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| Mar 03, 2010 3:03 am |
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re: Economic Capture - Money Power in the World |
John Stephen Veitch
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It's almost impossible to understand how the very biggest banks have developed a system to capture all the economic surplus in the world.
Our economy is built on credit. The money you borrow from the bank has zero cost. It's merely a book entry. $100,000 in your bank account and $100,000 in the banks debtors ledger. It's just a double entry accounting entry.
Banks have traditionally financed business and real estate purchases, on terms that seem very reasonable. The borrower promises to pay, and to pay the agreed "interest" on the loan, backing that promise with title to land or other saleable assets. This process is supposed to provide the economy with low cost capital, and the banks are supposed to be in a "no-lose" situation.
But there's little profit there, for the bank.
So many banks have tried to find new sources of money. They start out by lending money to more risky ventures. This is attractive because the interest rate isn't constrained by rules, or community pressures, and they can charge fees to set up transactions that might be massive compared with the cost and risk of transaction. So they look at the profit potential of the "deal" and try to milk as much profit off the "deal" at the front end as possible. That leaves the client relying on the back end of the deal to get their share of the "deal".
Not happy with that, the bank recognises another "profit centre". The possibility that the "deal" we just set up will fail. That the borrower will "default" on the transactions agreed too. So they have developed these new securities, "credit default swaps" which are "insurance" that "we" will get paid whatever happens.
Now they collect "economic surplus" when things are going well, and they also collect "economic surplus" when deals go bad. More-over the existence of credit default swaps help grease the track to make default more likely.
This is a bit like going to the race track and backing every horse in the race for a win. Of course that's not a success strategy. You have to "know" which ones are more likely to win. (Or which ones are likely to fail.)
Big banks are in exactly that position. They are to a large extent able to set up the "race", and put handicaps to suit themselves on the various horses. As a result, whatever happens, the banks win, and ALL the horses lose, even the winning horses. Where-ever there is economic surplus in the economy the banks vacuum it up for themselves.
Modern banking has become a predator on the real economy.
John Stephen Veitch; The Network Ambassador
Open Future Limited - http://www.openfuture.co.nz/
Innovation Network - http://veech-network.ryze.com/
Building an Open Future - http://openfuture-network.ryze.com/Private Reply to John Stephen Veitch (new win) |
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