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c1ue
05-27-11, 01:55 PM
There's a lot of good information to read concerning fractional reserves, credit creation, accounting standards etc etc.

However, the missing link is this:

By creating a system where credit is the biggest component of finance - whether real estate, small business creation, corporate governance, whatever - the effect is to create an auction where everyone bids to pay the most interest to banksters.

Do you see the problem here?

The 'winners' are those who are willing to give the most economic rent to banksters.

Fiat Currency
05-27-11, 03:21 PM
Yes. And since the $USD is still the World's Reserve Currency, it is up to US citizens to do something about it.

Would you hurry up, please. ;]]

3893

mmr
06-02-11, 01:17 AM
The auction concept isn't entirely true for the whole industry - there are still some lenders that take the concept of risk-adjusted return into account (you don't necessarily want to lend to the person who's so desperate that they'll pay you an extra 4% interest on their mortgage, since you'll lose more than that extra 4% when they default.) This is particularly true for lenders that plan to extract rent by holding the loans to maturity - if they reached for higher returns, their rent would be reduced by the losses they'd bear.

This little limitation went away completely for a while in the 2000s with the "originate and sell" model, which allowed sketchy subprime lenders and bigger banks alike to flip the risk to someone else and capture the lifetime value of the higher interest through the sale price (capture the full return, offload all of the credit risk). The whole subprime model was predicated on being able to originate and move as many loans to Fannie Mae / Freddie Mac / Norwegian pension funds /etc. as quickly as possible. The interest rate environment and the fact that the whole insurance and pension / investment sectors had to reach for yield to meet their fixed obligations didn't help matters.

c1ue
06-02-11, 02:04 PM
The auction concept isn't entirely true for the whole industry - there are still some lenders that take the concept of risk-adjusted return into account (you don't necessarily want to lend to the person who's so desperate that they'll pay you an extra 4% interest on their mortgage, since you'll lose more than that extra 4% when they default.) This is particularly true for lenders that plan to extract rent by holding the loans to maturity - if they reached for higher returns, their rent would be reduced by the losses they'd bear.

Quite true - I've never said there is not a role for finance.

However, the point I was seeking to illustrate is that the concept of extracting maximum economic rent - exemplified by frankly fraudulent practices like securitization of clearly bad loans, as well as use of campaign donations/speaking fees/post regulatory employment job offers, etc to secure changes in laws like property tax reductions, Glass Steagall repeal, FASB accounting changes, Fed and federal subsidies, mortgage subsidies, etc etc - all of these go well beyond the beneficial role of the financier/banker and into the role of parasite/bankster.