Monday, September 27, 2010

WTF is Money Anyway?

Here's a recent comment by Rep. Dr. Paul:

But did some missed mortgage payments and other personal debt really equal the collapse of the credit market as we knew it?
"What went wrong in September 2008 was not that the existing Basel II capital requirements were too low but that banks found a way around the rules. The Basel II rules base a bank’s capital requirement on how risky its loan book is, and banks can make their books look less risky by buying unregulated “insurance contracts” known as credit default swaps (CDS). This insurance, however, proved to be a fraud, when insurer AIG went bankrupt on September 15, 2008. The credit collapse that followed has normally been blamed on the collapse of the subprime housing market. But according to Yale economist, Gary Gorton, (whose views were recently embraced by Fed Chairman Ben Bernanke), the subprime problem was not itself sufficient to trigger a global credit freeze. What it did trigger was an old-fashioned bank run, in the not-so-familiar market known as the shadow banking system.
Bank runs don’t generally occur in the traditional banking system anymore, because (a) depositors are now protected by FDIC insurance, and (b) banks that run out of reserves can borrow from the Federal Reserve, which is empowered to create money ex nihilo (out of nothing). But FDIC insurance covers only $250,000 in deposits, and there is a massive and growing demand for banking by large institutional investors – pension funds, mutual funds, hedge funds, sovereign wealth funds – which have millions of dollars to park somewhere between investments. They want an investment that is secure, that provides them with a little interest, and is liquid like a traditional deposit account, allowing quick withdrawal. "
-Ellen Brown, September 22nd, 2010

It really has to do with the nature of modern money. Thomas Jefferson, in his infinite wisdom, warned us that "full faith and credit" in the hands of greedy bankers and corporate profiteers would bring us all down. Congress forgot this somewhere around 1999 so they could ride the gravy train. The engine of which was the AAA rating stamped on toxic waste and sold 'round the world to the tune of a quadrillion dollars.

Jefferson wrote to John Eppes in 1813:
“Although we have so foolishly allowed the field of circulating medium to be filched from us by private individuals, I think we may recover it . . . . The states should be asked to transfer the right of issuing paper money to Congress, in perpetuity.

Or just give your fake money to me. I'll get you more of it. Here's what I'm doing with my pretend fake money. I'm up 29.09% over the last 14 months.

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