bobomite

8 Important Facts About the Federal Reserve

The debt-based economic model that we use today was evolved in the 1800s. The long-term effects of bringing money into existence as debt without creating the money to pay interest have taken many years to fully understand. There is nothing sacred about our system; it is just what we are used to.

Mathematically, our financial system will implode eventually. This will provide the opportunity to re-learn that these systems can be built however we choose.

The first crucial step is that enough people need to actually take an effort to understand what money is and how our financial systems actually work. The current downturn is certainly encouraging people to begin that education.

This article is in a great example of that process in action.

Time to Cautiously Get Back in the Game

Nice collection of anecdotes. Was there a point?

We Can't 'Spend and Save' Our Way Out of This Recession

Well let's see... The banks are in trouble because they have taken on too much debt.

That's only because consumers have too much debt, such as paying too much for their houses and credit cards.

So to solve it all the government takes on additional debt, to get the banks out of debt, so they can make more loans to the consumers.

Which is ironic, since the private central bank of ours can make all the money it needs. Oh crap, we wouldn't want to collapse the currency by publishing M3 or anything. And since we create most money as debt, then creating cash to cancel out debt is deflationary. People might take the cash, (if they can get their grubby hands on it) pay their loans off, and save some money for the future. How on earth would banks make money if everyone was not in debt up to their eyeballs? Service charges? That's madness. What was I thinking?!?

I guess what is good for the individual hurts the money supply. Time to re-order my thinking... banks first, then everyone else.

Ok, I think I got it now...

Everyone will make more money in the future, by going further into debt now!

I see no reason to worry.

Stock Market to Bernanke: Hints Aren't Good Enough

The Federal Reserve is the problem. When your money is created through debt, it is the bank that wins.

Getting Past the Panic

This bailout is a cash handout and makes about as much sense as throwing coins into a septic tank.

The Senate just wants to "get it done" as I keep hearing repeatedly in their bailout support speeches this evening... Sounds like Larry the Cable Guy is running that shop.

Defensive Positioning in the Bailout's Absence

bonified -

The way we are currently *choosing* to create money is through debt only. (Well and the FOMC.)

The constitution authorizes congress to issue debt free currency. We (America) have a record as the longest users of debt free currency in history. But we gave that up.

It's all about choices.

Defensive Positioning in the Bailout's Absence

Great article. I totally agree - pumping up a deflating bubble makes no sense in the greater scheme of things. And I agree the stock market is inflated as well.

You know, I was talking to a friend about how things were when we grew up in the 80's. Most people didn't have credit cards, or if they did they didn't go into a constant state of debt. People would actually put things on layaway and pay for them over time before they got the goods.

We were pondering that concept and then started thinking... Society functioned pretty well then. People were happy, and didn't mind not being able to purchase $2k home entertainment systems on a whim.

House prices had ups and downs but were basically stable. People had savings accounts and actually planned how they would save. Life was lived, people were fed, things worked just fine.

So then we started wondering - what if this utter explosion of consumer debt and credit availability over the last 25 years was not a good thing at all? What if these massive asset bubbles and crashing deflations were very unhealthy for everyone except the banks at the top of the food chain?

Anyway what I see today is consumer negative savings rate, climbing credit card debt, spiraling government debt...

Kind of makes you wonder what exactly we are trying to build here - a day traders never-never land? Or a functioning country?

The Calm Before the Storm?

The Paulson plan does not make sense at all. When JPMorgan took over WaMu they got a 100% equity stake. Buffet got 9% of GS for chump change.

Paulson proposed handing over cash for garbage assets with no equity.

A bank would never make a deal like that, why would the Treasury?