But this is for the good of everyone.

Baaaaaaaaaaaaaaaaaaaaaaaaaaaaa

Wish I was big enough so someone would not allow me to fail.

Always remember the new golden rule: "He who has the gold, makes the rules". As per usual the rich get richer while the poor get poorer.

"Banks are bailed out, but who will bail out the American taxpayer?"

Nobody! Back with the nose to the grind stone, everybody!

Ah the greedy version of the free enterprise system at work. Now lets see, scam money, tell the government to stay out, get into trouble go to the government and yell help. Why has no one yet questioned those CEO's making 10's of millions off this scam. They sould be brought up front and centre to answer questions. But we all know this will never happen as they are the ones that control government.

Peter, always enjoy your columns, always look forward to the next one.

My question is--if the banks had not been bailed out, what would the alternative been? Total collapse of the world's economies? That dire?

We got the good end of this one. With no bail out the entire worlds economy is going to suffer terribly in the short term. Under this scenario the US taxpayer gets screwed while the rest of the planet benefits, at least short term.

Dont get me wrong, the giant correction cannot be put off forever. But for today, and probably tomorrow, all is good.

Do you think that Canada would have been saved this fate if Harper had been in power at the same time the Americans deregulated their banking systems? Do you really believe that Stevie Harper will be good for Canada if he has a majority?

If the bail out did not occur the world banking system would go under and the 1929 crash would looking a party.

Thank you Peter for the financial articles you have written for this web site. I think your series of articles titled "Invasion Of The Moneylenders" was right on the money. (Pardon the pun). I posted a story on this site on Dec. 1, 2007 which took some quotes out of this series of articles. The following is the link to my post on that day:

http://www.opinion250.com/blog/view/7609/7/forestry+woes?

At this time I would like to acknowledge Eagleone (former pen name I think Chadermando) for the first person I could find on this site who first made reference to the credit/debt bubble which burst in the summer of 2007. This post was dated Oct. 11, 2006. At the time of this post most people in most countries were partying like it was 1999. They were dancing on the table tops, drinking their favorite beverage with lamp shades on their heads and singing "We are in a new era of never ending prosperity". These people forgot one thing though, that the boom times they were experiencing were due to more and more credit/debt being injected into the economy.

The following is the link to this post:

[url]http://www.opinion250.com/blog/view/3791/3/real+estate+market+remains+hot?[url]

I posted the following on this site on May 26, 2007. (In general, the debt fueled party was still going on.)

"I was recently on the Statistics Canada web site, where it says the m3 money supply has grown by 36% over the last 4 years. This is an annual increase of 9% per year over the last 4 years. Their site only gives the information for the last 4 years. The GDP in Canada has only grown by about 3% annually over the last 4 years

For the information of other reading this post, the definition of money
supply is as follows "The entire quantity of bills, coins, loans, credit, and other liquid instruments in a country's economy."

I think our present booming economy is a ponzi scheme which is totally dependent upon the Bank of Canada willing to increase the countries' money supply at a very high rate and upon the people, businesses and governments in this country willing to borrow this money. I think that when this debt bubble finally bursts there is going to be a very painful adjustment process in this country (as well as in most of the other countries in the world which also have central banking systems).

I think it very common for the average household to receive several debt solicitations( by phone or by mail) every week. I think it is very common for our retail sales industry to offer deals like 0% financing and no payments required for many months (and somethimes years)"

To Opinion250.com and/or Peter Ewert. I really hope you consider doing a story on this topic of debt and how our financial system works. In my opinion this is our countries biggest problem. I consider it unfortunate that the mainstream media choses not to report on this story. Ben I applaud how you stick up for the little guy. This is one story you must do.

I do do not think our big banks, (as well as the rest of our financial industry) would like to see the mainstream media report on how our financial system reaaly works. The biggest 5 (or 6) banks in Canada made a net profit of 19 billion dollars last year. I think our big banks have a really good thing going because they are literally able to create money out of thin air and charge interest on it.

(new post on the same day)

In the last paragraph of my post, (along with a couple of typing mistakes), I accidentally left some words out of the final sentence.

