Greedy Banking

Corrupt  Banking destroys Capitalism and Prosperity


Letting the market adjust in accordance with pricing determined by supply and demand is fair and it is far more efficient than leaving it to politicians.  You don’t believe Grandma? You are in good company for nobody on the far, far right or the far left would ever agree. Don’t be deceived by these extremes in both parties, (Republican and Democrats) for this is actually one group not two, and the divide is artificial. Liberty Lovers define these politicians as Statists. Statists can be defined as those who want to keep and protect the status-quo. AIG and cronies (assholes in greed) earning big bonuses in a casino designed by bankers, are the prime defenders of the status-quo. They want things to stay the same – investment business as usual.

The big question is – has business as usual given us a fair and workable distribution of American wealth and resources. Take a few minutes to examine the true facts and you may find the situation more dire than the propaganda line.

Watch this video: mind blowing facts

Now are you ready to listen up here, and help Grandma educate and spread the word?  If you care, your hat is to make what is really going on real to voters in 2014. This is a critical year. Grandma believes that the world is on a tipping point and the outcome of the next two elections, will decide our fate. Free and Prosperous again? Maybe, but maybe not?

This is the second in grandma’s series.of educational posts about free market economics.  In the first post she used an anecdotal example, introducing Tom and Sally who both work in the canteen in a VA hospital. In that first post it was Sally who was promoted and as she began to earn more money, she put her surplus in a bank owned by Dick. In the first post we also met small business owner Harry who has a furniture factory/shop and it is Dick the banker who financed his enterprise and helped him to take it up to the next level. Harry got his loan for ten thousand dollars from banker Dick and he paid ten percent for the privilege of using the bank’s money. He invested this money in machinery and raw materials and his enterprise prospered.

The fundamental problem is that the money was never Dicks. It was money deposited in his bank by hard worker Sally and many others like her.  The loan Harry got from Dick was for ten years and he was to pay it back in ten years or else Harry would be subject to a penalty. The penalty was that if not paid in ten years, compound interest would accrue.

Harry did well and in the beginning even Sally was rewarded with a good return on her deposited money.. Here we find Dick the banker engaged in a constructive activity.  This is how Capitalism works in the ideal.

Then Dick got greedy!

There is a problem with people who work only with numbers, for it is easy to have a disconnect. Decisions are made and policies put in place that are not for the greatest good. I think most Americans sense that there is something wrong, they just don’t understand how it works. So they cannot use elections to right the wrongs. The answer is to educate them. .

This is exactly what went wrong: When there is a corrupt marriage between government and banking,  it is possible that Harry’s loan can be corrupted. In our example Banker Dick got greedy and decided to charge compound interest from the get-go and to add insult to injury  to make these charges retroactive. Then to make matters even worse  he cut Sally’s interest rate to way lower than 5%.  How was he able to put his hand in the cookie jar an get away with this stealing?

 Politicians propitiating

This is the exact point where an honest government (justice department) should have stepped in to play umpire and to say, “Oh no, hold it right there Dick There was an agreement here between you and Harry and an agreement between you and Sally and you are unilaterally changing the rules.

When government (which is force) gives Dick the right to change the terms of his agreements, the system has been corrupted by the force of government and we no longer have Capitalism. Do you think it right that banks can change the terms of agreements without even asking you? Does that sound just a little bit familiar; just a little bit too close to home? When did banks last change the interest rates on you? It is always all hidden in the small print.

“But that is not what we agreed to,” wails Harry.  “I am perfectly happy to pay a penalty if I default, but . . . ”  Well if Dick is contributing to election coffers, and has the politicians in his pocket, poor Harry can protest as much as he wants and there will be nobody there listening. Government (especially DOJ) is no longer playing umpire and properly calling the fouls. In short they have quit doing their job. 

(Incidentally Grandma believes that DOJ has not played umpire since just after Lincoln was assassinated, and the Executive took over the Department of Justice.)

A fair transaction is one where both parties agree and both parties benefit and the transaction is transparent. If the bank persuades its buddy, big government to allow it to charge compound interest from the get go, the system has been corrupted and banks (who are in no way producers) are getting an unfair slice of the dice. If the banks persuade big government to also let them have floating rates of interest, fractional banking and variable penalties, this destroys Capitalism and our prosperity.

So let’s pretend a little longer: Another banker, Banker Dikhead, sees Harry doing well and casts his greedy eye on Harry’s loan.  So he goes to Banker Dick and says “I want to buy that loan from you”.Can he do this? Was there an honest transaction between Harry and Dikhead? Of course not. Both Dick and Dikhead’s confusion is that a loan is a product or a service when what it actually is, is a private agreement between Dick and Harry that ought to be honored. This is a point where justice should be stepping in, but this has not happened for a very long time.

If Justice allows Dick to sell the loan to Investor Dikhead, who in turn sells it to banker Moby Dick who passes it along to Savings and Loan, Dikneck, we get a “dick, thick” market that is filled with sludge, and everything slows down. In a slow, confused economy poverty enters in. We all get poorer and even the super rich will eventually get sucked into the dwindling spiral. Even if some good politician were to bring about a fair exchange for the electorate, it has now become almost impossible because we no longer have clear and clean transactions and government has a corrupted organizing board where even justice has become the tool of the super rich.

