This page has been archived and commenting is disabled.
The REAL Battle Over America's Banking System
The battle to reform the American banking system needs to
include reimposing the barrier between investment banking and
depository banking (Glass-Steagall), pay incentives based on what is
best for Americans and not just the top executives, the end of too big
to fail, and other changes which are frequently discussed by financial
writers. These are vital issues.
But there is more to the battle for reform than you might know.
New York Versus the Rest of the Country
If
you are happy with the banking system, and don't think it needs to be
reformed, then you probably work for one of the banks headquartered in
New York.
Indeed, the banks outside of New York have acted much
more conservatively, used more conservative capital ratios and less
leverage and gotten less involved in credit derivatives and other
speculative investments.
Buy a banker in the Midwest a drink,
and he will probably rail against the giant New York banks for causing
the financial crisis, costing the smaller, better run banks a lot of
money and huge fees, and driving many smaller banks out of business.
And
even within the Federal Reserve, what the New York Fed and Bernanke are
saying is wholly different from what the heads of the regional Fed
banks are saying. The Fed banks in Philadelphia and Kansas City and
Dallas and elsewhere disagree with what the New York Fed and Fed's Open
Market Committee are doing. See this and this.
So
the battle isn't between bankers versus outsiders. It is between the
giant New York money-centered banks and the rest of the country.
Reserve Requirements
Congresswoman Kaptur said last week:
We
used to have capital ratios. We need to get back to them. Ten to one.
For every dollar in your bank, you can lend ten. You know what J.P.
Morgan did? A hundred to one. And then with derivatives, who knows how
much?
Remember, Milton Friedman - the monetary economist
worshipped as the guy with all of the answers in the latter part of the
20th century - advocated for 100% reserves.
Friedman has been deified as the economist to follow. But his views on reserve requirements have been completely ignored.
Goldman Using Taxpayer Dollars to Buy Stock in China?
As everyone knows, Goldman became a "bank
holding company" in September, to be able to access funds from the Fed at
essentially zero percent interest.
But in a new interview with Bill Moyers, Simon Johnson noted that in August of 2009, Goldman switched again - to a "financial holding company".
What's the difference?
Johnson
says that being a financial holding company means that Goldman can
borrow money from the Fed at essentially no cost, and then invest it in
any thing it wants. For example, Johnson says that Goldman
has bought a large share of the stock of a Chinese automaker. Johnson says that if the
investment succeeds, Goldman will reap the profits; but if it fails, the
taxpayers are on the hook.
Banks Have the Power to Create Money
Congresswoman Kaptur also said last week:
Banks have the power to create money. And decide how much that is worth.
What is Kaptur talking about?
Here Comes the Judge
Well, in First National Bank v. Daly (often referred to as the "Credit River" case) the court found that the bank created money without having the reserves:
[The
president of the First National Bank of Montgomery] admitted that all
of the money or credit which was used as a consideration [for the
mortgage loan given to the defendant] was created upon their books,
that this was standard banking practice exercised by their bank in
combination with the Federal Reserve Bank of Minneaopolis, another
private bank, further that he knew of no United States statute or law
that gave the Plaintiff [bank] the authority to do this.
The court also held:
The money and credit first came into existence when they [the bank] created it.
(Here's the case file).
Nobel Economists, Congressmen, the Fed and Treasury Agree
Still confused?
Well, let's hear from some top economists.
As PhD economist Steve Keen pointed out
recently, 2 Nobel-prize winning economists have shown that the
assumption that reserves are created from excess deposits is not true:
The
model of money creation that Obama’s economic advisers have sold him
was shown to be empirically false over three decades ago.
The
first economist to establish this was the American Post Keynesian
economist Basil Moore, but similar results were found by two of the
staunchest neoclassical economists, Nobel Prize winners Kydland and
Prescott in a 1990 paper Real Facts and a Monetary Myth.
