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TechnoratiWho's to Blame for Market Failure? Clue: Not the Bankers
When money's being made, the denizens of the financial system are responsible. In a downturn, it's the collective 'we'
How extraordinary it is, that representatives of the great names in global finance that have recently bitten the dust were lately paraded on television as the supreme experts on the global economy. Until today, few serious programmes on TV about the financial outlook were complete without some hireling from Bear Stearns, Lehman Brothers or Merrill Lynch pontificating on what governments should do, on how to ease the tax burden, on ensuring the health of the economy, on the fundamental soundness of the system, and so on.
Free markets, the Washington consensus, liberalisation - ideas that have resounded around the world - are suddenly shredded, although the fortunes made in their benign shadow have no doubt been carefully stashed away in unreachable "havens". Where governments had been pleased to acknowledge their relative unwisdom in the presence of the superior knowledge of the markets, they are now being bidden to "step in", to re-regulate, to tame the beast they were so proud to unleash, and in the presence of whose "performance" they were only too willing to efface themselves.
It seemed to the fallen experts and discredited knowalls that government had become an obstacle to the further creation of wealth. Guilty of imposing stealth taxes, inhibiting the free play of market forces, governments were spoilsports, shackling enterprise and undermining business. Obligingly, governments sought to withdraw with becoming modesty, avowing themselves powerless in the presence of such mighty forces, in order that the financial system should work smoothly and effortlessly for the benefit of everyone, including the poorest, who would be wafted to plenty on the coat-tails of the super-rich. The daily plebiscite of free choice in the marketplace seemed a reasonable substitute for a democracy in which quarrels over how to run the economy had been laid to rest.
What a beautifully simple and plausible story it was, the rich miraculously transformed from grinder-down of the poor into their philanthropic rescuers - a metamorphosis that coincided with the rehabilitation of capitalism and its own mutation into something called "the economy". Wealth itself became the oracle, and people listened avidly to fairytales of win-win, economic miracles, market magic and the supremely precious life of geese that laid golden eggs.
Attempts to assimilate the workings of capitalism to the equivalent of a natural phenomenon have been so successful that even the words used to describe the present "downturn borrow a lustre from primeval nature: we hear of mortgage famine, credit drought, floods of bankruptcies, contagious insolvencies, epidemics of repossessions: the language evokes biblical plagues and last days. Is not nature red in tooth and claw? Or was that capitalism?
Perhaps even more telling, images are also taken from the realm of nuclear warfare - there is economic meltdown, a chain reaction of business failures, consumer confidence at a critical level, while the fallout is incalculable. It would be difficult to evoke a more apocalyptic scenario.
All this is of course, calculated to ensure that debate is securely contained within the fraying parameters of a capitalism to which no alternatives now exist. It would not do for people to become too inquisitive about the nature of a system which has been so closely identified in recent years with human nature itself. The fiction must be maintained, at all costs, that there is no other way of ordering our affairs. We are like medieval cartographers, beyond the boundaries of whose known world lay only monsters and dragons.
To forestall any such unpleasantness, the friendly first person plural is employed. This places the responsibility of what has happened on a collective that is absent when profits are being taken and the money made. It is "we" who have allowed the wheelers and dealers, the shady operators in the world of sub-prime loans, derivatives, futures and options, to get away with it. We have not held our governments to account sufficiently to curb the markets' excesses. We have been remiss. In other words, we are to blame; and if our nest-egg is annihilated and our savings are turned to dust, we were always warned in the small print that investments can go down as well as up.
This is puzzling to those who cannot read the hieroglyphs of economic discourse. We have been told that the markets know best. You can't buck the markets. You can play them, appease them, measure their sentiment, coax them out of volatility or nervousness. But all the financiers and experts, the no-nonsense acuity of the personnel of now-defunct institutions were doing was within the sacred space of what the markets would bear.