To add to all the silliness in the system, let us say that investor Dick Sorrowmaker looks it over and he says “Mmmm, I think we may have a bubble here. (sound familiar?) I shall bet my sorry fortune that this bubble is going to pop!” Of course it is going to pop because it has no intrinsic economic integrity.  Dick Sorrowmaker wins his bet and gets to be one of richest men in the world, profiting from a decline, a burst economic bubble; and it is downright scary that he can get away with it. I mean be objective here. Should any investor be able to profit from a decline?   This is crazy economics. This is our market place turned into a Casino Investors should profit only from a predicted  increase then they will use their money and influence in that direction.

And what of the unintended consequences? We now have an investor who was able to buy countries and politicians and radically change elections and not always for the better. Is Dick Sorrowmaker a producer? Investors, bankers and politicians, none of them are producers.

Oligarchy defines a society or a system that is ruled and dominated by a small minority of the top wealthiest (corrupt) citizens. Oligarchy is a way to enrich the few at the cost of the many. So the free market ceases to function and Capitalism becomes a system in name only. Those who are at least up to seeing the inequities tend to embrace socialism as the solution. Socialism has one major flaw.  The common denominator in the decline of honest banking has been a lack of banking integrity and the greed of bankers and an inept Justice Department.   Capitalism detractors see this as a flaw in the free market system. Yet what it truly is, is a flaw in government and a corruption of justice. Will more corrupt government fix it? Unfortunately power creates an appetite for more power.  We can now see evidence globally of international bankers embracing socialism as their new “great scam” to consolidate their hold over us and our wealth.

In a free economy Harry gets his loan, buys new machinery and starts to make fancy decks and sun porches. He employs new workers who are paid fairly. Employment goes up. This new market he has newly found is wide open and he can keep his furniture at an even keel and depend on the new products for his profit. He has already learned all the woodworking tricks that will take him successfully into his next venture.  The price for his furniture and for his decks will be determined not by government but by supply and demand. True Capitalism is governed by self interest, but it is the community’s cumulative transactions (the market) that has the power to transform self interest into the greatest good for the greatest number “as if by an invisible hand”

healthy economy

 Quote for the Week

Anyone who robs Peter to pay Paul can always count on the support of Paul.   George Bernard Shaw


Capitalism and Prosperity

Capitalism is the best system, but is that what we have in America?

When we look back in history, we see that Capitalism is closely linked to prosperity. Sadly, Socialism (a managed economy) always brings with it poverty. The propaganda in favor of socialism notwithstanding, compare the standard of living in America (flawed as it is) with the low standard of living in Europe and the even worse standard of living in Mexico and other Third World countries. There is a reason for this?

“Sally”, goes to work and produces product, and if she is effective, she is able to produce more than she needs for her own consumption; in other words she has some spare-change. In a Socialist Country she gives this money to the State, in a Capitalistic country she either invests her spare money in a friend’s business, a 401K for her retirement, or she puts the surplus in a bank. She has her own account in the bank and to that degree she still has some cause and control over her surplus, in other words she doesn’t owe it to anybody.  In a capitalistic system even the bank she uses to store her money is not owned by the State. In our little story here, a story that will be woven over several related posts, our banker is called “Dick”

Why should Capitalism bring prosperity when socialism brings poverty?

Hercules and the World

It is in the nature of man to work hard for private property (wealth)  It is also in the nature of man to like the game; working men and women thrive on competition.

Both Sally and Tom work in a canteen in a big hospital. She is a cashier in the food court and he is a cashier in the Canteen Retail Store. Both work under the Canteen Chief who has only one assistant who is about to retire. Both Sally and Tom want this post, so here is a healthy scarcity and some healthy competition. This is not a bad thing for both wanting that job motivates them. In fact Sally is quite determined to prove that as a woman she is as good as or better than Tom!  It is true that both Tom and Sally want to advance, yet only one of them will promote to assistant with better prospects and a better salary and better opportunities for the future.

If it comes to pass that Tom likes the good life and goofs off, yet Sally puts in extra diligence and works long hours efficiently; and Sally, although a woman, is better liked by the other workers and goes out of her way to help the Canteen Chief whenever she can, she will in time get the  job she wants   So as Sally promotes and as she begins to earn a surplus, she invests this in Dick’s bank. In a capitalistic economy she is also free to choose her bank

Free competition is the freedom to produce, and the freedom to trade what one has produced with whomsoever one chooses in the pursuit of happiness.

A different man, (call him “Harry”) is an effective entrepreneur and he starts a furniture company, expanding his small business to where he and his workers reach maximum efficiency. He will need new materials, new machinery, and more personnel if he wanted to take his business to the next, higher level. Going from small, to a medium sized or big business requires capital. Seeing his need, Dick the banker goes to Harry and he says “Hey there, Harry, I have got this money, I got this money from Sally and what am I to do with it?” He forgets conveniently that it isn’t really his money, that it really still belongs to Sally who entrusted him with its safe-keeping.

