They had no idea what was in store

Friday, June 21, 2019

The GFC, or global financial crisis, was caused by banks in the USA leveraging their deposits by over40 times, and of course, because they were not seers, they had no idea what was in store.

It is a fact that money only comes into existence through borrowing from a bank.

When this happens a borrower gets his money, yet no one has any less. This is because banks do not lend money, they create deposits.

Banks do not borrow money to lend.

There is no wholesale market of money that is a cost to a bank, that argument is simply a wank.

The $380 billion dollars “bail out facility” set up by the government for the benefit of the big banks is because, if just 5 per cent of customers stopped paying their mortgage obligations the banks will fall over.

Also at the rate of leveraging we are experiencing, we can know that the assets of the big banks are worth about 4 cents on the dollar.

While this may be shocking to some, it is knowledge that is easily available. Even a modest economics dictionary will give you heaps of knowledge.

Oh, by the way, banks cannot lend depositors money. It does not help to know that when you deposit money into a bank you become an unsecured creditor of that bank.

Finally, if the government started to borrow off the Reserve Bank of Australia a big chunk of public money would not be transferred into the private sector, as is now happening.

That alone should be a good thing.

Neil Forscutt

Willow Tree

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