In the last 7 years (June to June) I make it that the community subsidised the banking system here in Australia about 50 billion dollars with a further 25 or so billion dollars of inflationary benefit going to the government.

If the Americans flushed in enough cash to stop a free-fall in total spending they will need to also put in an RAR to stop all this extra cash being inflationary.

This would be a retirement of debt. Since they could retire debt with the extra cash. The RAR would eat into the financial sectors earnings since they would no longer be being subsidised. So most of them could well go broke anyway. But in this scenario them going broke wouldn’t hurt the general public.

But they won’t do it. They will raise debt, taxes, hurt anyone, collapse the dollar, destroy everything before them……. they will do this before they will give up their money-creation priviledges.

None of them will give up their counterfeiting priviledges nor would they even so much as suggest it.

It is interesting the way the reserve deposit system has been completely discarded as a monetary policy tool. Primarily due to the banks sidestepping these requirements by way of non-bank intermediaries.

If there is one good thing to see from all this is the sight of Republican Senators getting their heads around the fact that one of the core roles of government is as “lender of last resort”. The ideology of strict non-intervention is taking a timely beating but the issue is more one of whether the regulatory price of that role will be in proper proportion to the long term need.

Of course you are right Ian. The regulations specific to this crisis is an integral part of the crisis. But we see the specific problem of bank crises and the business cycle echoing down through the ages. And the one thing that is common to all crisis is the unwinding of fractional reserve pyramiding.

Now that our banks are so huge and regulated it can take longer for the bubble to burst. And in the information age the pyramiding can go further before it bursts and this is the case also because of the pure fiat nature of the system and the implied government backing.

We have even lost any reserve asset ratio. For the very first time pyramid money outweighed cash 100 to 3. Thats a system that is a hair-breadth away from collapse.

In fact forcing it all onto minorities might have kicked the can down the road another year or two but made things a great deal worse when the unwinding came. This is like what Greenspan described in the 60’s as “putting a penny in the fusebox.”

We see government action or any number of problems precipitating the crash in every generation for some hundreds of years.

But the one thing that all such banking collapses and recessions have in common is the fractional reserve ponzi-scheme.

The war spending the bad regulations and the stimulus packages would have stressed the system. But where you have a crash what you have is an unwinding of fractional reserve.

http://www.dailyreckoning.com.au/warren-buffett-goldman-sachs/2008/09/25/

At least take your head out of your own ass long enough to give us some substance as to why it was not mandated loan targets that dug the current economic hole. Just a single fact would be an improvement on your last few posts, you bombed out bogan. Did they exist or didn’t they? And what was their impact?

So yes, he’s even more of an insufferable twerp than before.

I’m just not able to sort out these gradations of unrighteousness with your subtlety. I thought he was just as appalling before he left.

Oh low IQ bullshit. Models were understating risk across the board. Stop bullshiting

Some time ago the US congress mandated that all lenders had to allocate a large, fixed, portion of their housing lending to minorities as an off budget social program.

The key problem with this was that this meant lending to people with a very unstable work history, low skills base and high marginal propensity to consume any additional income they might gain. They also purchased property in less investment worthy locations as the regulators intended them to.

Bankers recognise these people as “bad risk”, race or skin colour had nothing to do with it. And when faced with a compulsory accumulation of this bad credit in their portfolios they had no choice but to get the modellers to work to see how far they could syndicate this stuff to spread their risk as wide as possible.

The financial modellers were not maximising greed but, rather, minimising risk that stemmed directly from an ill-conceived regulatory measure.

It should also be noted that this structural expansion of the lending envelope had a strong expansionary impact that tended to obscure the underlying instability of the employment prospects of the borrowers. Add an expensive, but in my view, necessary war of occupation and some ill-timed tax cuts and the rest is history.

But none of this has been mentioned by all the leftist economists who, after crawling into holes after the Vietnamese, Chinese and now Indian economic take-offs, are now back out in the street regurgitating their calls for rigid financial re-regulation.

But even these calls are all quite redundant as the US banking system is now essentially being nationalised as the government picks up both good and bad quality assets at a fraction of their fundamental value.

Note, the worlds richest man, Warren Buffet, has recently entered the market to get his full share of bargain wealth at the firesale. And when the write-offs flow right through the economy over the next decade or two the government will make some very healthy profits at the expense of the public whose savings will fund the repurchases.

“I’ve been finding it hard to concentrate on the future of the planet …..”

http://johnquiggin.com/index.php/archives/2008/09/22/climate-change-and-the-murray-darling-basin/

This isn’t funny anymore. Since his return from the 2020 summit, he’s become insufferable which is saying something even for him. Is there a medical term ” delusions of grandeur”.

He obviously needs a full time job. Give the kid a bucket to fill up the Murray.