For hundreds of years the banks have made a profit by loaning money. Where does the money come from? They are allowed to “leverage” their assets and create money out of thin air with the touch of a keyboard.
In the United States this leverage ratio is 10/1. The result is the vast amount of money in the world is not created by governments but is “loaned” into existence by banks as debt. The problem is when the loan is made it must be paid back with interest. The bank did not create the money to cover the interest. To “cover the interest” new loans must created in a large enough volume to service preexisting debts along with the interest on them.
Thus an expanding level of debt is required to keep banking and the rest of economy afloat. But we now have a “debt crisis” and banks have curtailed their loaning activities. So how are they making a profit?
Instead of loans the major banks are “investing” assets in various markets. Stocks, futures, options, and by far the biggest of the all is the derivatives market. Just how big is it? It is estimated J.P. Morgan Chase bank has over $90 Trillion worth. That’s right — Trillion with a capital “T”. The reason it is just an estimate is because the derivatives market is unregulated.
Not only do we not know how much they own, we do not know what kind (there are many different types and combination of types), whether they bought or sold them, and to whom they bought or sold them!
In the banking industry this is called “Casino Banking”. All the major banks around the world are “Casino Banking” It has been estimated that as much as $1.3 Quadrillion of various derivative and combination types are “in play”. So when Jamie Dimon is not very worried about a $2 billion loss you can understand why!
David A. Douthit
Mesa
VofReason posted at 12:52 pm on Fri, May 18, 2012.
$90 trillion? President Obama and his cronies should rev up the tax machine and get on those 1%ers. That way they can not pay down the debt and waste even more money to get re elected.
truth posted at 4:34 pm on Fri, May 18, 2012.
Like most Republicans, they have a short memory. Under G. W. Bush, he falied to prevent 9/11, CIA briefing on Aug 6, 2001. The Republicans failed in 2003 to prevent the Fanny and Freddie failure, and don't want to take steps to prevent another bail out like J.P. Morgan. Bush went to war in Afghanistan with cases of millions of dollars to pay for a fake warloard war that failed and we all know how Bush failed in Iraq. And now Mitt Romney wants to be our next President with the same staff that Bush had. And lets not forget the 700 BILLION DOLLAR TARP BAILOUT FROM G. W. BUSH.
sockratties posted at 8:26 am on Sat, May 19, 2012.
Pointing fingers at presidents or political preferences is satisfying but unproductive. Yes, we can say such and such happened on Bush’s watch or Obama’s watch, but they didn’t cause the problems and they can’t solve the problems. If they set the agenda and nobody follows it they get blamed. If everyone follows, they get blamed. We hand them the tiller, yell “full speed ahead” and watch the ship hit the iceberg while pretending we put them in charge. Congress is supposed to regulate Wall Street but Wall Street is regulating congress. Follow the money.
David is 100% correct about banks creating money with the stroke of a pen. If you borrow $1000 from a bank they write a loan that says you owe them $1000. The $1000 shows up in their ledger as an asset which they use as collateral. It wasn’t printed by any mint or loaned by the government and has no real value beyond your promise to pay. The bank created this virtual money and can use it as a basis to create more loans. The banking system is a huge Ponzi scheme. If you or I were to do this we’d go to jail for racketeering. Multiply this by millions of times and you have more than half the wealth in the country (or world if you wish) secured by nothing but speculation.
While we’re pointing fingers we should do our own speculation…. what do we expect a president to do about this? We need to point at the House, the Senate, the regulators and at Wall Street. Or we can just put our hands over our eyes and pretend it’s not happening.
Rational Human posted at 7:33 pm on Sat, May 19, 2012.
The only problem that I can see is when the liberals force banking institutions to make loans to people they know are likely to default on the loans. That is why we are in this mess today. A democratic congress was responsible.
Rich posted at 8:29 pm on Sat, May 19, 2012.
Write a novel, a poem, pant a painting. Stop bitching. They aren't worth your time. Stop
giving them time and money. It gets better if you do your thing. If just gets worse if you want some else to