Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
You do realize that very few people agree with your framing of the way finance works.

What we do agree on is that the present system is a Ponzi scheme, we just differ on where the extra money flowing into the pyramid is coming from.

You haven't explained, for example, why Freddie and Fannie needed to be created. I claim it was because traditional banks couldn't attract enough capital due to their constraints how much profit they could make.

If you have another explanation, I missed it in your remarks. It is also a detail whether banks get their working capital from depositors directly or from inter-bank deals which are just intermediaries to the ultimate depositors.

The multiplicative effect of fractional reserves is a big talking point among the right wing libertarians in the US right now, but their alternatives don't make much sense - we are not going back to a gold standard.

This week Merrill sold $33 billion of mortgage-backed instruments for $7 billion and lent the buyer $5 billion to make the purchase. Obviously these bonds were not based upon actual assets, no part of the housing market is experiencing an 80% loss rate.

I'm assuming that firms borrowed 10% and then used this to issue bonds with a 100% nominal value, this is what Jay Gould did in his heyday. It's just plain old fraud.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Aug 1st, 2008 at 11:35:58 AM EST
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