Looking
at the timing of economic variables, they found that credit money was
created about 4 periods before government money. However, the “money
multiplier” model argues that government money is created first to
bolster bank reserves, and then credit money is created afterwards by
the process of banks lending out their increased reserves.
Kydland and Prescott observed at the end of their paper that:
Introducing
money and credit into growth theory in a way that accounts for the
cyclical behavior of monetary as well as real aggregates is an
important open problem in economics.
In other words,
if the conventional view that excess reserves (stemming either from
customer deposits or government infusions of money) lead to increased
lending were correct, then Kydland and Prescott would have found that
credit is extended by the banks (i.e. loaned out to customers) after the banks received infusions of money from the government. Instead, they found that the extension of credit preceded the receipt of government monies.
Keen explained in an interview Friday that 25 years of research shows that creation of debt by banks precedes creation of government money, and that debt money is created first and precedes creation of credit money.
As Mish has previously noted:
Conventional
wisdom regarding the money multiplier is wrong. Australian economist
Steve Keen notes that in a debt based society, expansion of credit
comes first and reserves come later.
This angle of the banking system has actually been discussed for many years by leading experts:
“[Banks]
do not really pay out loans from the money they receive as deposits. If
they did this, no additional money would be created. What they do when
they make loans is to accept promissory notes in exchange for credits
to the borrowers' transaction accounts."
- 1960s Chicago Federal Reserve Bank booklet entitled “Modern Money Mechanics”“The process by which banks create money is so simple that the mind is repelled.”
- Economist John Kenneth Galbraith
[W]hen a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The
money is not taken from anyone else's deposit; it was not previously
paid in to the bank by anyone. It's new money, created by the bank for
the use of the borrower.
- Robert B. Anderson, Secretary of the Treasury under Eisenhower, in an interview reported in the August 31, 1959 issue of U.S. News and World Report
“Do
private banks issue money today? Yes. Although banks no longer have the
right to issue bank notes, they can create money in the form of bank
deposits when they lend money to businesses, or buy securities. . . .
The important thing to remember is that when banks lend money they don’t necessarily take it from anyone else to lend. Thus they ‘create’ it.”
-Congressman Wright Patman, Money Facts (House Committee on Banking and Currency, 1964)
"The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented.
- Sir Josiah Stamp, president of the Bank of England and the second richest man in Britain in the 1920s.Banks
create money. That is what they are for. . . . The manufacturing
process to make money consists of making an entry in a book. That is
all. . . . Each and every time a Bank makes a loan . . . new Bank credit is created -- brand new money.
- Graham Towers, Governor of the Bank of Canada from 1935 to 1955
Monetary reformers argue that the government should take the power of money creation back from the private banks and the Federal Reserve system.
Indeed, PhD economist and candidate for Florida governor Farid Khavari wants to create a Bank of the State of Florida, to create credit without burdening the state and its citizens with high interest charges by private banks.
The state of North Dakota already has such a bank.
The
bottom line is that monetary reformers argue that letting banks create
credit and money and then charge high interest rates creates massive
levels of debt for states and taxpayers. They argue that the power to
create money should be reclaimed by the government and taken away from
the private banks.
Personally, I agree with the monetary
reformers. But even for those who think this is too radical a
proposition, the question is whether a system where debt has to
constantly and continually expand to keep the economy afloat is
sustainable.
The Ever-Expanding Bubble
In a hearing held on September 30, 1941 in the House Committee on Banking and Currency, then-Chairman of the Federal Reserve (Mariner S. Eccles) said:
That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.
Indeed, Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, said:
If
all the bank loans were paid, no one could have a bank deposit, and
there would not be a dollar of coin or currency in circulation. This is
a staggering thought. We are completely dependent on the commercial
Banks. Someone has to borrow every dollar we have in circulation, cash
or credit. If the Banks create ample synthetic money we are prosperous;
if not, we starve. We are absolutely without a permanent money system.
