Corrupt  Banking destroys Capitalism and Prosperity

Is the corrupt system that we have sustainable?

greed

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 financiers all over teh world would never agree.  And why not? Because they have injected all sorts of unusual  interruptions to the business cycle to give themselves an unfair advantage. Don’t be deceived by these extremes put forward by the Crony Capitalists.(Republican and Democrats alike) for this is actually one group and not two, and the divide is artificial. Liberty Lovers define these politicians as Statists. Statists can also be defined as those who want to keep and protect the (corrupt) status-quo. Goldman Sachs and AIG and cronies (assholes in greed) earning big bonuses in a casino designed by bankers for 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 to educate and spread the word?  If you care, your hat is to make what is really going on real to voters in 2016. This is a critical year. Grandma believes that the world is on a tipping point and the outcome of the next election, 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. .

The first corruption occurred when 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 corrupt bankster, 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 is being corrupted by the force of government and we no longer have true 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. 

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 way of life, our liberty 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.  Investors should profit when they contribute to growing the economy and creating jobs. 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.

They do not make anything.

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.

Sally is well rewarded by an honest bank for her industry and thrift. She uses her surplus to buy a house and her spending as she decorates keeps several other small businesses afloat. She even buys furniture from Harry.

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. After all Small Business is the largest employer of all. 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.

And so the market grows and the nation gets prosperous.

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

 

lynnblueovalAbout the Author

Lynn Verhoeff (Grandma Thunder) has been writing for twenty years.  She has published two books, “Politics IOU” and “Magic Money” both on Kindle.

You can read more posts at www.grandmathunder.com