Posts Tagged ‘700 billion’

There is lots of people out there who do not understand what this crisis is all about. They have no idea what fractal reserve banking is, why banks can make billions of profits and all of a sudden be bankrupt one year later. Well, fractal reserve banking means the bank is not obliged to keep your money when you bring it to them but they can spend it. This usually means they will lend it out to someone else against a higher interest rate than they give you, and the difference is their profit.

However, when stuff got deregulated banks could not just lend out your money to someone else, they could also start to gamble with it on the stock markets. This is where things went wrong. Banks bought giant amounts of mortgage-packages that were promised to be good and they turned out to be bad mortgages that do not return any profit, at least not yet. They’re problematic. So they have spend lots and lots of our money on bad investments. This means that
the profit figures they have flaunted last years, based partly on these investments, were fake. They made it look like they were growing and growing, just to be able to cash in more money at the stock counter.

So now they’ve got called on, they have a huge cash flow problem. These bad debts are made of your money, and when too many people start asking their money back: euh, its just not there. In fractal reserve banking the bank keeps just a small amount of money inside to be able to pay direct transactions. For that reason they have put caps on daily withdrawal amounts too, too high caps would bring them into trouble.

That’s one side of the story: they wasted your money on bad loans and don’t know how to pay it back. But there is more to this crisis. The whole American economy and partly European economies and other economies are debt-based. The American national debt has risen in the last eight years from 5 trillion dollars to 10 trillion dollars. So it has doubled under the Bush administration. This is all borrowed money. It has to be paid back. And every time the amount gets higher, it gets harder to pay back because of the interest issue. So what we see here is a debt figure that has risen to such an astronomic amount it has become virtually impossible to pay it back, or maybe even to stop it from growing. This is the core phenomenon we are dealing with at the moment: Crisis which will return at accelerating speeds, like this debt money is accelerating in size all the time. The effect of this in the long term is an economy in perpetual crisis. There will no longer be good times, bad times, depressions or recessions. People who believe this is a returning pattern in our economies are right, but they forget that we already had a major crisis in this decade: this is the second one. The crisis is a circular pattern but its exponential: it will keep coming back at a faster and faster pace, because debt is an exponential phenomenon.

The American author Gore Vidal wrote a book called ‘Perpetual War for Perpetual Peace’. In it he suggests that America has to stay in a state of Perpetual war to afford their lifestyle – there is much true about that, and what we will now see is that the economy more and more will follow a Perpetual Crisis model: faster and faster will these Crisis return. Either that, or there will be a total collapse. I’m not sure which option is the worst one. In the long term a collapse might be much, much more healthy. The 700 dollar bailout plan is of course ridiculous: more debt, to keep ‘things running’.

There is no quick fix, this time around. It’s pretty hilarious to see McCain and Obama talk of nothing but tax cuts.

Martijn Benders, Dutch writer and Freelance Economist

So, Congress is now going to vote over the 700 billion dollar bailout plan that is doomed to fail. Why is it doomed to fail? I will explain. It’s quite simple really: Bush and consorts claim that these ‘bad mortgage assets’ can be bought now and sold at a higher price later on. I don’t think he has paid much attention: these are BAD mortgage assets. This means they are mortgages from people who can’t repay their houses. NO ONE SANE will ever want to buy these mortgages from you, it’s like offering a shipload of fake golden watches. So we have the US government buying a shipload of fake golden watches for 700 Billion dollar, claiming to the tax payers that they will be able to sell those at a higher price later even if everyone knows those watches are fake.

This is insane! What’s also insane is to see Bush address the nation telling everyone they are bailing out Wall Street so they can borrow more money, to send kids to school, for example. Borrow more money! Has this guy totally lost it, or what? He wants to borrow 700 Billion dollars to buy a shitload of fake golden watches, and why, oh because then you, the taxpayer, can keep borrowing money and put yourself into more debt!

I dont think I have ever seen a more insane line of logic. We borrow your money, buy fake shit with it, so you can keep borrowing more money too. Oh, and we will lower your taxes too while we’re at it. Let’s borrow, for there ain’t no tomorrow!

It seems like ‘borrow’ is some sort of Financial mantra in the States. You want a soul? Just borrow one. You want to have a plan? Just borrow someone’s brain. You want your life back? Some day you will be able to borrow it from the only bank left, the Federal Reserve.

M.H.Benders, 29 September 2008

Today the US congress approved a 700 billion dollar rescue package for the US financial markets.
The package will raise the National debt from $10.6 trillion to $11.3 trillion dollars.

That means that, if there are 250 million Americans, this package puts each of them 2.334 dollars further in debt. Debt per person is now: 45200 dollars.

Of course, this money will be printed extra, meaning inflation will rise sharply and consumers costs will rise extensively, so on top of the 45000 dollar debt you own the Feds thanks to Bush you will also have to deal with that.

Sooner or later they are going to pull the rabbit out of their hat: the Amero. Conspiracy theory? We will see. What’s clear is that debt based economies are greatly in favour of the ultrawealthy: the Federal Bank is owned by a few families. That is the largest mistake in American history, to have a Federal Bank that is not state owned. Now, all the financial institutions are state-owned except the one that matters, the Federal Bank. This basically means everyone has to work his ass off to repay debts to a few families in charge of the money flow. A mistake made in the end of the 20′s and I am sure we will see some new ‘mistakes’ rising during this New Depression.