personal financial failure. By living below your means, diversifying your investments, paying off debt, and building an emergency fund, you can increase your chances of long-term financial success.
To learn more or more information contact our team @ hello@theprizmeffect.com
Justin Ryder // CEO Prizm Enterprize
Certified Financial & Credit Advisor
