According to the power elite, a casino economy is important for our economic well-being. One moment investment bankers are taking home astronomical bonuses, the next the ceiling falls in. This is called having a “dynamic” economy. If you disagree with this you either lack a PhD in economics or are a communist.
We are told that boom and bust cycles are a matter of things getting a little out of hand, requiring corrections. However, the increasing frequency of these market busts internationally, at a time when finance has become more esoteric and sophisticated is beginning to bring into question how random these events are.
Is Debt as Necessary as Air?
Another assumption that should be questioned is how critical debt is to economic life. Debt has been enlarged from something that is necessary for purchases that are very large to purchases that are everyday in nature. That is debt has come to be used to finance a better lifestyle than many could experience than paying up-front for many desired items. This perspective is increadibly short term in nature. The treatment of debt as if it were a drug is an example of a behavior which while irresponsible, is promoted by the very wealthy, because it is very profitable for them. The very wealthy need a fertile market in which to load money, because the completely unoriginal industry of money loaning is easier than employing their money is more interesting ways that make a real contribution to society. What is amazing, with all the suppose financial innovation that has occurred recently is how completely robotic the activities of banking should actually be. Complexity comes into play in finance when there is chicanery. After all the focus on financial innovation, the lowly mortgage brought down the financial system. The mortgage – a simple loan, was turned into a bizarre and dishonest financial instrument called a mortgage backed security. Really, what as all the mortgage broker industry about but plausible deniability for banks?
http://counterecon.com/2008/11/17/mortgage-brokers-as-corrupt-middlemen/
We have estimated that this lowly 286 computer could process all the mortgage applications in the entire country. Mortgage approval is a simple process….as long as the inputted data is actually accurate. Banks should hold mortgages, and get paid on the interest rate differential and fractional reserve banking system (i.e. $1 in assets results in $10 of loans). Who would not be satisfied with this business model? Furthermore, this is consistent with their charter, selling mortgages to Wall Street is not part of their charter and in fact violates the reason they have been deputized by the government to create loans. If “liquidity” (the initial excuse for mortgage backed securities) is required, there is as much liquidity as desired through the government’s ability to create money. Allowing banks to produce liquidity through bizarre schemes like selling mortgages means that the government in effect loses control over its money supply. We can see the results of the policy of doing this.
The financial system that America needs is far less complex than the one that it has. Finally, the reliance on more debt is increasing asset bubbles. This quote from an article at Global Research says a lot about the problems with debt.
Of course, we’re told that a stable financial system is essential to economic prosperity. We’re told that credit must be easily acquired again, so that businesses can meet payroll and consumers can resume buying. But these claims are also irrational. Businesses properly should be capitalized by investment and products should be purchased with earnings. So why do governments claim businesses and consumption need to be financed by debt? The answer is really very simple. The wealthy increase their wealth by lending and they do it without even having to use their own money by means of the Ponzi scheme known as fractional reserve banking. And when debtors cannot meet their obligations, their assets are acquired by the wealthy at fire sale prices who then become even wealthier. This is what capitalism does; it does it consistently and spectacularly. It really can have no other purpose. Credit is good only for creditors; debtors always lose. – Global Research
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