Acres Of Green + Movable Type Blog: The Politics of Banking

Gasoline and crude oil are much cheaper than a year ago, the stock market is still reeling and many consumers are having trouble making ends meet. What gets us into trouble? Most of us like what we believe to be the good things in life and we will spend to get it. Some will do what-ever to get it, even if it's wrong! But here is some of the problem.

I'll start with the banks. In our countries recent past it was common for families to eventually save some money, of course some folk seem to always have money. This savings was usually placed in a savings account at a local bank. This bank would relend this money to others wanting to borrow. The bank would loan a percentage of what it had available from it's reserves. Later the banks could borrow money from a central bank and reloan that money to who ever wanted to borrow. This bank is not a part of the US government, did you know that? Our Federal Reserve is not a US institution!

Although this worked for many decades it didn't provide enough money for power hungery banks wanting to expand so they found a way to sell loans they made for cash. Of course the buyer also made money by paying a smaller percentage of what the loan would actually be worth. For example a US savings bond You might pay $75 dollars for the bond that is worth $100 dollars at the end of the bond's term, say five years, at which time the government will give you $100 dollars for that bond! The banking system's setup is more complex but this is a good example.

Bankers wanting to expand and loan millions instead of thousands now had the means to do so. By selling loans they made to a third party the sky was the only limit. This was the start of our decline. Wall Street was more than happy to buy loans and had billions to do so. Consumers could get nearly any amount they wanted provided they had a job and good credit and the bubble not only started, it grew into a monster - and bailout's won't be enough to control it.

Getting this monster under control will be a long, painful experience few of the younger generation has ever experienced. My dad lived through the market crash of '29' and he related a few pains along the way. Today we have government programs that help but these may run out of money sooner than later and if the Fed's start printing money again to fund these programs we'll have a round of inflation/depression none of us can imagine.

The only way we can survive is to start saving our money and hope the presidents new plan works. Keep in mind this is a similar plan used to turn '29' around but there will be a lot of changes in our future.

Acres Of Green + Movable Type Blog

Acres Of Green blog page. Global warming, Energy, Environmental, Bio-fuels, and Political Issues! Share Your Comments! More info @ www.acresofgreen.com. Plan of Action with Oxygen Included! Acres Of Green currently accepts no advertising.

The Politics of Banking

TrackBack

Comments