Busted: Bankers and The Global Economy

June 9, 2008

Banks Take Profit on Interest

The Federal Reserve has aggressively cut interest rates. The economy is largely stagnant and jobs are disappearing into the mist. On the mortgage front, large quantities of homes remain unsold. Under normal circumstances, one would assume that mortgage rates would already be on floor to attract qualified home buyers. That is simply not the case.

One reason is that many large mortgage brokers went out of business. They could no longer find investors to buy their loans and fund business operations. The number of mortgage lenders is much smaller than it has been in recent years, compounded by the fact that billions of dollars in liquidity have vanished into thin air.

Foreclosures and delinquencies are held to be quite high in the financial market and lenders are frightened by the prospect. The general belief is that inflation is the demon that the U.S. economy faces, which will cause the Fed to raise interest rates. The real problem that this economy has is deflation of the national currency, the dollar. The Federal Reserve has issued so much credit and printed so many dollars that the global market is awash with them.

A dollar doesn’t go as far as it did a year ago and the lack of buying power shows across the board in higher fuel costs, food expenses and falling capital investment prices. Instead of learning new investment techniques, investors are going overseas to invest. Even investment bankers are opening up a new stock exchange in Europe, since the euro is solid right now. The opportunity for money making overseas borders on legendary.

U.S. banks have been in such a bad way that they are not passing on any savings to customers in an effort to hold the bottom line. As a result, favorable rates from the Fed or lower costs are being absorbed by the banks and not passed on with lower consumer costs. In fact, the specter of substantial inflation is more real than is recognized, which in reality is holding up bank lending rates. However, this ‘possibility’ is readily ignored. The U.S. government and the Federal Reserve still maintain to the public that the U.S. inflation rate is holding steady at 3%. The media goes along with the charade even though the evidence is clear. The appearance is that the nation’s economists have forgotten what inflation really is or how it is measured. That is how America keeps its national confidence: through lies and deceit.

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