Once again? ‘Where’s the Beef?’ Protesting is great, but I would like to see some solutions…

OK, so in the last post we covered a bit about banks, investment and the Federal Reserve.  One of the things that has been bothering me since hearing the first reports of the ‘Wall-Street occupation’ is that there seems to be absolutely no direction to the protests.  Of course people are frustrated, heck I have been screaming into the wind for the last thirty years.  One simple rule, if you are going to complain, you better be ready to offer a solution.

It is appalling to see the NYPD hauling off people at random.  Most of the ones they grab are women, young men, and people of small stature.  I did not see them haul away anyone that could have weighed more than 60 kilos.  In review of the news footage, the frustration and rage of the participants are as evident as their solidarity to the ’cause.’

But what is the cause, and what are they hoping to achieve?  Everyone wants to protest against what is wrong, but it is rare to hear what they propose to correct the situation.  No one wants nuclear power plants, but they want clean air and propose / force the introduction of electric autos.  America consumes a quarter of the world’s resources, drives the biggest autos; what the heck does some mom need a Ford Navigator or F-250 quad-cab pick-up for?  Jeepers.  The irony gets my knickers in a twist.

So back to the subject.  What the people are up in arms about can be summed up in one picture…

Yep, Greed.

Now to back up a bit, let’s look at how we got into this mess.  In order to do this, a bit more information is required.  Time to review a bit about banks and the reserve system.  A bank is (well was) required to maintain a capital (that would be cash) reserve of 10%.  In simple language, if they had 100$, they were allowed to loan out 90$.  10$ had do be kept as hard currency.  It already does not sound good.  However, when they made a loan, for example to the Farmer for a new Tractor, the money would come back over time with interest.  In the meantime, other depositors would be putting money in their accounts, and the cycle would continue.  Sort of a ‘legitimate’ Ponzi-Scheme, (If you do not know what it is, you had better read the article, it will come up later.)  Meanwhile here is the business model of loans (From Rev. Sheldon Emry):

If $60,000 Is Borrowed, $255,931.20 Must Be Paid Back

When a citizen goes to a Banker to borrow $60,000 to purchase a home or a farm, the Banker agent has the borrower agree to pay back the loan plus interest. At 14% interest for 30 years, the Borrower must agree to pay $710.92 per month for a total of $255,931.20. The Banker then requires the citizen to assign to the Banker the right of ownership of the property if the Borrower does not make the required payments. The Bank then gives the Borrower a $60,000 check or a $60,000 deposit slip crediting the Borrower’s checking account with $60,000. The Borrower then writes checks to the builder, subcontractors, etc., who in turn write checks. $60,000 of new “checkbook” money is thereby added to “money in circulation.”

However, and this is the fatal flaw in a usury system: the only new money created and put into circulation is the amount of the loan, $60,000. The money to pay the interest is not created, and therefore was not added to “money in circulation.” Even so, this Borrower (and those who follow him in ownership of the property) must earn and take out of circulation $255,931, almost $200,000 more than he put in circulation when he borrowed the original $60,000!

Now, the interest rate is not 14%, (except for those who have credit cards at 18-24%—a topic for another time).  However, you get the picture.

Let’s do a quick look at the recent crisis, the one in 2007.   First a quick note about ‘local’ banks.  Where I grew up, I think there is one remaining; Phoenix Federal.  My Family was instrumental in the founding of Harleysville National Bank.  Located curiously enough, in Harleysville, PA.  In the `80’s, my banker told me that after the retirement of Walter Dahler Sr., things were going to change.  One of the changes, was that the charges for ‘service’ were planned to rise, with the target of up to 30% of bank revenue coming from the “Service Charges”.  I do not know about you, but last time I checked, over 90% of the transactions in a bank occur electronically.  Even in Germany, the cost of electricity is not enough to warrant what they charge for ‘account maintenance.’

So, back to 2007.  Thanks to Alan Greenspan, and his low rates, money was ‘cheap.’  Quick lesson:  Put ten people in a room.  A hot room.  There are three bottles of water.  Normally the bottles of water cost 1$ each.  One in the room had 100$ in his wallet, six in the room have 3$ in their wallets.  One has 2$, and the other two have .50 cents.  The one with the hundred dollars offers ‘credit’, without proof of repayment to all who want it, for a rate of only 5% over 10 years.  Suddenly, there is a flush of capital, and the three one-dollar-per-bottle water are suddenly worth 3$ each.  Now the bottles of water have been sold, but not opened.  Just like a rabid eBay auction, the value continues to rise, and the man with 100$ continues to make loans.  Suddenly, water is no longer seen as a commodity, but as an instrument of speculation.  Think about it.  If I bought one of the bottles at 2$, and they are now worth 3$, I bet that they will go to 5$.  So one in the group borrows more money and buys up all of the bottles at 5$ each.

Ok, so that is what happens when money suddenly becomes ‘cheap.’  Let’s apply that to houses.  The ‘American Dream.’   Something physical, not one that once the cap is twisted, the worth declines.

