Basically I want to encourage you to navigate over to Marker Ticker by Karl Denninger. You need to listen to the latest podcast called “Europe and China near detonation“.
There is a quote in this podcast from a CNBC show that occurred Monday. A representative from Egan-Jones per Karl’s account, was being drilled by questions on Europe and there ability to issue money & credit to shore up their finances. He shot back with this bombshell of truth to power.
“When you emit credit in excess of GDP growth, you make creditors poorer.“ This is what we are doing in America and this is a core issue I have been pounding the table about for years now. But here is the rub, WE ARE THE ULTIMATE CREDITORS. He made the other wonderful and true point that most the money in our system is credit (ie: debt) and where is most of this generated?? Two words…. Commercial Banks.
Before I continue, I want to be clear, I have no issue with the concept of banks and I believe and a fair and regulated market. The problem I have is that we have literally given over this most crucial power of government over to the Federal Reserve which is basically a cartel of most the banks in the United States. That is not even the biggest problem, the biggest problem is that we allow this system to operate on a debt basis (treasuries to get dollars) AND on a fractional reserve basis.
This is why we are under the un-escapable sucking power of all this debt in the system, and why you allows hear we “have to grow” and “deflation is bad”. These are bad because it would hurt the holders of assets priced in a currency that is be inflated daily.
The major portion of this credit creation is through loans via the commercial banks. If you have real reserve requirements, it would be a real check against this unbridled debt creation we have happening now. We will have a breaking point and it will be much sooner than later.
We need to flush all the bad credit out of the system and put into receivership, any institutions that are deem insolvent. It is just absurd we have allow some of these banks hold derivatives in such excess that they are more that annual GDPs of major countries. What is really happening is these derivatives just represent bad bets that are being rolled over at our expense so the some of these banks can not take the hit. I want us back in an era of prudence and real market forces with government regulation that maintain the fairness of markets to keep the game of life fun.
Currently, we are just spending ourselves into perpetual debt and lowering our standard of living, while forcing people that did not have as many opportunities as others into difference forms of government assistance. This is not how I want to see people living and I think most people would like to have more opportunity to better themselves and to make sure rules are enforced and are fair. Under that scenario we can then look for prudent way to extend assistance in ways that are either absolutely necessary because we are a society of compassion or in area to help people that are working to help themselves. We need this so we can get our optimism back.
Please do something, call your representative, comment below or read some books and get more understanding. It is almost certain we are going to have it get real bad before we take enough pain and hardship to change this disconnected culture we are generating. People need to wake up, know there is not free lunch and yes, you need to make time in your business life to engage in politics so you voice can be heard, and please, educate your opinion so its actually worthwhile.
Just what we need is more super-sized banks. Now when BofA gets into trouble we will be talking about how they are “too big to fail”. I thought we passed an act in the 90s that prevented investment and commercial banks to be under one roof? How soon we forget.
Bank of America Corp completed its purchase of Merrill Lynch & Co on Thursday, creating the largest U.S. bank and perhaps one of the biggest challenges yet for longtime Chief Executive Kenneth Lewis.
The closing allows Bank of America to bypass JPMorgan Chase & Co and Citigroup Inc in size, giving it about $2.7 trillion of assets.
No doubt that we will see continue losses and write-downs in the future until they finish de-leveraging and find a sustainable balance in their business model. It is sad that all the investment banks have either gone out of business or are now commercial bank holding companies. Capitalism is not dead but it needs a second to catch its breath.
This is what happens when people get too greedy and they lose all fear. It is always a balance of Fear vs. Greed. The is the natural balance that keeps the free market in check. That is why it is bad when government start intervening and picks winners and losers, it through everything out of whack and make private capital evacuate the market until the rules quit changing every other day.
Goldman Sachs Group Inc reported its first quarterly loss since going public nine years ago as plunging values of stocks, debt and real estate caught up with a Wall Street leader that until recently had sidestepped the worst of the crisis.
When did it become critical that people can buy a new car every year? I am just astonished that we are letting a car financing unit become a bank just so they can get access to our taxpayer funds. Mainstreet has been left in the cold and all we seem to care about is all the fat cats that did not make prudent choices to retain money for the bad times that always come. What direction are we trying to go, backwards or forwards?
GMAC LLC investors holding about $10.5 billion of bonds agreed to sweetened terms of a debt swap, bringing the auto and home lender closer to its goal of becoming a bank and getting a federal bailout.
The Fed’s actions in the treasury market is really sucking out much of the extra liquidity out of the market as people are using it as a flight to safety in these uncertain times. It is no surprise that the private markets could not come up with the $30 billion needed to give GMAC the capital they needed to met their obligation under commercial bank status.
GMAC LLC, the auto and home lender seeking federal aid, hasn’t obtained enough capital to become a bank holding company and may abandon the effort, casting new doubt on the firm’s ability to survive.