The same people (at least those who have not gone under with their venerable institution) who were soothing us with the wisdom of deregulation are now sagaciously offering up their analyses that more stringent oversight of financial transactions is required. A "rules-based" system must be observed. The operations of investment banks must once more be separated from those of high street banks, to avoid their high-risk investment with our money. Regulation, restraint and watchfulness are the new remedy. At least until the next time.
Capitalism, which had coyly hidden itself beneath the voluminous drapery of prosperity and luxury, now thrusts out its face from the faded finery to look once more on a "real world" it has laid waste - on lives ruined, security trashed and hope trampled. A generation brought up to believe that affluence represents some existential truth about our lives will, inevitably, be disoriented and angry. If the coming impoverishment brings about an increase in violence, crime, racism and breakdown, who will bear those costs, who will bail out a bankrupt society? Certainly not the makers of fortunes whose activities we were until recently expected to admire as the acts of heroes and demi-gods.
37 Comments so far
Show AllCapitalism works, communism is an abject failure, socialism (in Europe) is failing, multiculturalism world wide is also an abject failure.
BUT capitalism must be contained, look at the robber barons of the last century, we have their reincarnations to day (Ken Lay for example). Without capitalism much of what is invented would not be invented (WHO WILL INVENT A BETTER BATTERY IF ALL THEY CAN EXPECT FROM THE MILLIONS OF $ HE INVESTED IS MAYBE A STATUE?).
The government needs to regulate to some extent the robber barons, when a banker tries to give a mortgage to someone who obviously cannot afford the house he/she wants but gives them an "interest only loan " for 5-10 years on the speculative hope that person will get a raise or promotion to be able to afford the house IT IS THE RESPONSIBILITY of the government to hit that banker between the eyes with a base ball bat and say NO YOU DON'T and send that banker to jail for a long time for failing his fiduciary responsibility to the depositors and the stock holders of the bank . The same with the rest of these failing businesses, no golden parachutes just a long time in Leavenworth.
Both houses of congress as well as the present and past presidents have failed the people of the US, IT'S TIME FOR TERM LIMITS IN CONGRESS.
TERI D: I think you're onto something with your metaphor. But do check out the www.solari.com site and the one posted by SlamDave, the two dovetail in what they wish to make evident, and it runs parallel with what MiMiCCS stated.
MIMICCS: I think you are borderline genius in understanding this multi-tiered ponzi scheme, but I wish you could see through your own resistance on global warming!
SLAMDAVE: Yes, good link. Everything happening with Canada runs parallel with the exact same strategies and incentives in the US occult world of banking and finance.
If real estate is tanking, if the dollar is going down, if stocks are unstable, if many nations are tied together in this banking debacle, where is it safe to put $? (P.S. under the mattress is not the greatest advice either, since Florida has lots of weather events that may lift said mattress and disburse what's beneath it.)
They are using global warming to generate a new branch for the ponzi tree.
Many issues that people treat as separate issues are in fact interconnected.
It's not just capitalism. Economic systems of capitalism, communism, socialism, imperialism, colonialism, totalitarianism, fascism, nazism, monarchism, corporatism, and all other centralist monetary-isms maintain the monopolized control of money, and hence the control of society itself, through their own brand of Legal Tender that excludes other forms of money from the Market.
Legal Tender is a legal contrivance, and when issued in the form of debt is nothing more than a pyramid/ponzi scheme.
http://theformofmoney.blogharbor.com/blog/_archives/2005/9/18/1236759.html
The most fundamental of the market failures extends through all of the markets in the US economy controlled by concentrated power. This failure has to do with the market demands. In the capitalists' bible, "wealth of nations", the "father of capitalism" assumed that market demands would serve the society's better interests. Such market demands naturally limit market abuse without the need for government regulations but today such demands are extremely weak in the USA, having been systematically subverted by the class war aggressors' societal control schemes. Through these schemes the people are prevented from pursuing the society's better interests in their market demands, resulting in chronic market failure across wide swaths of the economy. Individual policy solution: Demand from the markets only what serves the society's better interests. For example, demanding much lower volumes of dangerous commodities.
