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Archive for March 17th, 2010
In Dodd We Trust
March 17th, 2010 | 
Author: | The Daily Show With Jon Stewart | Mon – Thurs 11p / 10c | |||
| In Dodd We Trust | ||||
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Posted in Banks, Chris Dodd, Corruption, Economic Crisis, Economy, Federal Reserve, Financial System | 
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It's The Debt Stupid: More Evidence that Banks Create Credit Out of Thin Air
More Evidence that Banks Create Credit Out of Thin Air
I recently provided evidence that banks create credit out of thin air.
I’ve just found two more pieces of evidence:
(1) William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, said in a speech last July:
Based on how monetary policy has been conducted for several decades, banks have always had the ability to expand credit whenever they like. They don’t need a pile of “dry tinder” in the form of excess reserves to do so. That is because the Federal Reserve has committed itself to supply sufficient reserves to keep the fed funds rate at its target. If banks want to expand credit and that drives up the demand for reserves, the Fed automatically meets that demand in its conduct of monetary policy. In terms of the ability to expand credit rapidly, it makes no difference.
(2) On February 10th, Ben Bernanke proposed the elimination of all reserve requirements:
The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
Of course, Bernanke’s proposal is the exact opposite of the 100% reserve system proposed by Nobel prize winning economist Milton Friedman and Laurence Kotlikoff, former Senior Economist for the President’s Council of Economic Advisers.
More importantly, if banks don’t make loans based on available reserves, but can enter into loan agreements first and then borrow any reserves needed, that means:
(1) This was never a liquidity crisis, but rather a solvency crisis, as I and many others have repeatedly tried to explain. In other words, it was not a lack of available liquid funds which got the banks in trouble, it was the fact that they speculated and committed fraud,so that their liabilities far exceeded their assets. If you don’t understand what I’m saying, please read this.
(2) The giant banks are not needed, as the federal, state or local governments or small local banks or credit unions can create the credit instead, if the near-monopoly power the too big to fails are enjoying is taken away, and others are allowed to fill the vacuum.
Posted in Banks, Corruption, Debt, Economic Crisis, Economy, Federal Reserve, Financial System, Money, State Banks, State Sovereignty |
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A 'No Vote' Vote: Is This What the Founding Fathers Had in Mind?
A ‘No Vote’ Vote: Is This What the Founding Fathers Had in Mind?
By You Decide - FOXNews.com Americans send people to Washington, D.C., to be their representatives — to cast votes that represent the will of the people. But House Speaker Nancy Pelosi is pushing Congress to pass a sweeping health care reform bill — without a vote. Do you think this is what the Founding Fathers had in mind?
VOTE
The Start Of A Trend?
The Start Of A Trend?
Posted by Karl Denninger
From Western Rifle Shooters Association:
Pistol loaded, openly carried. Rifle unloaded, slung to rear. Bandoleer of magazines containing ammo. All in accordance with rules below. Please note that guidelines below are subject to final coordination with the Department of the Interior:
Participants and attendees are expected to know and abide by all applicable state and federal firearms laws. None of the information provided below is legal advice, and no attorney-client relationship is created by reading or relying upon this information. If you have questions, then you are expected to know the applicable state and federal firearms laws before attending the event.
Anyone prohibited from possessing a firearm by state or federal law may not possess a firearm at this event.
Participants and attendees may not bring any firearm prohibited by state or federal law.
This is a lawful muster and protest to be, apparently, carried out on Federal land.
This is the first I’ve seen of this type, and as a peaceful and lawful protest – an expression of individual rights and a peaceful demand that our government recognize our rights and enforce existing laws – including the existing laws that forbade the sort of fraudulent conduct in out financial markets that not only led to the collapse of 2008, but continues today – it is a good thing. While I am not involved in this protest personally (I don’t belong to the group involved) it goes right to the heart of the matter – the peaceful and lawful exercise of our first and second amendment rights.
Opportunities still exist for our nation to do the right thing. To investigate and put a stop to the fraud in our financial markets. To force those hiding losses to admit to them and eat them – even if it drives them out of business. To allow the housing market to correct to the point that average Americans can afford to own homes again.
To, as I have said repeatedly:
The Anti-Savings Model – Offer 0.1% APY on Savings Accounts and Charge 15% on Credit Cards. A System Designed to Punish Savers and Encourage Extravagant Spending via Usury.
Posted by mybudget360
U.S. Banks have a solid incentive, dipped in gold, to keep people in a perpetual state of paying rent on debt while not saving a shiny penny. In fact, their ideal state of financial equilibrium for Americans would be one in which people spent every single penny from their earnings reaching the end of the month like a pauper showing snake eyes in their savings account. This unfortunate banking structure has also been fostered by decades of government banking welfare for an entrenched corporatacracy. Now it is no responsibility of the government or banks on how people choose to manage (or mismanage) their money but when taxpayer money is used to subsidize the banking structure it is important to setup a system that is both fair and beneficial to the overall economy. That should be a minimum requirement. Today’s current system is designed to penalize savings and creates perverse incentives.