When one gets a complete grasp of the picture, the tragic absurdity of
our hopeless position is almost incredible, but there it is. It is the
most important subject intelligent persons can investigate and reflect
upon. It is so important that our present civilization may collapse
unless it becomes widely understood and the defects remedied very soon.
America's banking system needs to be fundamentally reformed.
- advertisements -
RE and Gordon have some great thoughts and insights. The inconvenient truth is that all geometric growth (i.e. exponential growth) processes have a limit in real systems. Scientists have understood this limit in their physical models for years but in finance its mostly forgotten or ignored. The resource limit for the earth relative to its population demand is the most important one as pointed out by RE. The earth is the world bank! And yet our system depends on ever expanding money/debt and inflation to pay interest on this debt-and thus is doomed. Like many, I did not understand this until recently, (kudos to ZH and its wonderful, amusing commenters) not really spending much time thinking about how fractional banking functioned by creating money out of nothing (i.e. fraud). Economies can only really grow wealth through productivity increases as noted in the above Mises quote. Productivity - friction = wealth, where friction is the useless dissipation of energy via the FIRE economy of finance, real estate and insurance. We need to reduce this friction by getting rid of the FED and requiring full deposits to back up all loans before its excessive heat leads to complete combustion of the real productive economy. Banksters=parasites. (I know I'm preaching to the choir here) QED
"Precious Metals have been money for over 5000 years, I think they've definitely won on the longevity scale rogue."
Actually, PMs stopped functioning as "money" for all practical purposes around 1692 when Sir Isaac Newton became Master of the Mint in Jolly Old England. Though any number of people hoard Gold Coins and Silver Slips in their basement safes, about nowhere on earth do they trade as currency in a marketplace for the purpose of buying a loaf of bread or anything else. The fundamental problem is that there isn't enough of the stuff to go round in a world of near 7B people so we all can carry a few Golden Gunieas and Pieces of Eight in our money pouches.
Far as dollar collapse goes, it doesn't have to lose value entirely to be a proximal cause for social collapse. It merely has to be either too hard for J6P to get hold of in a deflationary spiral where there is no work or lose enough value through inflation to make necessary goods unaffordable for a large enough percentage of the population. We appear to be reaching that point rather rapidly now. I seriously doubt we will need to wait 400 years to see some major changes in our social and economic system here. 40 months would be a way better WAG.
RE
Thanks Anonymous. Feel free to join us on the Reverse Engineering discussion board for further examination of the problem.
http://tech.groups.yahoo.com/group/reverseengineering/
RE
Excellent write up roque economist. Whats going to stop them from getting your bartered goods? I for one am scared shitless about the endgame. Looks like we are in for a rude awakening..:-)
While perhaps most people did not grasp this before, I think by now its common knowledge across the blogosphere that Money is Debt, and that Banks create money basically out of Thin Air. Money is a quantitative statement of the Obligations of one man to another. Quotations from Henry Ford and others notwithstanding, the simple KNOWLEDGE that money is debt is not enough to bring such a system to closure, you do need some type of alternative if you are to avoid anarchy resulting from monetary system collapse. From the Roman Empire on further through Mr Peabody's Way Back Machine on the time line, a real good alternative to this system hasn't become apparent on the grand scale. This includes PM based monetary systems, which themselves only work so long before the "wealth" in the form of Gold or Silver becomes so centralized it no longer can function adequately as a currency system.
What we have to deal with in THIS case of monetary system collapse is a vast network of Obligations that build up from individual debts to the debts of Nation States. In reality in this case, because of the Global nature of debt money NOW, we are ALL debtors. The Creditor of last resort was and has always been the resources present on the earth, and the monetary systems merely have served as a means to define that debt, one through another to what seemingly was an inexhaustible Bank, Mother Earth herself. We find NOW of course its possible to bankrupt the Earth itself, so no Nation-State can borrow anymore and then loan further to its Citizens.