As a side point, listen, if you can, to news coverage of these banking and economic collapses. The language is evasive, indirect, metaphorical. You'd never guess from terms like "realignment" that institutions that survived the Depression were failing.
yes well.. as perception creates reality.. the last thing the media would want is for people to believe the economy is actually shot..
example- ( I believe this was ww2?,).. for some reason people believed there was a toilet paper shortage.. and so everyone raced to stock up on toilet paper.. creating.. you guessed it.. a toilet paper shortage..
if people believe that everything is fine.. then they will go about their lives borrowing and spending and supporting a fragile economy..
problem is- will this work when it isn't just perception creating reality..?
what happens to chicken little if the sky really is falling.. even a little bit...?
Will this perhaps create a good instance, a learning experience.. that people need to understand that the microcosm is a quantum expression on the macrocosm and vice versa..
What lesson are people collectively-individually failing to learn..?
obviously we didn't learn it first time around: great depression.. and note that was called the great depression, not because it was FUN.. but because it was BIG.. and we are noting here that institutions that didn't fall then.. ARE falling now.
And from what I have followed.. it is going to get.. WORSE.. as the fiscal crisis that is now hitting the private sector.. is soon and likely going to hit the federal government.. which I will guess.. has been playing the same shell game with the money...? yesno? anyone out there better versed on this?
Lots of words, little wisdom. Learn more useful things here - BANKETEERING http://www.rudemacedon.ca/lgi/banketeering.html
Green Island - first we take back our brains, then we take our country
Marx and Engels, in various forms, made the statement that Capitalism will sow the seeds of its own demise.
There is a revolution taking place in Latin America. Nation after nation is out to free itself from U.S. Imperialism. Only Peru and Columbia are still ruled by governments that are under the heel of Big Capital centered in New York.
Peru will be the next to throw off those chains, most likely.
I want chaos! I want Cats and Dogs living together! I want homelessness to skyrocket out of control! I want Banks to fail! I want chaos, and all hell to break loose! I want the Synarchists, Neocons, Fascists, and the Elitists of the highest order to bring it on. Because those folks hide behind their ideaology to make hypocrites look like angels, with the vile doublespeak. What affects us, will eventually reach them. And then they lose!
Coffeelover,,,,,
the problem with this scenario, I think, is that every time there is a revolution/change.. the paradigm ends up re-creating itself. How many times do the liberators become the oppressors? Someone else might be able to expand on this- not my expertise to be able to cite instances here.
One example I will use ( cautiously).. is the israeli-palestinian situation. The jews were persecuted, denied all rights, property confiscated, evisted, imprisoned etc ( am sure you all know the scoop there).. The world felt so bad about what had been allowed ( knowingly?) to happen to the jewish people that we created a homeland for them ( and let's not even go into those specifics/ arguments)..
But what have the jewish people done? They have become their parents.. on the larget scale. The palestinians experience the same treatment that the jewish people learned at the hands of the third reich. We are biologicaly? socially? wired to reproduce what we know best, be it good or bad..
The solution will come from a different paradigm than just toppling the existing order. Example- if I recall correctly- there are some very interesting things spontaneously evolving in chile(?).. where factories/ businesses had been closed down, but the workers came together and are re-establishing them, as collectives (word?).. from what I was reading, it sounded very much what marx and engels wrote about, where the workers rise up ( not rebelliously here, but spontaneously) and assume the ownership of the process. in chile all of them are paid the same amount, regardless of " role" and all are participating in just about every aspect of the production/ management/whatword here..(?).. and it has been very successful.. has anyone been following this?
SA was the first and hardest hit by the economic reform policies of the US/ freidmanites etc.. however.. they are the first and strongest in recovery.. which is what we are seeing all over SA today.. as it has been somewhat left alone in its crashes and has reinvented itself without an outside model...
does the old model need to change? chances are good that it has outlived its biological timespan.. does change need to be painful and radical.. that is hard to say.. but change is out there.. it is happening.. and anthropology and biology.. show very clearly that change.. spreads:)
Somebody else on CD said that Capitalism, like Communism, contained the seeds of it's own destruction. Absolutely irrefutable!
