Like many people, I periodically comment on articles I read by other readers at popular websites. Lately, I've seen more and more comments by angry citizens, calling for people to pull their money out of the commercial banks and put it into credit unions instead. In essence, they're claiming that your money will be safer and that it will punish the commercial banks.

An example of such a discussion was initiated at cnn.com this week. One particularly angry poster wrote, in reply to another poster with whom he disagreed:

"It isn't about what is owed or by whom. It is about the FRAUD committed by Banks from the very beginning, you moron."

I ignored the unnecessary personal attack on his adversary and replied to his comment in a different vein. I wrote:

Actually, that's only half right. Think of it this way. Whose money did the banks lend out in the first place? Was it their own money? Of course not! The original fraud wasn't that they deceived people when they loaned them money regarding the terms of the loan. The original fraud was that they loaned out money that didn't even belong to them in the first place!

This person very kindly wrote back, saying:

"Good point Walt. Which is one more reason for people to leave Banks altogether. Although there has been a small migration to Credit Unions, it isn't enough. People need to migrate in large numbers. If 50% of all bank account customers migrate in a very short time frame it will not only hit the banks hard in their 'Bottom Lines', but it will signal a larger response by the remaining bank customers to do the same. Until this happens banks will continue to do 'Business, as Usual'."

There it was again, the blind faith I have observed that so many people have in credit unions. They think that since the depositors are the owners of the institution, credit unions must be a better deal.

I wrote back to him the following:

Thanks Steven. Unfortunately, the solution you suggest is no solution, because credit unions engage in the same practices as banks do. The only significant difference is that credit unions do make it clear that your deposited money will be loaned out.

However, given the fact that there are NO bank-like institutions of any kind where one can participate with a checking or savings account in the modern day economy WITHOUT the money being loaned out, saying that credit unions require you to give your permission to loan out your money is a distinction without distinction.

With a credit union, you get the choice of giving your permission to loan the money out, or not participating in the modern tools of economic exchange at all. That's no different from commercial banks.

Like banks, credit unions count liabilities (deposits) as assets, thereby expanding the money supply and contributing to the devaluation of the dollar.

Like banks, credit unions trade only in fiat, debt-based money. You can't deposit gold, silver, or other precious metal money in a credit union.

Like banks, you can't prevent credit unions from loaning out your money.

Like banks, when credit unions make mistakes (and let's be honest...everyone in business does that), it's the depositors who are at risk.

credit unions vs banks - failure rate

Since credit unions fail at an even higher rate (number of failures compared to total pool) than banks do, and since they contribute to the dollar's loss of value proportionally to what commercial banks do, there is clearly no advantage in putting one's money in a credit union...not to mention a significant disadvantage.

I read a post one time by someone questioning how safe credit unions were. He went in to his local credit union to ask about opening an account and asked the credit union's officer how much of the money they had in their vault. They behaved like he was casing the joint to rob it. When he clarified that he was worried about getting his money back, they pointed to the FDIC poster on the wall.

Anyone who truly understands the FDIC knows that it is really false protection. The reason the big banks were "too big to fail" is that the FDIC couldn't cover their losses. Further, the FDIC doesn't charge its member banks and credit unions based on risk. Instead, they charge premiums based on deposit totals. Thus, the institutions which take the greatest risks are effectively subsidized by those institutions which behave in the more prudent manner. Which approach do you imagine is more profitable under such circumstances? That's right. Risky lending becomes the better bet when you can always count on the system to bail you out of your troubles. It's a no-lose situation for the money suckers.

No, the solution is not to pull money out of commercial banks and put it into credit unions. If only it were! But in reality, it accomplishes nothing.

The only REAL solution is to press for systemic change, to outlaw legalized fraud (including fractional reserve banking), to outlaw legally-required currency monopoly ("legal tender" laws and the outlawing of gold and silver as money), to legalize the use of precious metals as money in a competitive currency system.

Only then will we finally achieve prosperity for all.

Only then will we finally wipe out poverty world-wide.

Only then will governments be deterred from engaging in war-based foreign policy (because without fiat, debt-based money, war becomes too expensive to conduct on a regular basis).

Only then will we all be much, much better off.

There are millions of such exchanges that take place on the Internet today. While I obviously can't involve myself in more than a fraction of them, I am determined to do what I can to help people understand that band-aids won't work. We need dramatic, systemic change as soon as humanly possible if we're to avert the worst of the coming debacle.