Let us first look at how absurd current savings rates are:
This rate is so low, that if you had $10,000 in a Chase standard savings account, after one year you would earn a whopping $10 or enough to buy two Big Macs or one movie ticket. What incentive is there to put your money in a bank account? They used to say people enjoyed watching their money grow but at this rate you’ll have better luck watching your lawn grow. Much of this low rate environment has been created by the Federal Reserve pushing the Fed funds rate to zero:
What incentive is there for saving any money for the typical family in the U.S.? And interest rates do make a big difference. Take for example the rule of 72. This is a quick rule where you divide a stated interest rate to see how long it will take to double your initial money. This actually highlights how important it is to get a solid rate:
72/15 = 4.8 years at 15% to double
72/10 = 7.2 years at 10% to double
72/5 = 14.4 years at 5% to double
72/.1 = 720 years to double
Right now, most of the too big to fail banks are offering that .1% annual interest rate. At the same time, they are charging astronomical rates on credit cards and other loans making up a margin that would embarrass even your local loan shark:
The current national average interest rate for credit cards is 14.56 percent yet they are offering clients who want to save 0.1% or even lower on their savings account. In business lingo this is what you call the margin and it is gigantic. This is why the banking system is fundamentally flawed. They borrow taxpayer money for cheap, take client money for cheap, and lend it out at usury rates. Not only does it encourage massive consumption but it creates a large part of our economy that is simply dedicated to paying rent above and beyond the face value of the product. And many people only pay that minimum interest rate. As we have seen above, only paying the minimum with a 15% interest rate will double the cost of the item in 4.8 years. That flat screen TV no longer costs just $1,000 but $2,000 over many years and high amounts of interest.
And the problem with savings at least in our current banking model is that these same banks are also the biggest credit card pushers:
U.S. general purpose credit card market share in 2008 based on outstandings
(Note: 2007 ranking in parentheses)
1. JPMorgan Chase – 21.22% (17.74%)
2. Bank of America – 19.25% (19.36%)
3. Citi – 12.35% (13.03%)
4. American Express – 10.19% (11.40%)
5. Capital One – 6.95% (6.95%)
6. Discover – 5.75% (5.65%)
7. Wells Fargo – 4.21% (3.07%)
8. HSBC – 3.47% (3.65%)
9. U.S. Bank – 2.14% (1.84%)
10. USAA Savings – 2.02% (2.01%)Source: Creditcards.com
There is no incentive to offer a competitive savings account from the banks perspective because they can milk their clients on interest and other fees. What other choice do people have? At the same time, any bad loans that go sour will be bailed out by the taxpayers. This is the most incestuous and corrupt banking system in the history of the U.S. What real use is being provided? We need banks but not operating under this structure. Banks right now are operating like feudal lords smacking their peasants around for their interest payments. Ironically a part of GDP comes from this servicing of debt:
So let us set aside saving anything for the moment, many Americans are only having enough to service the current debt they have. And if they try to save, they get rates that are equivalent to stuffing money into the mattress. The only option that even comes close to competing with credit card rates is the stock market but that is one giant casino.
Or take a look at I-Bonds from the U.S. Treasury. These seemed to be a safe place but not so:
Since I-Bonds started, they were meant to pay savers a guaranteed amount bi-annually based on current inflation rates. The bond would never go below zero percent even in a moment of deflation. Now, no one ever expected this to hit when it started in 1998 but we hit that in May of 2009 when we did experience deflation. So for six months, I-Bond holders were receiving 0.00%. These are the ways the system punish savers even who are looking for “safe” 5 percent returns.
There is a reason why banks are making billions of dollars even in this economy with record unemployment. They are the new landlords of the nation.
FHLB Seattle Goes Where The Cops Refuse To
FHLB Seattle Goes Where The Cops Refuse To
Posted by Karl Denninger
I’m sure you all remember how clearly I have stated that I believe that mortgage origination, securities packaging and dealing was fraudulent during the housing bubble, right?
I’ve been saying it now for three years – that credit quality was flatly ignored, appraisals were intentionally rigged and borrower lies were intentionally ignored.
Well now FHLB Seattle has gone and done what no criminal prosecutor has had the balls to do – it has sued nine securities dealers. Among them are Credit Suisse, Deutsche Bank, JP Morgan and Bank of America. What is FHLB Seattle alleging in its suit?
“The bank’s complaints allege that the dealers made untrue or misleading statements about the characteristics of the mortgage loans underlying the securities,” according to the statement.
The dealers made false statements or omitted important information about the loans that backed the securities they sold, the bank alleged in its complaints. The bank claims the dealers failed to disclose that appraisals were biased upward on properties that secured mortgage loans, that underwriting guidelines were ignored by originators and that loan to property value ratios were exaggerated.
Yep. Exactly what I have said for the last three years, and what should, in my opinion, had long since led to criminal charges for alleged fraudulent conduct.
This is the second such suit – as I reported earlier the same bank and the FHLB Pittsburgh bank sued Goldman, JP Morgan and Morgan Stanley last year.
The economic mess we are in will not be resolved until these securities are recognized on bank balance sheets at their true underlying value and, where appropriate, those who falsified credit quality and other information about these securities during their packaging and sale are held to account for what they have done.
Now exactly where are all these securities and at what marks are they being held in the banks across our land?
That’s a question we all deserve an answer to.
Posted in Banks, Corruption, Economic Crisis, Economy, Federal Home Loan Bank, FHLB, Financial System, MBS |
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proudly supports:
Bill Still For President
for Congress
Michigan 11th District
By Bill Still
There is only one answer for the world economic situation; monetary reform.
1. No More National Debt
2. No More Fractional Lending
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