Let's just try to make it later rather than sooner.
Must've been the few bad apples... yeah, just a few bad apples folks. Nothing wrong with the system... move along...
"Capitalism, which had coyly hidden itself beneath the voluminous drapery of prosperity and luxury, now thrusts out its face from the faded finery to look once more on a "real world" it has laid waste - on lives ruined, security trashed and hope trampled."
It's engineered.
Although there are great opportunities for the absurdly wealthy to become obscenely wealthy during times of prosperity... having inside information on downside timing (or better yet, being in a position to control the downside), can provide the opportunity to "own the world".
The core tenet of Naomi Klein's disaster capitalism premise, is that the driving force behind capitalism is greed and it is most satisfied by conditions that approach chaos. If it doesn't occur naturally... then the next best approach is to create those conditions.
... and here we are.
If you can't push the country into another war during the election cycle, the next best plan of action is to eliminate financial security for millions who are marginal... and point your finger.
Although I haven't completely ruled out an Iran invasion, at least it appears that we have been able to push it to the back-burner. That would have been the first choice by far. But there are plenty of opportunities to benefit from the engineered misfortunes of others while changing the focus from "change" to "survive".
The wailing and moaning of millions of Americans while disaster capitalists pillage and loot, is intermittently broken by the sound of golden parachutes popping open.
It's not just engineered; it's LEGISLATED. And it is TAUGHT as a "business model" at schools like Harvard and Yale.
I love this little bit of poetry: "The wailing and moaning of millions of Americans while disaster capitalists pillage and loot, is intermittently broken by the sound of golden parachutes popping open."
The Trickle Down seems to have Trickled Out.
When was the last time you ever saw money flow downwards?
We could have stuff like trickle-down weather balloons if all you had to do to make an impossibility real is to put an adjective in it.
It is curious that those concerned with how "human nature" somehow "requires" the creation of large, impersonal, amoral organizations dedicated to maximizing profit only focus on the owners of such organizations, and never on the slave-like workers. Oh, yea, I forgot, the workers are thought to be subhuman. I guess it is subhuman nature to pursue life as a worker bee in a large, impersonal, amoral organization.
TERRI D: Read what Catherine Fitts says about the whole mess as an insider at: www.solari.com
Thanks Siouxrose
for that link.
Enlightening and terrifying.
Some highlights:
"Increasingly, revenues and share price of the corporations and banks in this military-industrial complex depend on more rules and regulations that guarantee them market share or drive their smaller, more efficient competitors out of business."
"So what has evolved is a corporate and banking model to run the planet that has no connection whatsoever to fundamental economics or business. It is not efficient, it is not transparent, it does not compete, and it is not productive. It has absolutely nothing to do with capitalism or free markets or free enterprise"
"Central banks print money to pay armies and navies. Armies and navies make sure the money is honored and that profitable markets and cheap resources are accessible. And around and around we go. "
"The wealth those bankers engineered into private investors' pockets during World World I and World War II institutionalized the American financial addiction to weapons purchases and defense contracts that so deeply frustrated Eisenhower. "
One thing that has struck me for awhile now is that the cost of bribes to buy politicians has become a very profitable investment for these companies. Bribing the government to get the advantages they want has a wonderful Return on Investment.
Typically, a company might give a hundred thousand or several to campaigns. But the rewards they get from favorable regulations (or lack thereof) or squashing competition pays off in the millions.
If we just leave this in the hands of the politicians, nothing will change. Right now, they get rich and their corporate sponsors get rich. They ain't going to change by their own hand. Until we the people mobilize and take back our government, this ain't changing.
And it will never be any politician with corporate money in his accounts and getting favorable press in the corporate media that will change this. The one you want is the one ridiculed by the corporate press and who is selling bumper stickers just to raise a little money.