The final sentence should have read "I think our big banks have a really good thing going because they are literally able to create money out of thin air, loan it out, and charge interest on it.

The following is the link to my post on that day:
http://www.opinion250.com/blog/view/5977/3/first+session+with+canfor++leads+to+a+second?

In closing I would like to urge our current Mayor and City Council to please put a hold on any present (and future) big spending plans for at least one year to see how this financial crisis plays out. Please think of the ability of present (and future) taxpayers to pay for the costs of running this city in the context of what could be the bursting of the biggest credit/debt bubble in financial history, and the fact that it is very likely housing prices in this city (as well as the rest of Canada) are going to be experiencing a big time declnein the near future.

As the renowned Mises warned us decades ago, "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."


To Ben and Elaine:

With the next municipal election just around the corner, could you please bring up the topics (on your web site and new radio show) which I have raised in this post, when you interview the candidates for Mayor and City Council.

I made a boo boo when I posted the link to Chadermando's post of Oct. 11, 2006. (Hopefully) the following is the link to this post:

http://www.opinion250.com/blog/view/3791/3/real+estate+market+remains+hot?

lol Charles, nice find. I agree with what I wrote back then.

Now I just have to shake my head when I hear the president of the states speak... ditto for Obama when they talk the talk that 'everything is all right go back to work'... and then use the catch phrases like its all a mortgage melt down problem and we need to bail out the banks to keep people in their homes and keep the world markets liquid. When they go down that mortgage road right away I know they are a liar, and then I'm fascinated at how they can lie with a straight face. All great talking points for the banks IMO.

What we really have here is not a mortgage crisis. What we are now seeing is a derivatives crisis. What we have is a multi-trillion dollar derivatives market that has been created since deregulation that is built on money hedge funds do not have, but is enabled through obscene leverage that enables bets on real world markets with real world dollar payouts for what amounts to insurance type gambling and high stakes bookmaking. The derivative market creates nothing of value and only serves to enrich the non producing banksters at the expense of the people who do create real goods and services of value. It allows the hedge funds to manipulate markets and public companies without risking their own capital. These financial tools are the root of evil and they destroy the honest investor and the honest economy.

The CDS (Credit Default Swaps) you hear them talking about are a form of credit derivatives where two parties engage in private contracts to bet whether or not a company will default on its bonds (asset packages ie bundled mortgages in a lot of cases). When the economy is good the banks make a ton of money on fees with little in payouts, but when the economy turns (sub-prime bubble) the banks are over leveraged... and then require taxpayer dollars to cover the bets the smart people at the banks made based on their computer models.

So what is happening now is rather than let capitalism and the free market rule and letting the banks go into bankruptcy where the assets can be evaluated, valued, and the ownership web is untangled through the court process according to law... instead the government has to hide the criminal nature of the derivative markets from transparency and so therefore the American administration has chosen to use the private owned US Federal Reserve to bailout the entire Washington/Wall Street crime network keeping all the books behind a wall protected by the US Fed. The US Treasury (tax payers) will forward the credits to the US Fed (private) to pay the billions of dollars required to guarantee all the bets (thus keep it all out of the courts) the bankster crime network made manipulating markets in their hostile takeover consolidation of industry as well as the resource and asset speculation bubbles.

The US Fed (responsible for the whole mess in the first place) is now 80% equity owners of the worlds largest insurer paid for with American backed tax dollars... a multi billion dollar expense to the American tax payer made entirely without the congressional approval as the American constitution requires. They say a Trillion dollars (size of the Canadian economy) will fix the financial mess that is derivatives in nature and not sub-prime. A trillion dollars is just the down payment money if we are to try and compete with an out of control derivatives market and its domino and cascading cross defaults that could infect an estimated 1000 Trillion in derivative contracts today , which can only be paid for by a 60 Trillion dollar global economy through slavery if backed by the tax dollar... or someone is not going to get paid and we will have a great depression to sort it all out.