IMHO, you have to wrap your mind around the concept of NO MONEY. You only have direct obligation of one to another and your only real means of commerce in such a situation is through Barter. The TRUST involved in a paper or digital monetary system has been VIOLATED to such an extent that its about impossible to see how at any time in the near future it could be resurrected. That is not to say the system we currently have running will collapse in entirety overnight, its already clear that won't happen. However, it will become increasingly less useful as an arbiter of value. The individual mainly needs to find ways to reduce dependence on ever more worthless money of all sorts, which of course is easier said than done.
The destruction of money ALWAYS results in conflagration, in this case conflagration will be WORLDWIDE. You cannot avoid the conflaration resultant from monetary system collapse, even Vermont Farmers could not avoid conscription into Civil War battalions of course. You can however try to remain t the periphery of the conflict for as long as is possible. The key to that is identifying where the conflagrations will happen first, and exit stae left from those places. AKA, the Big Cities. The money will go worthless here one way or the other, throuh a deflationary spiral or through a hyper-inflationary one, so the only OUT is to remove yourself as best as possible from the monetary system entirely, and prepare for a barter based economy. No paper wealth will hold value, nor will PMs hold much value either. Only your friendships and your comunity and obligations to others will hold true value. That is how the end game of a monetary system collapse plays out, ALWAYS. Accept that as TRUTH, and you have a leg up on surviving the cataclysm coming down the pipe here.
RE
To quote Mises: "Money is not wealth, production is wealth, money is merely a medium of exchange".
Precious Metals have been money for over 5000 years, I think they've definitely won on the longevity scale rogue. There is no paper currency system that has survived longer than 70 years before dying in hyperinflation. There simply is no example out there, because paper currencies are always subject to manipulation.
We have had two paper currency failures in the United States alone in the past 200 years, the Continental, the Greenback, (and one might consider the Confederate dollar but I'm not including it). The fiat greenback will be no different.
But saying that the current dollar will collapse, is like saying the Roman Empire will collapse. You were just as right in 50 B.C. as in 410 A.D., but it won't affect your life too much in the case of the former. So the question about the dollar collapsing isn't "if", it is "when"? Maybe Bernanke and co will succeed in re-inflating the current bubble and the right place to be is in stocks, maybe THE collapse is 50 years down the road. Who knows.
What Gordon Gekko and I are saying is that banks should have a 100% reserve requirement. They should only be allowed to lend out of their deposits, and not be allowed to practice fractional-reserve banking.
Mises, Friedman, Volcker, et al. agree(d).
Doc
RE, that's an amazing post. you've hit it right square on the kisser.
have you clicked on the link that G-dub supplied above about the guy running for Guv in FL? if not, you really should. i'm reading his book now and it's probably the most well-thought-out transition process i've read yet (without completely going stone-age).
will it work? who knows...but it's definitely thought-provoking and evolutionary...worth a discussion fo sho. hopefully G-dub will do an entire post on it in the near future.
Try reforming the monetary system itself.
http://www.themoneymasters.com/mra.htm
What most people disregard and what has played such a role in the present circumstance in banking is that it is only partially true that should all financial obligations be paid there would be no currency left in circulation. What is not figured into that equation is the factor of interest on those loans. In fact the money in circulation would disappear long before all loans would be paid as a result of interest being resolved in the process. The system is dependant upon expansion of the money supply into eternity simply to cover interest which is not created as money when a loan is originated. Apply this line of thought to what is happening now. Banks are sitting on money not making loans and still the supply of "money" supply continues to shrink. As deleverging continues interest is also retired which is then subtracted from the money supply. The result? If no lending is going on then the money supply contracts as interest is paid along with the loans.The following link fills out more of the picture.
http://www.financialsense.com/fsu/editorials/2009/0921.html
Mr. Gekko,can you comment on the massive numbers published in the state and county CAFR's? Is it true they are trading everyone's social security # and birth certificate # on the NYSE for income on future tax liabilities?Are'nt you worth more than 1.8%?
McGriffen,
As we would have said back in my day in the Corps... "you better un-f*ck yourself quick"...
