Count to 10 on June 11, 2009 at 4:10 PM

Do you understand how the basis of the modern banking system, fractional lending works?

Its a classic pyramid scheme, which will only work if there is no hit to the system larger than your cash reserves.

When you are leveraged up to 25 times, as was normal before the latest little downturn, any 3-5% downturn, like in a recesion, will destroy the banking system…. which is EXACTLY what happened (housing bubble), and is why they have had to prop up the system with so much Taxpayer IOUs and manufactured cash.

That downturn could be due to bad Gov decisions (which we have), called in debt, natural disaster, War, or a bubble in some comodity.

If the system cannot survive a 3-5% economic downturn without Government intervention, then the system is flawed, because history shows those downturns are almost inevitable.

Ahh a Lion on June 11, 2009 at 3:59 PM

Well, it wasn’t a Ponzi scheme until now, and even that is pushing it. Continuous global economic growth is pretty much a given, except when socialists and other control freaks come in and dam it up.
So long as the US currency was kept stable, none of this was a problem, but we now have people in control with dangerously incorrect economic theories which they will push at the expense of the robustness of our currency. Yes, things are going to get bad, but the trade deficit is not the cause true cause of that pain, only one of the many instruments by which the consequences of socialist policy will drive home our errors.

it only exists because people in other countries want in on our prospects of future production.

Count to 10 on June 11, 2009 at 3:03 PM

Yes, but that’s an illusion. The scam is that the dollars we send to other countries constitute an IOU on future production. Other countries believed that those IOUs would actually be repaid eventually. Unfortunately for them we have been selling the cows and chickens to buy milk and eggs, and have no productive capacity to make good on those IOUs. As Romeo said above, it’s just a giant Ponzi scheme, and as we know, those always fail when investors lose trust. The bond market collapse of late shows that the Ponzi economy that the US government and Federal Reserve have helped facilitate is coming to an end.

Is our economy based on nothing more than a blatant pyramid scheme perpetuated by the Banking system?

If you look at fractional lending practices, and the amount the banks are leveraged, any hit to the system of even 3% or 4% would cause collapse… as we are seeing now.

Is this all just an effort by the banking system insiders to keep the Pyramid scheme afloat?

It’s actually not any more unstable than anything else in economics. As long as the world uses US Dollars the way it used to use gold, and the world economy expands, it will continue. If that ends at any point, there will be consequences, but there is nothing inherently bad about it in and of itself.

Count to 10 on June 11, 2009 at 3:06 PM

Key part is “and the world economy expands”… which it is not.. Recesion? Thats what makes it unsustainable. Its based on the assumption that things will always go well… but in real life it does not.

Federal Reserve Chairman Ben Bernanke had suggested to another Fed official that “management is gone,”

Isn’t there something called the RICO Act that responds to this sort of intimidation by a group?

Paulson said that Lewis and the BofA board would be replaced if they sought to end the merger, which Paulson viewed as integral to the health of the U.S. financial system. Paulson told New York investigators that he threatened Lewis’ job at the behest of Fed chief Ben Bernanke.

No matter who did it, it is wrong…

Exactly…. problem is that this is an unsustainable model. We can’t do that forever.

Romeo13 on June 11, 2009 at 2:55 PM

It’s actually not any more unstable than anything else in economics. As long as the world uses US Dollars the way it used to use gold, and the world economy expands, it will continue. If that ends at any point, there will be consequences, but there is nothing inherently bad about it in and of itself.

Romeo13 on June 11, 2009 at 2:54 PM

It is a bit simple minded to interpret the trade deficit as meaning that we consume more than we produce: it only exists because people in other countries want in on our prospects of future production. If the US were not such a powerhouse of future economic growth, we would not have the constant influx of investment, and the exchange rate would quickly bring our trade deficit to zero.
Now, P.BO’s barrow-and-spend spree is going to be sticking a monkey wrench in that, crushing both our current productivity and out prospects for future productivity. You will know that the important people in the rest of the world have caught on to that when/if our trade deficit shrinks, or worse, goes into surplus. It will be painful, but still just the natural consequences of socialist policy, the better to teach us of our folly for hiring Democrats.

Basically, we are buying lots of tangible assets (oil, computers, whatever) and we are sending them paper with ink on it (which may soon be worthless).

I guess we’ve been getting a great deal!

BPD on June 11, 2009 at 2:46 PM

Exactly…. problem is that this is an unsustainable model. We can’t do that forever.

Count to 10 on June 11, 2009 at 2:17 PM

Um, I understand quite well the difference between trade deficits (or balance of trade, and balance of payments, which are also different), and budget deficits, thanks for thinking I’m a retard.

The US system is actualy a CLOSED system… enclosed by its own laws and banking system. It interacts with other systems, but is a system unto itself (which is why we can measure GDP and such).

The American system must MAKE more wealth, than it consumes, exports, and wastes, or it goes under. The amount of DEBT (US Gov, Corporate, and Private) we owe to other economic systems shows that this balance is NOT being maitained.

Keep with your unreal platitudes all you wish, while the American economy is still strong, it is now going further and further into debt to other countries to continue in its unrealistic and unsustainable “plan”.

10% of GMC is being sold to Canada. Chrysler was sold/given to Fiat. How many other “American” companies are now foreign owned? How much American real estate is now foreign owned? All of these point to the FACT that we are not producing as much as we are using (as a Macro Economy)… and are now having to sell off ASSETS.

Basically, we are buying lots of tangible assets (oil, computers, whatever) and we are sending them paper with ink on it (which may soon be worthless).

I guess we’ve been getting a great deal!