----------------------------
"To know, and not to do, is not to know"
www.samsonsworld.blogspot.com
Dafoe
What the hell are you moaning about, this is america the best country in the world the freest the bravest etc etc etc. at least that is what I keep hearing in perpetuity. You made it this way, you keep electing the sleezy politicians . It will continue until you change the system and the constitution and good luck with 50 tinpot governors thinking of themselves, not even enlightened self interest. I admire those people in Vermont who want to secede. This country has become a fascist nation there for the sole benefit of the corporations and what does one see, flag waving and cheering the perpetuators on.
Don't forget those brave souls in Alaska who also want to secede, including Governor Palin's husband. God Bless 'Em!
but if we secede.. where will we go...? and there aren't enough of us ( yet?) to make that an even remotely viable argument. Killington ( town in vt) got close, in approving secession to become part of NH- despite the fact that it is 50(?) miles from the border..
but all in all, politically speaking.. I can't complain too much about vt:) we got sanders and leahy.. and welch ( I don't know much about as he's new)..
anyone that the VP curses out on the senate floor.. must be doing something right:)
and sanders is a socialist..
so yup.. we are closer to being not-entrenched than probably most states;)
Those tax cuts given to the upper-echelon-investor-class in order to "expand" the economy has done a very fine job expanding the economy of China/India by gutting the US economy of its jobs, its industry, and its health. In other words,
those tax refunds to the 1percenters got re-invested into the ruling class pockets.
Excellent article! Amazing how quickly these market mavens claim free markets benefit everyone when the Dow races ahead. Then, when the Dow isn't doing so well, we're told to wait for buying opportunities. The interests of the little guy have been completely subverted by the Republicans--lets be honest, that's their political orientation. The idea is that by the rich getting richer, we'll all be somehow better off. Even a lot of so-called moderates are inclined to believe what is good for the rich will be good for them. For a while there, we did have a rising tide that lifted all boats. More recently--or since the time Bush came in, to be more exact--wealth has gone to the richest, who now control more American wealth than at any other time since the Great Depression.
The tax cuts have been bundled as a method to expand the economy, but the rich have simply taken the money and run--we've lost millions of higher paying, benefit-providing jobs.
I guess it's just a question of time before the little people wise up, or at least those who are politically aware actually vote to change things. But hey, wait a second, voting won't really change things, will it? Yes it will, kinda, and so don't be apathetic--APATHY IS A TOOL OF THE RIGHT. Even if voting doesn't solve all the problems, at least it can prevent many. You can bet Washington insiders are getting heard--the best you can do is make your voice known. The sound of twenty, thirty million little beeps does add up.
easy answer republicans = privatize profit, socialize losses.
it's "let the markets correct themselves" when there is gross profits,but when the "bubbles" burst and all the top players have skimmed the billions of "profits" into offshore unreachable "havens", the cry becomes "we need a bail out or the rest of you will be in dire straights"
...and that is called high level EXTORTION through fear!
I'm still not entirely sure I understand precisely how the banking system works/ worked in terms of loans, selling of debt, etc. But it seems to me that the banking industry is EnronII? Is the dynamic essentially the same phenomena? deregulation, greed and dishonesty coupled with limited accountability?
Can someone elaborate on that?
tnx
Simplified version.
If the treasury needs money to pay some bills, they can go to the Federal Reserve and offer them securities (T-Bills, bonds, etc), which are promises to pay after a certain time period, plus interest.
The Federal Reserve does not have the money, but they issue a check for the securities, creating the money out of thin air, and the securities they buy become their assets.
We have a fiat money system so they can create as much as they want , but since the 70's we made them return the interest, so they act as a dealer and we borrow from China and other money rich countries, at interest. The government could just issue it's own money for infrastructure and social welfare and not pay any interest as well as they can issue securities, which is backed by nothing more than our credit. Lincoln and JFK are the reasons we do not.