Don't take that the wrong way, but you're missing the whole point of the conversation or the article. You obviously DO NOT understand our monetary system.
Money in our current system only exists as debt. When you state that an institution only carry "10% to 12% reserve requirements", you think that if said institution had $100 it would lend out $90 to $88, THAT IS NOT THE WAY IT WORKS.
The institution holds $100 in reserve and CREATES $900... the vast majority of what we call "money" today is debt.
Don't take our word for it, read Mises, read Friedman, read the quotes in the above article. They all believe in a 100% reserve requirement.
Henry Ford said it the best:
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
Doc
Well, I think i get a reasonable grasp on banking (what I would term banking at it's true format). What I'd like to understand is where growth is supposed to come in a non-debt, all-cash society. Do tell. It is not credit extended that is evil, it is credit extended to those ill-suited to properly handle or manage it. I'll open up my tent business tomorrow, pronto.
not an economist or monetarist by training (unless McCulley at Pimco counts in a small way). I wish, I wish.
Back in the early 90s I worked summer breaks for a company with no debt. That company also had zero vision. Leverage is not evil. Excess leverage compounded by ass-clown decisioning is what;s evil.
McGriffen,
You are discussing oranges, I'm discussing apples. You are discussing banking, I'm discussing the monetary system.
I'm not an economist either, it has taken me a couple of years to understand the monetary system, and after a lot of hard work, I finally got it.
In modern economics the monetary system is taken for granted, there is no argument for or against it. In past decades monetary policy was one of the pillars of economics. I highly suggest you read the British Currency School, Rothbards' The Case Against the Fed, and What has Government done with our money (both are free if you go to http://www.mises.org), and of course Mise's works on the subject...
I agree with part of you post, but the difference between your post and mine, is I understand what you're saying, you do not understand what Gordon Gekko and I are trying to tell you about the monetary system.
ALL MONEY IS DEBT IN OUR SYSTEM. Banks create money whenever they loan it. Read the quotes in the above article, the guys explain how banks create money, and the people being quoted aren't every Tom, Dick and Harry. It's the heads of the Bank of England, regional Federal Reserve Chairmen... I THINK THEY GET IT!
But until you understand what fractional reserve banking is, and how banks manufacture money when they create loans, this is not a conversation between us but a monologue... with all due respect...
Doc
points(s) taken...I've got some homework for the week, and appreciate the reference materials
Credit extended in today's monetary system is extended fraudulently and is therefore evil. A big part of the reason it is being "extended to those ill-suited to properly handle or manage it" (as you rightly point out) is because it is being extended fraudulently i.e. out of thin air. Do you think the bankers would be - could be - this indiscriminate if we were using Gold as money or operating on strict reserve requirements?
What matters is the purchasing power, not nominal increases in GDP, wages etc. that we call "growth" today. Imagine if your salary doesn't rise for 10 years but the same money's purchasing power has increased three fold. It's as if your salary has risen 300%. Isn't that better than rising nominal wages but falling purchasing power? In fact, in a non fraudulent monetary system rising productivity should cause prices to fall, not the other way round.
Gordon,
Given the damage done after 35+ years of being off the gold standard, is there a way to continue extending credit without damaging purchasing power or over-inflating asset values? Is reinstating the Gold Standard enough? Do we need to re-write Bretton Woods? Is it too late?
Glass-Steagall pops up all the time, dammit. Yet the Obama ChangeMonkeys never even mention it .......and they won't. The BAC/Merrill JPM/Bear deals were Uncle Slam's compounding blunder within the formerly private retail banking system. These babies will continue to carry an umbilical cord right back to the taxpayer for God knows how long.
I grind my teeth everytime I read about the need for reinstaement of Glass. The only other boondoggle that pisses me off even more is CFMA 2000, the Enron Loophole.
And speaking of tin foil hats for everyone, Bill Clinton signed off on both of these rat bastard bills in a trade for not being convicted by the Senate on his impeachment.
