I’m going to sound like a broken record, but government debt is the ‘gold standard’ and REQUIRED in a privately owned and operated fractional reserve money system as a foundation for leverage, which is used to create even more new money. After deregulation in 1999, deposit banks, who have the power to create money out of thin air, could do so and then lend it to their own investment banks or to partnering hedge funds who could use the new money to gamble in the financial marketplace. With nearly unlimited free money, they created an ENORMOUS bubble of money that was engaged in derivative games. And, yes, some of this money trickled down and average people got to play in the market, too.Picture an upside down pyramid with a tiny point of government debt and as you increase the size of the money pot you’re talking mortgages, then CDOs from the mortgages, then CDOsquared from the CDOs and so on….until we had a derivative market with a nominal value of over $600 TRILLION—-more than 10 times the GDP of the entire world!!! The average leverage of financial firms in the US was about 35 to 1 in 2007, so a 3% drop in the value of their assets rendered them insolvent. With some smoke an mirrors, and because these financial firms control our government, they were able to keep air in their balloon pyramid upright by increasing the size of government debt. AND, until people wake up and take our government back, and RE-regulate the financial sector, the back and forth over taxing and spending is mostly a side show with clowns.
vhammon almost 13 years ago
I’m going to sound like a broken record, but government debt is the ‘gold standard’ and REQUIRED in a privately owned and operated fractional reserve money system as a foundation for leverage, which is used to create even more new money. After deregulation in 1999, deposit banks, who have the power to create money out of thin air, could do so and then lend it to their own investment banks or to partnering hedge funds who could use the new money to gamble in the financial marketplace. With nearly unlimited free money, they created an ENORMOUS bubble of money that was engaged in derivative games. And, yes, some of this money trickled down and average people got to play in the market, too.Picture an upside down pyramid with a tiny point of government debt and as you increase the size of the money pot you’re talking mortgages, then CDOs from the mortgages, then CDOsquared from the CDOs and so on….until we had a derivative market with a nominal value of over $600 TRILLION—-more than 10 times the GDP of the entire world!!! The average leverage of financial firms in the US was about 35 to 1 in 2007, so a 3% drop in the value of their assets rendered them insolvent. With some smoke an mirrors, and because these financial firms control our government, they were able to keep air in their balloon pyramid upright by increasing the size of government debt. AND, until people wake up and take our government back, and RE-regulate the financial sector, the back and forth over taxing and spending is mostly a side show with clowns.
wrdrennan almost 13 years ago
PUHLEEZE. $4 trillion is not a drop in the bucket.