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US Steals Banks
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bridarshy
post Sep 19 2008, 01:10 PM
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This goes beyond Socialism... This is pure theft. :(

http://news.sky.com/skynews/Home/Business/...%2C_Sources_Say

This link explains this better. So what will happen is the gov't will buy bad debt/securities, and resell them to their banker friends for pennies on the dollar, thereby assuming the loss. The tax-payer assumes the loss.

This could be as expensive as the Iraq war. $800B is about $2200.00 per US citizen, and where does it go? To bankers, to Wall Street... This is the biggest theft in United States history.

This post has been edited by bridarshy: Sep 20 2008, 02:18 AM

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Orion_Zorn
post Sep 21 2008, 08:02 AM
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I think the problem is that no one really understands what it means when they say the taxpayers foot the bill. Everyone thinks we just borrow more from China, problem solved. The news can talk about how much teh Iraq war costs, but for most people, nothing has changed, our taxes have not gone up, what is the big deal?

Until people realize that part of the increase in prices over the past few years is due to the war, not much will change. If our taxes go up, that would also do it.

I am still confused on much of it though, why would the US government want to 'steal' a bunch of bag mortgages? Isn't this what is happening? And if they sell them for pennies on the dollar, does it matter if they are still worthless?

This is the other problem, I think. The average american does not understand exactly whta is going on. we hear the words on the news, but dont really know what it means other than 'there were a lot of bad mortgages, banks lent money to people who couldnt afford the loans'.

I do know that part of theproblem had to do with cdo's (?) where they split up mortgages into parts, then split the bad mortgages in with lower risk loans (?) and somehow got the entire group/package to still have a good risk rating. or something like that.

see what i mean? How can we be expected to protest what is going on when it is so hard to understand what the hell happened? ;)

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mG_Despair
post Sep 21 2008, 09:11 AM
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QUOTE(Orion_Zorn @ Sep 21 2008, 08:02 AM)
This is the other problem, I think.  The average american does not understand exactly whta is going on.  we hear the words on the news, but dont really know what it means other than 'there were a lot of bad mortgages, banks lent money to people who couldnt afford the loans'. 
*


This is exactly right.

The whole situation is confusing as heck, and it is somewhat unclear who exactly is responsible.

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bridarshy
post Sep 21 2008, 05:41 PM
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Yup, that is how they sell it to us. There really would be blood running in the streets if people realized their tax-dollars were lining the pockets of everyone involved in creating this legislation. I read somewhere, someone was claiming this was unconstitutional because it goes against the "General Welfare"...

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Orion_Zorn
post Sep 21 2008, 07:16 PM
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But if no ones taxes go up, they do not feel like they really paid for it. I have to find it again, but i am pretty sure that in Ron Paul's book, he says that when we 'borrow' from China, we really have to create Treasury Bills (Bonds?) and sell them to China, so we not only owe China interest, we are adding more dollars to the money supply, which creates inflation. If this is true, everyone should know this.

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bridarshy
post Sep 21 2008, 09:50 PM
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I.e. the central bank...

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Orion_Zorn
post Sep 22 2008, 09:26 AM
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http://video.google.com/videosearch?source...jekyll%20island

This is something people should listen to, considering the state of the economy today.

At about 23 minutes he explains why the government loves our type of system. "This is the reason they are in this partnership. Becasue the government has instant easy access to any amount of money at any time without having to go to the taxpayer and ask for it in the form of direct taxes."

I swear the most amazing part is that people laugh it off as conspiracy.

One of the most interesting parts from the video/lecture is when the guy explains that one of the aims in creating the Fed was to 'reverse the trend of private capital formation'. He says there was a trend at the turn of the century for businesses to hold part of their dividends and use that money to expand. The banks needed a way to get businesses borrowing more money. Until the Fed was established, the banks could not just lower interest rates to entice businesses to borrow. "THey knew the only way to get people into the banks was to artificially depress *natural interest rate* by creating a 'flexible currency'.

A flexible currency is one not backed by gold, etc.

he also talks about passing the banks losses onto the taxpayers 'in the name of protecting the people. The game is called 'bailout''

This post has been edited by Orion_Zorn: Sep 22 2008, 10:19 AM

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KS_Rockstar
post Sep 22 2008, 12:44 PM
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I agree, really confusing. I've been trying to educate myself and I've come to a few conclusions. Feel free to correct me if you know I'm incorrect.

1. Some portion of the blame lies in the hands of Americans as a whole. I have a friend who bought a house at about 3 times what he could afford based on a crazy baloon mortage payment and variable interest rate. He has now lost his house and all his money and I suspect his mortgage is one of the ones being bought out by the government. He is far from alone. So on some level, the individiual and their greed is to blame. Yes? No?