And so it is that Bubba's loose pee-pee got us into all this shit.
If you would like to see support for this article, you can find it in a documentary called "The Money Masters". You can find it on YouTube. Warning, it's 3.5 hours long, so it's divided into 22 parts for YouTube. The bulk of it is devoted to the war over the control of the issuing of money in the USA, between the bankers on one side and a few presidents and legislators on the other, a war which ran from 1776 until won by the bankers in 1913 with the Federal Reserve Act and the amendment authorising income tax, essential to obtain the money from the people to pay the interest to the bankers.
Also on YouTube you can find an animated video called "Money as Debt" doing its best to explain its own title.
In terms of a web site dedicated to money reform, try that of Ellen Brown: http://www.webofdebt.com/.
What I don't get is how a web site as sophisticated as Zero Hedge, and indeed the article above, isn't already providing these links. But then I'm new here, so perhaps I'm missing something.
I'm glad to see the world waking up to what I have been telling everyone I know for twenty years. Twenty years as an outcast 'wacko' will take a toll on you, that I can tell you for sure; at this point I just want it to crash and take everyone with it.
sweet lord, state-owned & state-run banking might be the only worse option to exists today. Just how politicized would the lending be?
All the harrumphing about the financial system...what about a non-profit where members own the institution? And that institution might carry, 10-12% capital; be involved in underwriting only the best of residential / consumer credits; and the management is all local people. Sounds like a CREDIT UNION to me.
Options exist, they just may be less convenient / less pronounced.
I think you'll have a better perspective on this article if you watch "the creature from jekyll island" (youtube it) and "money masters". Unless you expand your horizon of knowledge beyond what the state has provided you, it won't ever make sense. You'll know the truth immediately when you first see it and everything that's happening now will make complete sense...even a state-run bank being better than a private one!
i'll look into em this week
If we had a functioning Department of Justice,those guilty of financial treason would have been hung by the neck,thereby avoiding most of the current unpleasantness.All the more show dates for the future Collisium.
The complete quote from Josiah Stamp, from a speech delivered at the University of Texas in 1927.
""Banking was conceived in iniquity and was born in sin.
The Bankers own the earth. Take it away from them,
but leave them the power to create deposits,
and with the flick of the pen they will
create enough deposits to buy it back again.
However, take it away from them, and
all the great fortunes like mine
will disappear and they ought to disappear, for
this would be a happier and better world to live in.
But, if you wish to remain the slaves of Bankers
and pay the cost of your own slavery,
let them continue to create deposits."
just watch zeitgeist addendum, does a nice job of explaining what is going on, at least on the money creation side of things.
sometimes I wonder if ZH is a secret affiliate of the zeitgeist movement.
Zeitgeist is a mashup of other, more substantial works.
A much more interesting and accurate explanation of modern currency (and just how f**ked we are due to its nature) is found on a recent pair of productions, "Money as Debt" http://video.google.com/videoplay?docid=-2550156453790090544#
and the newer--arguably better--version, "Money As Debt; Promises Unleashed." http://www.viddler.com/explore/prommasa/videos/40/
I'm embarassed to admit, I've never seen zeitgeist (except for maybe a 2-minute clip of youtube which had nothing to do with money or banking).
Good God! I've lived my entire life under a system of banking that is completely fraudulent. Is this what they call the "anglo-saxon" banking model? Is this how these gov't people think debt is wealth? WTF...
If you really want to understand the very basic aspect of how debt creates money (not the other way around) look up Edward Griffin's chapter "The Mandrake Mechanism" from The Creature From Jekyll Island.
No official web copies, but this suffices. http://goldismoney.info/forums/showthread.php?t=3993
Thanks; quite a read. I'll be circulating that link to my friends so they understand the scam.
where is my mind
The system has been essentially designed to render us all debt slaves. The monetary system is a complete fraud today - what gives the bankers the right to charge interest on MONEY CREATED OUT OF THIN AIR? It is a slap in our collective faces. We will NOT pay interest on money created out of THIN AIR.
