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We Should Let The Banks Burn Down

7-8-2019 < SGT Report 29 882 words
 

from Silver Doctors:



When you see and hear about the banks burning, let them! Bring sticks, a few hot dogs and some marshmallows…


by Bob Moriarty via Streetwise Reports


In later 2008 during what is now referred to as the Great Financial Crisis, government and financial managers had an opportunity to reset a badly out of balance banking system. It would have required pain from bank bondholders, shareholders and taxpayers in general. Everyone recognized the banks were burning down, seemingly out of control.



We should have let them burn down.


What we have done in the decade past that point is going to make the problem an order of magnitude greater. The next time we see the banks burning down we need to let them.


It’s a self-evident axiom that all debt gets paid. If not by the borrower, then the lender must pay. Obvious but often ignored.


All money is loaned into existence. When the banks create money by means of making loans and then they charge interest there is always more debt than assets. The debt will continue to grow until the financial system explodes one day. It has to happen mathematically no matter what governments and central bankers may say. There is no way around the simple math of the equation.


No one ever dares mention this but basically debt is slavery. The borrower is the slave to the lender unless and until the debt is satisfied either by repayment or by default. The banks certainly know that even if borrowers don’t.


If your neighborhood dry cleaner has made bad decisions and goes out of business, some other better-run company picks up the slack. If a manufacturer of toys cannot compete against lower price and higher quality Chinese or Japanese goods, we let them go bankrupt. Then we sell off whatever assets remain.


It really doesn’t matter who owns and runs the dry cleaner or makes toys, when one company fails if the demand for the product still exists, someone else steps in to provide the supply. This is both true and obvious.


Except in the example of banks. If a bank or other financial institution is on the edge of burning down the Fed steps in, pours money into the corpse and often forces a merger with another someone else.


This was true in 2008 when the Fed dumped $182 billion of taxpayer money to prevent insurance giant AIG from collapsing in spite of their entire condition being a function of criminal behavior on their part. Then the Fed poured trillions into the banking system both domestically and worldwide. For the banks it was a license to steal.


That was pretty stupid. If financial institutions make poor financial decisions or engage in criminal activity, why don’t we let them fail? Why would anyone not bribed believe that criminal activity on the part of banks should be rewarded at taxpayer expense? There is no shortage of well-run banks or insurance companies to service the customers of failed entities.


The reason we don’t let the criminal banks collapse is because they have bribed Congress. The largest financial contribution to reelection campaigns comes from the banking industry and insurance companies. The best example is the totally financially and morally corrupt student loan program.


Twenty percent of Americans, over forty-four million citizens, owe student debt. Average debt is $29,650; total student debt approaches $1.6 trillion. Seventeen percent of borrowers are in default. Fifty-one percent of those in default have a dependent child. Graduates of the class of 2017 left college owing $39,400 in debt. That debt is a set of handcuffs that will restrain graduates for a long time.


In 2005 Congress passed the quaintly titled Bankruptcy Abuse Prevention and Consumer Protection Act, which exempted federal and private students loans from discharge through bankruptcy. The act created a monster as both colleges and lenders realized they gained an unlimited ability to steal.


From 1987 until 2017 tuition at public four-year colleges increased by 219% due to the difficulty in discharging student loans in bankruptcy. This increase is almost double the nominal inflation of 116% in the same period and is largely a function of the inability of students to discharge student debt. Congress handed colleges a license to steal.


But the real winners were the banks. In theory banks charge borrowers interest to offset the risk they take in making the loan. But if a bank makes a loan that cannot be discharged in bankruptcy, there is no risk. It’s free money for the banks.


So when Joe Numbnuts wants to study underwater basket weaving for ten years so he doesn’t have to actually work for a living, the banks are free to make that loan with no risk. They don’t care if Numbnuts is a deadbeat or there is really no demand for those good at underwater basket weaving. When he defaults, as he most certainly will, they have just gained a slave they can hound until the day he dies or pays up.


Read More @ SilverDoctors.com





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