2. Greed at the higher levels is definatly at fault. It's hard to blame a 5 year old for eating all the cookies if you set the cookie jar on the floor. Basically the people at the top wanted more money from a greater ammount of mortgages and loans. They (and I don't fully understand how it all works) artifically lowered interest rates to encourage more loans (which artifically caused a housing boom). At some point, interest rates couldn't go any lower and house prices couldn't go any (artifically) higher so the bubble burst. That started the process of overall financial decline were in now. There is also a stock market component to this which I understand even less but surmise it's approximatley the same concept? Yes? No?

3. Then there is the government to blame (or lack there of). I'm not totally sure what roll they play in this other than supporting legislation that supports these reckless lending policy's? I also gather that the difference between the two parties at the moment is not whether to bail out or not but whether to include legislation that would prevent this from happening again? The Republicans are against it on the grounds that it gives other countries an un-fair advantage as they don't have this type of regulation and the Democrats are in favor citing the fact that we can not continue to allow the cookie jar to be left on the floor. Yes? No?

4. Then we get to the solution. It seems as though the U.S. government will buy out the bad debt (at a cost of somewhere between 700b and 1t) for about 80 cents on the dollar. I get the impression that they will attempt to just sort of 'carry' this bad debt until the economy turns around and then sell the debt back at either a profit or a break even price? I also get the impression that there will be no actual individiual tax payer tax increase, at least not right away? Yes? No?

5. Finally, it seems as though most everybody agrees that we need to do some form of bail out. The costs of not balling out are severe layoffs and hireing decreases. Severe decreases in loans (and increases in interest rates on loans) which will decrease the opportunity for new business. There would also be an additional decrease in housing prices which will lead to a decrease in property taxes which will lead to a decrease in services and money for schools and the like. Yes? No?

Thoughts?

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Orion_Zorn
post Sep 22 2008, 02:55 PM
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You should watch/listen to the video I linked.

Does it not seem odd that the government can just procure 1 Trillion dollars without increasing taxes? The taxpayers are not up in arms because people just vaguely feel that at some point our taxes will be used, but no one expects tax increases, or loss of services.

I don't know how to explain it any further. Inflation is the trick that has been used by governments and banks for thousands of years. The specific trick that is being used now originated in the 1600s.

We will pay for that bailout in higher prices, and everyone will just blame oil prices.

It is no different than what Mugabe did to Zimbabwe, causing prices to go sky high. Our politicians are smart enough to know not to feed the fire too much, as eventually people realize that the government is the reason prices go up.

"This is the reason they are in this partnership. Becasue the government has instant easy access to any amount of money at any time without having to go to the taxpayer and ask for it in the form of direct taxes."


On your specific points, I really don't know. I guess once I found out the game was rigged, I quit paying attention to the minor rules changes. Does it matter if they add or remove a rule to the roulette table, if the table itself is rigged to cheat? They are fooling us with minor rules changes, making us think they are making sure that the players at the table are being honest, when in fact, the House is cheating and doesn't even care...they just need to appease the public to ensure more suckers come in to play.

This post has been edited by Orion_Zorn: Sep 22 2008, 02:59 PM

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Orion_Zorn
post Sep 22 2008, 03:28 PM
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http://www.dailyreckoning.com/Writers/Moga...s/MG091908.html

This guy has credentials, and is funny, and explains it clearly. He also points out that if you are not one taking a bath in this it 'is the greatest buying opportunity of all time.'


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Roark
post Sep 22 2008, 03:31 PM
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QUOTE
one of the aims in creating the Fed was to 'reverse the trend of private capital formation'. He says there was a trend at the turn of the century for businesses to hold part of their dividends and use that money to expand. The banks needed a way to get businesses borrowing more money. Until the Fed was established, the banks could not just lower interest rates to entice businesses to borrow. "THey knew the only way to get people into the banks was to artificially depress *natural interest rate* by creating a 'flexible currency'.

This theory has almost no basis in history whatsoever. It's a blatant case of applying modern motives to historical actions.

The Federal Reserve system was created in 1913. Even before it was created, we had national banks... from 1791 until 1913, only a cumulative total of 30 years passed with a banking system that was completely free and private. We had a central bank for 40 of those years, and a system of national banks for the rest.

Congress centralized the national bank system in 1913 because of the repeated bank runs that kept happening in the late 20th century. Specifically, you should read the article on The Panic of 1907 as it provides an interesting backdrop to what led to the Fed's creation. It is also starkly similar to the kind of things happening to us today.

In a completely unrelated incident, the US didn't retreat from a gold-based currency until Nixon closed the exchange window in 1971. This more was some 60 years after the permanent establishment of a US central bank (the earlier ones had run on temporary charters), and had its own independent cause... mainly that overspending by Johnson/Nixon in Vietnam led to inflation of the currency, and having it pegged to gold meant that the dollar was laughably overvalued.