“Ah, “says Harry, “If I can just use ‘your’ money for a little while, I could really make it worth your while.” Harry also makes the mistake of thinking the money belongs to Dick, for after all possession is nine tenths of the law.  So Dick and Harry enter into a financial transaction, which defines how much is loaned and when the loan will be repaid  This is a good transaction, well it is good if Dick is honorable and shares some of the gains with Sally, whose money it is.

Sally was the initial good producer, and prosperity comes to a community when producers are rewarded. But this trade between Dick and Harry, it is a good thing, for it enables Harry to buy more machinery and employ more workers.  If he manages his enterprise efficiently, everybody wins.

Capitalism has been known to function more efficiently than socialism?  This is because free men left to their own best interests without interference, are able to adapt to local and cultural changes. State-owned economies are cumbersome, they get top heavy and unwieldy, and so they slow things down. In a capitalistic economy creative men are able to see a need and have the smarts to fill it, and to fill it quickly. This was true for both Dick and Harry in our example. It was also true of Sally. True capitalism is dynamic, it is fast and it is sensitive to change.

Contrary to the black propaganda, Capitalism is also fair, for the free market is able to organize a billion economic decisions; how much a worker should be paid, how much inventory a company should carry, who should get product, and what new technology the firm should get, it organizes an incredible amount of complexity The amazing thing is that Capitalism’s price mechanism sorts it all out. The wonder of a dynamic capitalistic economy is that because creativity is rewarded, there is always an abundance of new solutions, new ideas, and new inventions. It works, it works efficiently and the community is rewarded with abundance.

Let’s take out our magnifying glass and newly examine how it works: Harry’s furniture factory gets bigger and bigger until he saturates the local market. There comes a time when most people in his local community own his cabinets, chairs, beds and tables. This can be a problem, giving him three choices. He can widen his reach and export his furniture to other counties and/or even ship out to other countries, but this will eat into his profits. A better solution would be to use his knowledge, his expertise, his people and his factory to create something else, a new product but one closely related to his first successful product   In a free economy he can use his smarts and his ingenuity to make a new product, where he can use the machinery and people he already has. In this way the community is enriched with more product selection.

Harry has a third choice but it is an unethical one. He could ask the state or government to protect his enterprise, or protect his workers or bail out the activity after he allowed it to get too big and unwieldy. This is bad news for the tax-payer who will have to pitch in to subsidize what is essentially inefficiency, non-production and a rigid system..

God coin sinking

End of Capitalism

In a socialistic system we have seen this happen, even in a quasi socialistic system the dice is loaded. One spots a “managed” economy (and the resultant onset of poverty) by the weighted dice, the irrational regulations and the enforced hidden agenda, by the crony capitalism. .

Those who advocate socialism or state intervention always point to the inequities in a free capitalistic society. What they don’t see is that these very inequities show that the system has already been tampered with.  It can get so far South that the only way to fix it is to reconfigure the full fundamentals of the economy.

The enemies of Capitalism are:

  • Big, Bad Banking
  • Crony Capitalism
  • Corrupt Corporatism
  • Corrupt Education
  • An inept public sector
  • Keynesian Economics (Quantitative Easing)
  • Mismanaged Tech Advances
  • Communism
  • International Socialism

You may be surprised to find the biggest enemy of Capitalism lies in the area of Justice whose job it is to police out the corruption.  Grandma believes that this went wrong just after Lincoln was assassinated. Surprised? Stay tuned and all will be explained.

It is the force of government that tells Sally she HAS to pay taxes and that she HAS to give all her spare money to the government. It is the force of government that tells Harry that he, too, MUST pay a hefty corporate tax and that he HAS to pay all the medical bills of his employees, and moreover provide a safety net of welfare for his workers, but also for the nation. He is also forced to do the work of government collecting the sales tax and other taxes when he could be working on promotion and production for his own company. Government forces him to do this work.

Sadly Harry knows that he (as a small business) cannot do all this and still compete with those from across the border. He is being unfairly squeezed.  So he goes out of business and another small business has been FORCED to close its doors

Government is force, and like fire it can be a force for good or for evil. Government is necessary for it keeps things on an even keel; government (OR JUSTICE) does have the job of playing umpire. Not all regulations are bad.

Our elected officers have to come up to understanding our system and knowing that it does bring prosperity, that capitalism is the only proven system that does in fact bring prosperity. We (the people) do not want this poverty that an inept (corrupt) government has forced upon us. So what is it that we can we do? There is always something can be done about it.

Like Grandma each and every one of us can take the time to understand the system for only then can we honestly evaluate and elect responsible leaders in 2014.

In understanding lies our strength.

Quote for the week:

The inherent vice of capitalism is the unequal sharing of blessings;
the inherent virtue of socialism is the equal sharing of miseries.

Winston Churchill

(from Grandma)

Grandma asks you to support all efforts to Audit the FEDExcerpt from “Politics IOU” by Lynn Verhoeff