We have a fractional reserve banking system. Only a small amount of the money on deposit and then lent out needs to be kept in the banks that make up the system. It is typically thought to be 10%, but with all the exclusions is closer to 3%. That means the System can create at a minimum 9 times more money than the Federal Reserve has created. The check they issued to the Treasury end up as deposits in the commerical banks that make up the Federal Reserve SYSTEM, and a small amount is deposited into in the Federal Reserve Banks as reserves.
So the system then can turn 1 billion into at least 10 billion. They do this by making loans. They do not print the money, it's checkbook money that gets created on a computer ledger/database and resides on a hard disk.
There is 300 billion in what we know as cash within US borders, another 400 billion outside the US, out of a total money supply (M3) about 15 trillion.
The money you borrow is money that did not exist until you borrowed it, and not only do you pay interest on it, you pay compound interest, and for mortgages, they collect the interest first, keeping the principal high to generate more debt (interest) . If you do not pay back the loan, the money the system loses is money that did not exist before it loaned you the money, and if you have an asset like a house they take it, and can then sell it to recover their money, or at least some of it.
It should be noted the biggest banks are the largest shareholders in the Federal Reserve Banks which control the system. They are too big to fail. When smaller banks go bankrupt because of bad loans on the books, the big banks just increase their market share. They may take some short term losses, but over a typical business cycle (they control amplitude and frequency of the cycles), they are like a casino, the house always wins in the end.
Actually, the smaller commercial banks who sold off the mortgages directly to investors are on the hook for non-performing loans. The Big Investment Banks who bought them are not idiots. The big banks get to provide their bad mortgage securities to the Fed as collateral for a loan or for the Fed to create money treating them the same as US securities, and calling them an asset, and so are saved. I wish I could turn my garbage into money.
The smaller banks go bankrupt, if they have an residual value, they get bought up for 10 cents on the dollar (like Bear Stearns).
The Federal Reserve is a private corporation and have a monopoly over the banking system. What they have is a license to steal, legally. Despite the myth of government control over appointees to the Federal Reserve Board. Look at where these guys come from and where they go after they complete their term.
Now about selling the debt. The loan they make is considered as an asset, and the money they created and paid out is a liability. Thats a wash. By selling the asset (debt) at market price, in many cases the most dodgy loans even Fannie and Freddie would not touch got sold to Investment Banks owned by the same Financial Holding Company (thanks to the repeal of Glass Steagall in 1999) they get money (an asset), and whomever buys it gets the interest and principal to be paid on the loan that will exceed what they paid for it (and they can bundle up many of these loans in one package and sell to investors, many of them foreign investors like the Oil Sheiks and China) .
Over a 30 year loan, the money the bank received would be higher than what they sold it for. Why do it then?. One good reason is insurance, getting Freddie and Ginnie to guarantee it. The other is to make more loans. Lets say they made a 100 K loan, and can sell it for 200 K since it will earn a lot of interest over the life of the loans (assuming the loan gets paid back). That additional 100 K makes the indivudual bank able to make another 100 K loan. Wash-Rinse-Repeat. That works in a hot market where there is a healthy demand for loans and the consumer can make thier payments. Not so well when the market cools and the consumers default.
For the system , more loans means more money creation and more interest payments.
It is also inflationary. Bank failures are only bad for the smaller banks allowed to fail and their customers. The Big banks like them, they get bigger and are better positioned for the next cycle.
this was the simplified version? :)
thanks.. still trying to digest and wrap my non-linear brain around something that would probably defy quantum physics to.. oh wait.. maybe quantum physics does apply.. very small particles that self-create..? pop into existence for a moment out of nothing.. sounds a lot like the asset/ money that the banks are fabricating.. because based on what you are explaining, if I have this right..
it is similar to credit card debt. btw- I liked the part about the money i-we borrow doesn't exist until I-we borrow it. that's an interesting and powerful concept.. and led me to a few interesting metaphysical insights. essentially, it is an extension of the credit card concept.. we are essentially asking someone to " make" money.. on our behalf.. and we are indenturing ourselves on behalf of that creation. selling off ourselves, our future hard assets.. borrowing from our futures at high interest in order to have NOW.. rather than allowing the future to happen at its own rate.. ie- save up to buy a house ( live low rent, or with family etc).. and as a result, the lenders have become like loan sharks... preying on our desire to have it now.. knowing they will profit no matter what happens..