So the Fed was created to insure against liquidity crises. The flexible currency was created because of inflation. Those aren't the same thing, and happened 60 years apart. It's also important to recognize that abandoning gold wasn't a necessary step in the govt printing money... they were already doing that anyways. Floating the currency just allowed it to be priced more accurately than it was while it was pegged to a shiny mineral.

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Orion_Zorn
post Sep 22 2008, 03:53 PM
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listen to the lecture I linked to. There are always two sides to every story.

edit: read the end of the wiki you linked to:

Picture a party of the nation’s greatest bankers stealing out of New York on a private railroad car under cover of darkness, stealthily riding hundreds of miles South, embarking on a mysterious launch, sneaking onto an island deserted by all but a few servants, living there a full week under such rigid secrecy that the names of not one of them was once mentioned, lest the servants learn the identity and disclose to the world this strangest, most secret expedition in the history of American finance. I am not romancing; I am giving to the world, for the first time, the real story of how the famous Aldrich currency report, the foundation of our new currency system, was written... The utmost secrecy was enjoined upon all. The public must not glean a hint of what was to be done. Senator Aldrich notified each one to go quietly into a private car of which the railroad had received orders to draw up on an unfrequented platform. Off the party set. New York’s ubiquitous reporters had been foiled... Nelson (Aldrich) had confided to Henry, Frank, Paul and Piatt that he was to keep them locked up at Jekyll Island, out of the rest of the world, until they had evolved and compiled a scientific currency system for the United States, the real birth of the present Federal Reserve System, the plan done on Jekyll Island in the conference with Paul, Frank and Henry... Warburg is the link that binds the Aldrich system and the present system together. He more than any one man has made the system possible as a working reality

As the lecture points out - why the secrecy? It was years later that it came out that these men got together to put this system together. And yes, I have read that Americans fought against central banking in different forms throughout the 1800s.

As the author points out in the video I linked: the people were up in arms against 'the money trusts', which were exactly the people who went to Jekyll Island to draw up this banking system. If the public knew who had drafted up the system, they would know it was likely not in their best interests.

Just ask, why would they have went to such lengths to keep their meeting a secret? As he points out - these were competitors who were getting together.





This post has been edited by Orion_Zorn: Sep 22 2008, 04:03 PM

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Roark
post Sep 22 2008, 05:02 PM
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I haven't watched the video because I own that guy's book (that the lecture is based on). I've put a few hours into reading it here and there and just can't get going. It's misleading, juvenile, narrowly-focused, and monotonous as hell.

For better reading on the Fed, I'd recommend "Secrets of the Temple: How the Federal Reserve Runs The Country" by Greider. It's 100 times more balanced than that Griffin nut, and actually explains the system objectively, instead of the endless rant that wearied me every time I picked up "jekyll island." Even Rothbard's "Case Against the Fed" takes up the issue in a more mature manner than griffin does.

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bridarshy
post Sep 22 2008, 06:09 PM
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I find it funny Morgan Stanly and Goldman Sachs just changed their status from investment banks to bank holding companies so they will be able to take advantage of the 700B set up for distressed debt. Their friends at the Fed magically waived the 30 days that is usually required for this.

:)

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Orion_Zorn
post Sep 22 2008, 08:26 PM
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Sounds like 'The Good Ole' Boys' scenario...

@Roark, I got this far in looking up the book you recommended. One quote on it said:

QUOTE
""Over a short period, low-income households are indeed the most adversely affected when prices increase, simply because they have the least maneuvering room in their budgets," Minarik wrote. "But over longer periods their incomes tend to catch up with prices." The poor were still poor, of course, but inflation did not make them worse off compared to others."


So I went and pulled out Ron Paul's latest book. he talks about how people argue that wages eventually increase anyway, so what is the big deal about inflation, etc. (ya, like wages are keeping up with inflation lol).

Anyway, he points out that those who receive the new money first are using new money but are not feeling the effects of inflation. As the money gets spread around, prices go up, but the people at the bottom have not yet had wage increases. By the the new money has made its way though the economy 'average people have all this time been paying higher prices, and only now can begin to break even.'

He says these are known as distribution effects, or Cantillon effects of inflation, named after economist Richard Cantillon.

And what is most interesting is that he says that where the government is most involved, is where prices will go up the most. Like... health care. Because there is so much money being directed into the health care industry, prices will go up there the most.

He then quotes William Gouge, Andrew Jacksons Treasury Advisor

QUOTE
"The rise of prices that follows an expansion of 9paper money) does not affect all descriptions of labor and commodities, at the same time, to an equal degree.... wages appear to be among the last things that are raised... the working man finds all the articles he uses in his family rising in price, while the money rate of his own wages remains the same."


So to me, the book you mentioned is not balanced, it is just part of the status quo.

This post has been edited by Orion_Zorn: Sep 22 2008, 08:27 PM



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