Ultimately we are screwed IMO. The quicker they print more dollars to try and float the risks that a deregulated banking system is creating... the less any real world savings will matter when it comes to investing in our future... and the debt we will require to keep pace with the unending appetite of the banksters and their corporate side kicks will drown most of the world in debt slavery...

AIMHO
Time Will Tell....

PS I think the dollar should be based on a fixed value that can not be so easily manipulated to create boom and bust cycles that enrich the insidious insiders. I like the idea of a gold backed currency for this very reason because its a restraint that makes the greedy global bankers respect the laws of supply and demand rather than try to manipulate it.

The taxpayer will pay out the taxpayer

International news says the Euro countries are using their US Dollars to assist with the bail-out. About US$500 billion have so far been written off and they are helping with that since it is in their interest to keep the US economic crisis in check as best as they can. At the moment, Great Britain is being hit harder than the EURO countries.

I wonder what will happen to the poor American taxpayer who is already saddled with a horrendous bill caused by the Iraq war. How much more money can the American Govt. pull out of the typical taxpayer before those poor souls go under?

"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."

John Kenneth Galbraith

July 4, 1776 Declaration of the 13 United states of America:

"all men are ..... endowed .... with certain unalienable Rights, that among these are Life, Liberty and the PURSUIT OF HAPPINESS" That to secure these rights, Governments are instituted ... "

The US government is simply continmuing to carry out its 232 year old mandate.

Charles wrote:- "I think our big banks have a really good thing going because they are literally able to create money out of thin air, loan it out, and charge interest on it."

We ALL have a really good thing going because they can do that, Charles. Or would, if the system enabled each overall cycle of production to be fully financially 'self-liquidating' in the same time period it occurs.

Unfortunately, it doesn't. And collectively we are continually forced to find ways to borrow more to enable what's already been borrowed to be fully repaid.

Contrary to what many believe, the problem does NOT arise because the Banks are allowed to create 'money' out of 'nothing'. Nor because they charge interest on it.

All 'money' is 'credit' ~ fundamentally, a BELIEF in the beneficial outcome of some line of action. Even when it's made out of gold, it's not the gold that makes money 'money', but rather the BELIEF that the holder will get something he wants to acquire in exchange for it.

In the case of the banker, the expectation of a "beneficial outcome" of the loan is that the contract for future performance he has just entered into with the borrower will be fulfilled.

The terms of that contract, embodied in a credit instrument known as a Promissory Note, did not exist before the Banker and his customer made them. Ergo, we can say 'money' was created 'out of nothing'. And it was. The borrower is exchanging his 'promise to pay' in the future, something not ususally fungible in the general community, for the Bank's 'promise to pay' now, which is.

There is NO inherent 'evil' in this, nor is there, as many who are ignorant of financial processes continually profess, any 'fraud'. Loans create deposits in a modern creditary system. Not the other way around. Were it that other way around, we would unlikely have ever progressed beyond conditions of life present in the Middle Ages.

The repayment of loans cancel the deposits created by them. Ideally, in the economy as a whole, this would take place at the same rate production is becoming consumption. Money being issued to facilitate production, and withdrawn as that production is consumed.

Presently, this does not fully happen, nor can it without some serious detriments and periodic 'adjustments'. The fact that it does not happen, and that even though there are 'adjustments' of a sort, though not properly directed, nor adequate, is one of the major CAUSES of the present problems.

Because the financial process is continually ongoing the illusion is created that money 'circulates'. While it does, of course, the more important thing to note is that it 'ebbs and flows' as Banks continually make new loans, and existing ones are repaid.

It is often suggested that the root of the problem of growing debt is "interest". That this happens because the Banker never created the "interest" when he created the "principal", therefore the interest cannot be repaid. This, however, is not true.

Modern Banking is at least 95% accounting, and a Banker who can create credit based on the expectations of a beneficial result from the actions of others, can certainly do the same thing for himself.

The spending by the Bank of this 'money' (by cheque) into the general economy to meet the Bank's own bills for wages and salaries and other banking expenses provides much of the money for "interest" paid by others. The fact that loan maturities overlap, and that the process is continuous, provides the rest.