When things get really bad, the big sharks start eating the small sharks and even turn on each other. The craven sharks even go hat-in-hand to the whale, and beg him to go catch great gobs of small slow clumsy fish (that are wising up and refuse to swim into the sharks jaws anymore) with his huge mouth, and puke them up so they do not starve. The fish complain to the whale it is not their fault the sharks are hungry. Times are tough. The fish population is suffering, and the whale will be back on a regular basis to fill up on fish to feed the sharks. The whale explains to the fish, it is for their own good, but the fish fail to see how, and keep complaining. The whale is less worried about the fish than he is about what the sharks might do if he does not comply with their “request”, so he agrees to puke up the fish and catch more.
The sharks stop eating each other, at least temporarily, and now expect to be fed by the whale the next time they get in trouble. When will the sharks feel like pooping again? Will the small slow, clumsy fish feel like eating? I do not know. But the small, fast, agile fish population was never in danger. It was permanent, and it was never involved in the shark poop/slow fish fiasco.
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Back to Reality
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Getting back to the real monetary-crisis. A number of economic issues caused people to worry about the economy and their own financial future. They decided to borrow less than they had been previously, meaning banks lent less, meaning less bank credit-money was created, meaning less money circulating and bidding up prices for goods and services, meaning prices began to drop, notably housing, meaning people began to default, meaning bank reserve ratios dropped, meaning banks got scared to lend, meaning even fewer loans and even less bank-credit money was created, etc. Meanwhile, people continued to pay down existing loans, and every time they did that, principle is extinguished (remember the $10?). It’s the credit money supply shrinking. You would have to study the details of fractional-reserve banking, required reserves, and bank capitalization requirements to understand why that implies bank failures, too.
It’s like the first Great Depression, but it might be worse because the arrogant Fed thinks it has the solution to an insoluble problem this time. The first depression was caused by the inherent inability of the banking system to tolerate anything less than constant growth of the money supply. A slowing of the money supply caused the pyramid scheme to collapse. This time the Fed thinks the solution is – just create more credit money and the money supply will never drop. Sorry, stupid Fed. The drop in money supply is not a cause; it is an effect. Increasing credit is not the cure; it is the problem.
Hopefully, you can see now that the housing collapse is not a cause of the problem. It is a symptom. Bank failures are symptoms, too. So are derivatives and companies based on foolish business models (mal-investments) that will never show a profit. All this financial instability, all these bad financial problems are symptoms, results of a 400 year old banking pyramid scheme, fractional reserve banking, that puts out temporary money – credit - that cannot be paid back with interest without an endless exponential increase in such credit. This system is worldwide, now. Hence, we have synchronized world-wide collapse of the monetary system, in progress. Just turn on the TV and watch; it’s happening in real time.
For Paulson to request and Congress to approve $700 billion in more credit is a bad joke. The economy is drowning in shark poop, and the only solution everyone talks about is to how to get the sharks to poop more, or feeding the sharks. Yes, as the money supply drops, liquidity is needed, but not liquid fertilizer, of which supply so many fish depend on the moods and needs of sharks. Unstable credit money is not the solution to our problems; it is the cause. What is needed is a permanent solution, and that requires a permanent money supply, either to replace or work in parallel with the existing system until the existing system can be phased out.
Seems like just the right time for a REAL CHANGE to me. What do you think?
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