Q- if there is 1 billion hard currency, but then 10 billion is printed.. doesn't that 1 billion dollar loaf of bread then equal-equate to 10 billion now? I would guess.. and I am not an economist here.. but that if all assets were on one side of the table..and all of the hard currency on the other side of the table.. isn't there an = sign inbetween? that the two things are essentially equal to each other? in physics, matter cannot be created or destroyed.. it just changed forms.. so isn't that the case with asset/ item.. and currency? currency ( the total thereof).. is the ability to acquire hard item. in this case money would equal potential energy, correct? and the item would then equate to kinetic energy?
now- using this " model" or analogy.. money is quarking ( quarks pop in and out of complete vacuums randomly) into existence randomly.. it is " being artificially created".. yesno? but.. like the quark... or perhaps a graviton ( which acts on multiple dimensions).. its presence is ephemeral? temporary.. it doesn't have actual real mass, or belonging in this plane of reality.. and it is fated to poof back out of existence ( or to wherever it was before it was "here").. and the game that gets played out on the playing field is like financial-quantum musical chairs.. when the music stops ( the non-real money poofs).. everyone scrambles for a chair ( real money) only there is way less of it than most of the players expected as the chairs under them start poofing...
further- it sounds from what you are describing.. that some of the players in this game have special glasses that allow them to know which chairs are real chairs and which ones will go poof. yesno?
how's that for a working metaphor? am I more or less accurate?
btw- I have a CD on the creation of the federal reserve banking system.. scary stuff.. and was top secret. it's neither federal ( as stated, its private).. there is no reserve.. there is no bank ( no building/ structure etc).. and there is no system behind it- rather it was the top wealthy international banking families.. that formed an alliance ( bad wording?)..
thanks for all the input.. and hopefully my responses will help someone else with additional perspective:)
Money as we know it has no value except as an accepted medium of exchange. In the US, the USD is legal tender. Overseas, the USD is required to buy oil. Hence the name Petro dollar. For those who acquire a surplus of dollars, they can park it in the US and earn interest.
Our current system defies the laws of physics. You see, the system only creates money for the principal, but not the interest. It is legally considered to be an Impossible Contract. It is a system which profits by defaults and foreclosure, because the money to make the interest payments does not exist.
This is why they tightened the bankruptcy laws (Biden supported this), so the credit card companies and banks can have hard assets to claim when the credit card defaults mushroom.
There are 2 types of capital in this world. Fictitous capital are controlled quarks whose potential quantity is unlimited, but whose mass, or value can be destroyed, creating devastation. This capital drives our economy since we exported much of our manufacturing that creates stuff that we use. Real capital earned by labour manifests itself as hard assets or deposits.
Fictitous capital can be created or destroyed in infinite amounts. It simply requires a coordinated action by those who control the most of it. This has been legalized by government under the PPT and the monoply given to the Fed who is asking for expanded powers over all aspects of the financial system, and not just money creation. This would be the antithesis to Glass Steagall, a reward for incompetence at best, treason at it's worst.
The financial system acts as a pump, where fictitous capital accumulates and then is pumped into a black hole. The void is filled with the real capital being sucked into the vacuum and into the hands of those who created and pissed (pumped) away the fictitous capital.
It's a great way to transfer wealth from the lower classes to the rich, and from rich nations to developing nations, both of which are happening today.
The Foreign central banks, and the Fed all take orders from the BIS in Basle which was created in 1930 to secretly fund WW II by building up Germany and Russia and protect their assets, and a number of Fed shareholders purchased shares. The longterm goal of course was a centralized control of the Global Economic Order. This has been accomplished. The US and Europe are being subject to an economic attack which will lower our living standards to that of the developing world, this will faciliate the next step in the NWO, where political control will be centralized globally. Your government leaders are Globalists and are on board with this plan.