Suddenly, starting in 2005, new ‘products’ were offered by the banks.  ‘Low Doc[umentation]’ and ‘no-doc’ loans.  That meant that any poor sap, regardless of employment history, credit or otherwise, suddenly was able to buy a house.  All of the Democrat’s cheered.  Housing prices were increasing, and one of the new products was an ARM; an ‘Adjustable Rate Mortgage,’  with an introductory rate of almost nothing, and increasing incrementally over the life of the loan.  With the explosion in house prices, everything seemed great.  Safe.  Heck, even people who had equity went out and borrowed against the accrued value in their homes…Boats, Plasma TV’s, Time-shares, and second homes.

Unfortunately, a local bank really isn’t.  20 years ago, when I bought one of my homes, the mortgage started at Harleysville, then it was with PNC.  I forget who they were.  Then the loan was sold to Watchovia, in the end it ended up at Washington Mutual.  What is that all about?

Ok, we are finally to 2007.  Remember the model above?  OK, it is based on 14% interest.  Yet, even at 5% over 30 years, there is a heck of a profit there.  A bank needs to have reserves.  So they can make more loans.  What they do then is package up the loans they have made, and sell them at a discount against their value in the future.  If they make a $200K loan, that will in 30 years net $325K, they sell the loan to another bank for $240K.  The ‘other’ bank assumes the payments from the creditor.  Nice deal.

This however was not enough.  Somehow, the banks developed a NEW product that put all of these loans together and created a “SRV” (Special Investment Vehicle).  They sold these on the market, all over the world…Goldman Sachs, Lehman Brothers, the list goes on…remeber “Low-Doc /No Doc”?  No one was paying attention.  After all, these notes were based on the rising values of real propery, not bottles of water.  Same principle, different perspective.  Oh, and by the way, they were rated AAA by the same companies that are downgrading the very countries that are victims of this scheme.

Time for a picture….

Time to wind this up…So, where did this money come from?  The Federal Reserve.  Who are they?  We covered that in the last post.  Who is distributing the money?  ‘Local’ Banks.  An oxymoron if I ever heard one.

Why are are people protesting?  Because they have been abused.  Albeit complacent sheep, who are now gathered in a herd and bleating that they are hungry / sick / tired / mistreated etc.  However, they complain and fail to identify the problems, only voice their discontent.  Bullshit.

Here are the solutions:

Under section 8 of the founding Constitution of the United States of America, the founding Fathers gave the right to “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures…”

Not banks.  Banks take a product, (monies guaranteed by all citizens and property in the USA), and play with it for their own benefit.  Sorry, but if a bank wants to have “Federal”, “National”, or “Trust” in its’ name, it should be controlled directly by the Congress.

Oh, that would include the ‘Federal Reserve’.  It should be immediately abolished, and the control turned back over to the US Congress.  (OK, I am not finished with that bunch of crooks (except Ron Paul) yet..next time).

However, the United States of America was founded by a group of extremely well-educated gentlemen, who knew human nature.  (It does not change.)  Jeepers, without I-phones, fax, or Facebook! How did they manage that?  Well, they were EDUCATED IN HISTORY.

The solution to this situation is to return to a Constitutional Government as designed by the Founding Fathers.   Do a bit of reading on Jefferson, Adams and Franklin….

OK, for those who are a bit slow, or want to see the solutions in clear text here they are:

  1. Re-organisation of banks according to the Constitution.  (Elimination of the Federal Reserve is only a start).
  2. If someone gets a bonus for something other than bringing the dead back to life, or finding a solution for poverty /cancer /obesity / laziness / etc, they should pay 90% tax on the bonus.  (Of course they can donate it to a LEGITIMATE organisation like AAEP  The NAACP DOES NOT COUNT!  racist bastards that they are.  (Sorry I broke the rules).
  3. A return to the tax-rates that put Lenny Bruce in his grave; over $500K in income, you pay 50%; over $1 million, you pay 70%. etc.
  4. No ‘off-shore’ tax shelters.  If you earn the money in the USA, you pay taxes in the USA.  Maybe Tom Cruise can make his next film in Balliwood.
  5. Jobs:  Maybe you missed the solutions here:  Jobs Program?
  6. No tax-breaks for “off-shore production.”
  7. Elimination of ‘Lobbies’  (Another post to come soon…) They completely derail the process.  Politicians MUST REPRESENT the constituents, not special interests.
  8. Campaign Reform!  The FCC should require members to provide air-time for candidates for free.
  9. Balance the budget!
  • No more Foreign aid, except for humanitarian aid
  • No more farm subsidies excepting those for sustainable farming
  • no more subsidies for companies that earn profits from ‘off-shore production.

It is a time to end this nonsense.  First the American Indians, now the people who benefit from that American Holocost.  Change is inevitable.  However, those that benefit need to be redefined.

more to follow…

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