Sunday, November 27, 2011
Monetary games and dead corpses
There was a times just a few years back that people were concerned that they would lose their house during the housing bubble. Prices on homes rose to an unrealistic level. The money for mortgages flowed like water with banks offering loans of 125% of the value. Now that should have been a tip off to anyone with half a brain that something was wrong with the system. Nothing goes up in price forever. There are some basic principles in acquiring a mortgage that were thrown out the window when all this happened. Regulations were lax ignored or simply eliminated. And as simple minded as the borrowers were the lenders didn't have to be too bright either. It was just a matter of filling out some forms, fudging some numbers and voila what the applicant thought he could not afford was suddenly affordable or so he though. The basic rule in mortgage however has always been that a loan could not be more than two and a half times a borrowers gross income. To do otherwise would definitely end in default. But the banks didn't care they were raking in the money from the loan fees and percentage points added to the loan. And what happened in the end? Just look around your neighborhood at all the empty homes that is if you yourself didn't fall for such a scheme.
There is one question that I never asked myself in all the years of homeownership. Exactly where does all that money come from to provide such a loan? One would assume that the bank would pull from it's assets to pay a former owner or builder much like a savings and loan. How wrong I was to find out that the money shelled out never existed in the first place. That is correct. When a mortgage is made the bank borrows the money. And where do they get it? From the Federal Reserve of course who prints money like it was a monopoly game. In fact for each dollar you hold in a bank that bank has multiplied that dollar to a factor of 9. They have leveraged it to the point where our system of money is virtually worthless. But we're not supposed to be aware of these facts. As long as the system is moving along and no one is paying attention no one seems to care. That is until the whole system hits critical mass and the house of cards starts to fall. We're seeing that happen right now. It started with housing then moved to business although the commercial downfall has been well covered up. Try looking for the statistics on business foreclosures. It's easier to find gold.
But now with the extent of all the debt (and I'm not even talking about our own federal budget) entire countries are beginning to fall. This Ponzi scheme of wealth has come to a head. Forget the national numbers. Look at the underlying loss of all the real estate values and you'll come up with something like 63 trillion dollars which is several times our GDP. And if you watch any TV at all you will note that anything remotely suggesting the emperor has no clothes will be met with ridicule and even violent arrests as we've seen with the Occupy movement. Capitalism is dead and the stench of it's dead corpse has finally permeated to the masses. They may not understand the process but they know something is wrong. And the powers that be raise the dead arm and wave it from time to time to try and keep the illusion going.
I look at the European bail out of countries and know that the money promised is nothing more than phony money printed on some press by some official sounding Department. Ah but forgive me in this day and age it's all done with computers. No need to transfer dirty dollar bills when a few key strokes will do the trick. It doesn't matter what political party you may see doing the talking because they are all part of the same game only this one doesn't have a winner when the house of cards falls.