The GOP/GOP Lite strategy has been to frame regulation as a pure negative--a problem for those of us who want to make more money. We were led to believe that regulation ended up causing prices to rise.
Now if you look at Naomi Klein's Shock Doctrine, you will see that the collapse of markets is often preceded by massive deregulation. The deregulation radicalizes the market to the point government loses all control. In the collapse, privatization occurs. We saw this in Katrina, when contractors came in. (FEMA and the Federal response actively obstructed local relief efforts.)
Weakening Federal regulations creates an inevitable "shock" that private sector entities can cure--for a price. The private Federal Reserve will come in and own the debt of these companies, but only for a price. They will extend money--they and they alone have a renewable license to make money--to the beaten down, unregulated entities that are faced with collapse (the shock.) Every dollar they lend becomes a debt burden for the Treasury, which will have to pay interest back to the Fed and the banks they represent. You, John Q. Taxpayer, will be paying off these loans, which were made with your own money! (As Ron Paul has rightfully explained, our government cedes money-making to the privately owned Fed.)
thanks
I get the big picture, ideological-political aspect.. and yes, shock doctrine is an amazing trove of information about how we have evolved into this state.
I understand buying and selling of property- driven by hungry realtors, colluding banks and eager homeowners/sellers- that over-inflate prices etc. Maybe someone can explain it to me this way:
I buy a house. what is the process of what happens to my mortgage? what part do ARM's and points play.. and where does my mortgage go after I sign it? Tell me a bedtime story of Morty the mortgage...?
( thank god I don't have a mortgage, lucking out with a low priced home that needed repairs many years ago!:)
"Once apon a time, Morty the mortgage was born at a table in a conference room..."
Most mortgages are sold the day the loan documents are signed, either directly to one of the GSEs (Fannie and Freddie of recent fame) or to a larger mortgage company. The bank/mortgage company you originally talked to gets to keep the loan fee as their cut, but, after that, they're pretty much out of the picture, though the company listed on the promissary note might be the one to which you make your regular payments.
The fun part is what happens next. The mortgage company or GSE that now owns your mortgage groups your mortgage with a bunch of other ones that have similar terms and, with the help of the GSE which brokers the deal, sells the whole shebang as a mortgage-backed security to willing investors. The mortgage company and the GSE each get a cut of the regular mortgage payments from everyone in the pool, but the bulk of the payments go to the investors. Until recently, such securities were viewed as safe investments because most people with mortgages are conscientious about making the payments. If payments were not made, the house could be foreclosed on and re-sold, which would minimize losses.
In defense of banks (by which I mean the traditional, brick-and-mortar, checking account variety), the main reason for selling mortgages off like this is that banks, for reasons of both prudence and federal regulation, can only lend out a certain percentage of the funds that they have on deposit. If they lend out too much money on 30-year terms (the common length of repayment for mortgages), they won't be able to lend out anymore because all of the bank's deposits will be tied up in people's houses. (See "It's a Wonderful Life") The sale of mortgages developed as a way to shift the burden of gathering funds for housing from traditional bank deposits to investors with capital to spare.
Where it got out of hand is that some (greedy and unscrupulous) lenders figured out that, if they were selling off the mortgages anyway, they weren't going to have to deal with the consequences if people borrowed more money than they could afford to pay back. That would be the GSE and investor's problem. Many of them stopped doing some of the essential underwriting work of traditional banking and ever-more-creative financing options (interest only loans, 40-year mortgages, "stated income" loans, etc.) were developed. I think you know the rest.
"Who controls the past controls the future. Who controls the present controls the past."
-- George Orwell
I think you have a pretty good understanding of the situation, TeriD.
Another way to look at it is like a huge Ponzi scheme (pyramid), where those on top get outlandish returns funneled up by promising securities which are relatively worthless. Those on the bottom of the pyramid (taxpayers) are always left holding the bag. Always.
Nice analogy Ted.