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Credit is not the “lifeblood” of our economy –
That attitude and belief has unnaturally increased the total amount of money in the system, increased prices for every necessity of living and increased the tax burden on every citizen and every business, for every service and every requirement on us from our government.
Excessive leverage, excessive credit, excessive speculation using highly leveraged illiquid assets are exactly what caused the Great Depression, the failures of the banking system then and has caused the situation we are facing, the current failures of financial institutions and is undermining the values of businesses and economies across the world.
Credit and excessive leverage are exactly the problems that need to be resolved, but today in announcing the new “bailout” plan for the banks (again), Mr. Geithner made the statement, “we are not changing the economics of leveraging.” Apparently, the Treasury and President’s Financial Working Group are attempting to produce solutions which continue the same basis of credit and leveraging as the foundation of our economy. It provides no foundation, that is the problem we are experiencing the conditions of now.
The fact is, credit is not real money. It is not real currency and not real value. It unnaturally and synthetically increases the overall money supply without any regard for value and without any regulatory structure assimilating it into the valuations of goods, services, assets, currencies, properties and corporate worth. There are no reins of safety, security and assurance built into the full faith and credit of the United States, if its entire foundation for the economy is nothing more than credit. It is therefore not appropriately, “the lifeblood of our economy” as described by bankers, news organizations and analysts.
The weakening of our economy’s true lifeblood has occurred because of toxic speculation, credit products without basis in reality, credit excesses, leveraging possibilities occurring in the ratios $1 for $40 and $1 for $73 ranges, credit interests to public consumers (individuals and businesses) that have ranged from a payback requirement of 50% to 500% and exotic loan types that are impossible to make good. And, the true lifeblood of our economy has been undermined by the ability of Wall Street, bank executives, hedge fund managers and Wall Street brokers to borrow against other people’s money to gamble using high leverage ranges to speculate, purchase and trade huge blocks of shares on the stock market both nationally and internationally.
What if credit did not exist to buy a new car? Wouldn’t the costs of producing cars, the prices of the cars to the consumer and the other elements of doing business to produce and distribute cars be brought in line with a true, healthy business model? Wouldn’t prices and wages for employment begin to reflect something that could exist on the same chart instead of existing only on wildly disparate charts?
Credit is the problem – not the solution. The buying of bad loan products from those who made them, traded in them and leveraged them to resell is not going to solve the basic problem which is that credit is not a valid currency. Excessive leverage undermines the real value of every product, asset and opportunity it touches. It unnaturally props up businesses that are otherwise insolvent without allowing them the basis of reality through which they would change.
– cricketdiane, 02-10-09
The total money supply does, by nature of reality – include the entire amount of printed currency plus the total amount of credit that has been extended (whether to individuals, to banks, to corporations, to Wall Street financial groups, and / or to the government.) It is a fact regardless of the degree to which anyone at the Treasury, the Federal Reserve, in politics or in economic analysis takes those quantities, adds them together and uses the total in their consideration of reality.