Reply #115: This deserves a response.... [View All]

[althecat]

This is as daft as what the ron Paul supporters believe, and that's pretty daft. To correct the misapprehensions of the OP...

1. Money is not debt. Banks do not create the money out of thin air when you get a mortgage. You think this because they don't keep the cash actually lying in the vault to be handed to you, but if you take out a mortgage the amount lent is entered on the bank's balance sheet. The amount they can lend out is limited by capital adequacy ratios.

In what way does your description suggest money is not debt. Banks can lend out 10 to 20 times the amount of money they hold on deposit meaning that 90% to 95% of the money they lend is created from nothing. Moreover once they move a bit of the mortgage finance on by turning it into a CDO or a SIV then they can use their capital all over again and lend another 90-95%.

2. Most people don't know who has the money, because most people are too darn lazy to find out.

That is pure rubbish. Tell me where I can find out. There is not only no place that knows (except possibly some people in the banking industry) but there is no way of finding out. The entire edifice of trusts, limited liability companies and bank confidentiality working together makes it completely impossible to ascertain the wealth of anyone. Ask the IRS.

3. The federal reserve is not a privately owned bank, it is a government entity. Allegations to the contrary are an idiotic conspiracy theory.

Again complete and utter rubbish. It is owned by the states federal reserve banks and they in turn are privately owned institutions mainly owned by other privately owned banks.

4. The super wealthy tend to increase their wealth independently of the economic cycle. Partly this is because we do not have heavily progressive taxation, but another reason is that they know what they are doing financially.

This is purely what they want you to beleive. We are rich because we are smart and it is good for you that we have all the money because we are smart.

This does not necessarily make them predatory, although some are. On the other hand, the country is awash with people who don't think hard enough about their financial decisions and get burned as a result.

So we should blame the victim then I guess. Here's how it works the most trusted man in $$$ Alan Greenspan tells em to borrow on a floating rate. The mortgage sales person says the same and - wonder of wonders - he can show them that on a floating rate they can actually afford the obscenely high asking price being asked by the slum landlord turned property speculator. They buy the house. Then the payments double. Then the bank stops letting them expand the mortgage to cover the $10,000 annual shortfall in household income caused by extravagances like toothache and a busted radiator.

There are a lot of ways that the finance system could and should be reformed so as to improve its integrity and value to consumers, but starting out with addle-brained conspiracy theories isn't going to bring that goal any closer.

Starting with some facts rather than the pure spun toffee that emanates from the newspaper and TV commentators is also a good place to start. Belief in a system is justified until the system spectacularly fails in its purpose. That is what is happening now you might think. Or is it actually doing precisely what it is supposed to do?