STOP PAYING ALL YOUR DEBTS TO THE BANKS TODAY. DECLARE A DEBT STRIKE.
IT IS NOT YOUR "MORAL" RESPONSIBILITY TO PAY BACK ANY DEBTS TO THE BANKS BECAUSE IT WAS CREATED FRAUDULENTLY OUT OF THIN AIR IN THE FIRST PLACE. THE MONEY DOES NOT BELONG TO ANYONE. INDEED IT IS YOUR MORAL RESPONSIBILITY THAT YOU DO NOT PAY ONE RED CENT BACK TO THE CORRUPT BANKERS.
False.
Borrowers enter into a contract to borrow money under their own free will. It is disappointing that many of these contracts are usurious, or otherwise inappropriate for the borrower, but a contract is a contract.
I'm not trying to defend either side of a deal.
I do believe there is merit in the concept that "Odious Lending", money loaned with no reason to believe it can be repaid, is fraudulent and subject to being legally uncollectible.
The only acceptable way is for fair contracts enforced by law.
WRONG. For example, contracts which do not obey the law of the land (involve some kind of illegal activity) are unenforceable and void. I will further argue that banks are committing fraud by creating money out of thin air, hence those contracts are not fair and should not be enforced (but they are since the enforcer i.e. the government is in the bankers' pay).
where does one draw the line...are we talking credit cards with JPM or BAC, or a mortgage to ABCDEF bank based in anytown, USA ?
Otherwise, yes. Lets all become a nation of deadbeats. And if the debt is attached to a stand-alone structure or car or future earnings, then we'll forfeit the right to utilize those future income streams and revert to being serfs in a very real feudal system.
All the big money center Fed-favored TARP TBTF banks (ala JPM, Citi, BofA, Wells, etc.) need to be especially targeted - none of their loans (be it credit card, mortgages, whatever) should be repaid. If you want to add insult to injury and make it worth your while at the same time, get your limit raised, max out and THEN default. Enterprising, able and willing citizens can also take on debt from these banks for the express purpose of defaulting.
Think of it as getting your money back which the govt. FORCIBLY took from you and gave to the banksters.
there's a big world out there outside the system, mcGriff.
once you swim in the gray or {ahem} black water for a little, you'll realize that it's actually one of the few pillars propping up the entire system at this point.
sorry to be blunt, but fuck your FICO. do you really wish to be judged by a metric you don't even know exactly how it's computed in the first place?
doesn't that already make you a serf?
"WE ARE GOD'S UNWANTED CHILDREN, SO BE IT!"
So true.
BTW, I have never experienced anything quite so liberating as trashing my FICO score.
I know my FICO and I know what's calculated to arrive at that figure. The cautious use of debt, in any format, is what's needed. The overt dependency on all forms of credit, be it student lending, credit cards, etc...must change. Take out $200k in non-recourse student loans at one's own risk, not mine or anyone else's for that matter
Is it just now the average consumer concludes that your local bank is not your friend? Banks exist to make money. Just like 'submart' or any other overly conspicuous chain.
*no, I don't include health-related emergencies into this particular rant. But in day-day routine living, yes (whatever routine may be...beer & chicken wings, beer & lap dances, beer & whiskey)
If banks exist to make money, haven't they all ready accomplished that? Money credits are created with the flick of a pen, or key stroke these days. If all debts were repaid (to the banks) there would be no currency. The banks would have it all.
Banks exist to own, control, and enslave. Not for silly profits. Profit is for the peasants.
But have you ever thought about exactly WHY today you need debt to buy a property or a college education in the first place? Because all the fraudulent money-out-of-thin air lending has caused the price of everything to be bid up so high around you that at this point you cannot afford any major life essentials (such as a house/car/college education/medical expenses) without DEBT. We have been falsely led to believe that things as they exist today is the natural order of things, when in fact it is not.