BPD on June 11, 2009 at 2:46 PM

Granted, that paper still means something, and things could get a bit … chaotic … if the Dems insist on grinding our economy into the dust, but, yes.

i’m just getting here, so pardon if someone already asked these questions.

Count to 10 on June 11, 2009 at 2:17 PM

Basically, we are buying lots of tangible assets (oil, computers, whatever) and we are sending them paper with ink on it (which may soon be worthless).

I guess we’ve been getting a great deal!

Romeo13 on June 11, 2009 at 1:40 PM

There are no losers in trade except those who fail to trade. You are making the mistake of conflating trade deficits with budget deficits, when they are in no way related.
Of course “giving” money to the Suadis doesn’t help us, but buying the oil they produce does — which is not to say that we wouldn’t be even more helped if drilling restrictions were removed and we could drill our own.
Also, do not be fooled into the delusion that the US no longer creates anything — we are still the most productive country on the planet, and even that which you call “moving money around” is ultimately responsible for the production of goods and services that would otherwise not exist. Money is not wealth: that which money buys is wealth. So, in fact, the US has been importing wealth all this time, because we are so productive. You are falling for the same victimist crap the Democrats thrive on.

All trade increases global production, which increases American prosperity.

Count to 10 on June 11, 2009 at 1:01 PM

If you believe that, Wow… just wow… so giving the Saudi’s BILLIONS of American dollars has HELPED the American economy? More than if we had drilled here and kept that wealth here?

In ALL trade there are winners and losers. There are buyers and sellers… and when it goes across International lines, it creates Trade imbalances, and wealth transfers.

We have consistantly exported American wealth for years, buying things from countries where labor was cheaper, but the ONLY way that works is with cheap transportation… ie, when transportation costs become less than the extra amount it would cost to manufacture that item internaly.

An overall economy can only sustain that exporting of wealth as long as its CREATING enough wealth to at least offset that transfer (and I’m talking THINGS, not money, when I talk about wealth).

We no longer create wealth in this country… we just move money around…. we don’t MAKE stuff… we outsource it… and then buy it with credit…

The whole system is unsustainable, and in the last year we have seen the first tremors of the coming Economic earthquake, which will finaly hit once the US cannot sell its bonds, and they call in those debts.

Didn’t we used to have guidelines on what the government could and couldn’t do? I believe it was called “The Constitution.”

Star20 on June 11, 2009 at 1:08 PM

“Failed policies of the past…”
-BHO

Sorry, but I disagree.

One major reason we have a net trade deficit, is because transportation costs became cheaper than the internal vs external labor difference. Thus, manufacturing, for internal consumption moved overseas.

One reason for those low costs was that you could flag a Transport ship in Liberia for a very cheap price, and then pay Liberian taxes, while being protected by the US Navy. Thus those tax revenues were lost to the US, thus they do not support the worldwide Police function of the US Navy.

We used our tax dollars to protect the very shipping (of other countries) which economicaly forced American manufacturing jobs to move overseas.

Romeo13 on June 11, 2009 at 12:18 PM

Actually, the trade deficit has nothing to do with this argument — it is really only a measure of net investment, and not related to prosperity.
All trade increases global production, which increases American prosperity. Though it would be hard to track down the effects directly, trade between two foreign countries ultimately boosts US production. We want to protect their trade, because it helps us.
Our “loss” or “outsourcing” of manufacturing has more to do with the extortive practices of US unions and the counterproductive regulation pushed by the left. It is going to other countries because we have said we have punished it, the same way that the productive immigrated to the US from nations that punished them. Blaming trade is like blaming the taxi driver who drives off with your slave after he has slipped his chains.

The Federal Reserve’s predecessors was abolished, how quickly we forget that act to remove power from government. Somehow we never do hear about rollback of government power, and yet our ancestors did just that to corrupt organs of government. The exact, same ills seen then now happen again and we are shocked (shocked!) that such well meaning things can go so ill… of course if you want to get rid of a festering, rotting part of the zombie that is government, how quickly the defenders of the mobile corpse appears to say how much good it does seeking to devour our livelihood and our liberty.

And how quickly we have forgotten the actual Laws of War as they came from their source to us over the centuries… it is perfectly legitimate to authorize private organizations to fight for the Nation: that power is right there, in the Constitution. As was understood at the founding it is, indeed, reprisal of equal scale against those that wrong us and cannot be gotten by any civil means, nor by ordinary military measures. But mention that, point out where it is, demonstrate the history of it and how the Nation used that to defend itself when it had no navy nor much army to speak of and people shake their heads. It is neither illegal nor immoral to seek reprisals via authorized and acknowledged means sanctioned by government openly and freely. Actually getting covered under the Laws of War while doing that is accountability.

I disagree with Ron Paul on many things, but not those two as they are directly related to the history of warfare and how our society has gotten rid of ill-conceived and run parts of government. Strange that remembering history should be considered ‘conservative’… yet it is slowly becoming radical, just like in the lead-up to 1776 when Common Sense became the rallying cry for Revolution.

Now, why would Bernanke think he needed a lobbyist?

Congress is trying to pass legislation to Audit them.

Remember, it’s always darkest before the light.

Ahh a Lion on June 11, 2009 at 12:28 PM

Always? sometimes its darkest just before they start to shovel dirt onto the top of your coffin…

Fed hires lobbyist

Sounds like it’s time for Ben Bernanke to be thrown under the B.O. bus!

pilamaye on June 11, 2009 at 11:17 AM

Larry Summers wants his job BADLY. It is not out of the question that this is all a giant setup so that Bernanke eventually gets “blamed” for some of this stuff and is forced to resign.