Do you mean to say you and I are not meant to make money? Nobody is stopping banks - or anybody else for that matter - from making money, but not through fraudulent means. That's what lending today is - FRAUD. It is theft - pure and simple. Doesn't it strike you the least bit odd that they can create money out of thin air and then charge interest on top of that?! It today has NO RELATION WHATSOEVER to the funds on deposit with the banks i.e. they are NOT lending out anybody else's money. Just because because the government (which has been bought off by the very banks, I might add) is sitting on it's ass doing nothing does not mean that it is not a fraud.
But perhaps we have been so well trained to think like slaves that we do not question anything even when our very economic and financial system is crumbling around us. Comments like yours make me think perhaps we deserve what we are getting.
Having worked 11+ yrs in fixed income & financial analysis, I have plenty of questions. The housing bubble certainly seemed long in the tooth & there were some things I saw coming, but not enough & sure as hell not the pending wave of problems that escalated beginning in August of 2008. Deleverage & some deflation, certainly were all on the table. Be that as it may, the angle of my thought pattern will differ. A more vast movement to personally responsible consumption, while moving one's major banking needs to a locally owned bank/thrift/credit union, may in the long-term do further possible damage to the TBTF functional operations. A few trillion in low-cost, easily collated deposits could/should do non-helpful things to the Net Interest income spreads.
The optimal move for average followers here to shift the pendulum is by shifting behavior, collectively, in supporting locally owned banks, businesses, etc. Conglomeration of many facets in daily US life is certainly an issue. Quite honestly I don't do enough, although I still keep accounts with a credit union based in North Carolina
On another hand, i consider this argument as somewhat self-defeating: impairing the TBTF very ability to collect outstanding liens/debts harms them little. It's a quarterly write-down to EPS, equity holders take a hit & life moves on for those in exec suites in Manhattan.
Take the failure of LEH, one example: surely Richard Fuld lost buckets of wealth, but he'll survive. On the other hand, support people in the organization such as those working the wire cages, settlements, operations, legal runners...they got crushed (both income & any accumulated wealth). Same thing happened at Bear.
Your original point: I'd just soon operate without debt, or rather a minimally open revolver that's paid down monthly/annually. I don't have a valid response on the exchange of owning property via indebtedness, back to the original point.
All I can say to that is you ain't seen nothin' yet my friend. The mess has been caused by excessive criminal abuse (still continuing) of our financial and monetary system; not by anything we did collectively to ourselves (except perhaps ignore the overtaking of the system by the criminals). Getting rid of the Federal reserve is a big - perhaps the biggest - step in reforming the system.
You're spot on, Gordon. To remove "bank credit" from the economy would immediately bring the price down for common purchases such as houses, cars, college educations and medical expenses.
The Americans who are most successful are also those who are not only the most careful in managing these acqusitions of debt (not overextending themselves, not acquiring more than they need, etc.), but those who avoid "toxic assets" (i.e. - spouses, etc.).
The great irony here is that when virtually every "middle American" decided to go out and fuck themselves, in doing so they fucked over virtually everyone else.
Its important to remember that when getting a call from collectors they have certain metrics for performance. Obviously a zero recovery is the biggest strike against their performance. So in the shoes of the collector...you have a list of phone numbers to call when you walked into work. What would be good results that keep you in your job as collector?
"Hey this guy was paying us nothing and now I got him paying $10 a month on $7K, take this baby out the cannot collect pile!"
"That guy paid $10 for two years now, we have to reclassify him or it goes back to cannot collect. Lets offer a restructuring of the loan and to sweeten the deal he only has to pay $5 a month now. Boom, out the cannot collect bucket."
Either of those outcomes would be a successful day in the life of a bill collector. But those outcomes are only positive for the collector if the loan starts out in the cannot collect pile. I like how you think Gordon.
ps: true stories, thats how we roll in GA
this is your secret right here to how to beat the system at their own game.