3 years, 2 months ago
The economy is "in the tank" now and most people blame it on the banks. Could a new bank without debt be started privately?
The truth is, you can take three sides to this economic crisis in my opinion.
1)You can say that it is the people's fault for taking out loans that they knew they could not pay back.
2)You can say that it is the bank's fault for allowing people who most likely could not pay back loans, to take out loans.
3)You can say that it is the government's fault for not governing the banks strongly enough; the government should have seen this coming and clamped down.
The problems with the banks right now is that people keep defaulting on their loans and until this defaulting stops, the economy is going to keep falling. But for the people that do have the means to pay back loans and they need to take out a loan, there is must less trust going around and those big banks are much less likely to loan you money.
The Solution? Why can't people make their own banks to start without any debt and they will be watching who they are loaning to so closely, that nothing bad can happen (in theory.) All you need is 10 million dollars and the patience to complete all of that paperwork.
So my questions are:
1) Whose fault do you think it is out of the three choices that I first stated?
2) Do you think that starting a private bank would be a prudent decision?
1)You can say that it is the people's fault for taking out loans that they knew they could not pay back.
2)You can say that it is the bank's fault for allowing people who most likely could not pay back loans, to take out loans.
3)You can say that it is the government's fault for not governing the banks strongly enough; the government should have seen this coming and clamped down.
The problems with the banks right now is that people keep defaulting on their loans and until this defaulting stops, the economy is going to keep falling. But for the people that do have the means to pay back loans and they need to take out a loan, there is must less trust going around and those big banks are much less likely to loan you money.
The Solution? Why can't people make their own banks to start without any debt and they will be watching who they are loaning to so closely, that nothing bad can happen (in theory.) All you need is 10 million dollars and the patience to complete all of that paperwork.
So my questions are:
1) Whose fault do you think it is out of the three choices that I first stated?
2) Do you think that starting a private bank would be a prudent decision?
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M$2 Answers
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In my opinion it’s everyone’s- but if we have to point fingers I’d say it’s the banks fault. Let’s put it this way, the Government can make a law stating the speed limit of a road is 75 MPH, but that doesn’t mean that drivers have to go the speed limit. They could go bellow the speed limit if they chose too.
Banks were given the opportunity to borrow from the Federal Reserve in order to loan out more money. Contrary to popular belief, banks only need a 1 to 20 ratio in order to loan out money. So if they have one dollar in a savings account they can loan out $20. At a first glance that doesn’t make sense, until you think about it…
When you take a loan from a bank, most often they type in the amount of the loan into an account and then they hand you the check book. How to Profit from the Next Great Depression says, “The automatic loan you can get through the check-guarantee provision on your checking account rarely comes as cash. Instead you write you checks against that legal overdraft in order to pay bills.”
The fact that we don’t take cash, allows banks to loan out money that doesn’t actually exist. It worked for a while (and maybe it’s still working… depends on who you ask.) until banks started loaning out money that wouldn’t capitalize.
Look at it this way- Banks will loan out money to help you buy that big screen TV. Most people are too naïve to realize that the minimum payment combined with the interest rate will require them to pay for months- if not years- on a TV. By the time all is said and done they will have paid enough in interest to buy two, sometimes even three TVs. Of course it’s not a problem, if that’s what they chose to do- but money spent on paying for a TV over and over again, means they don’t have money for other things they want and sometimes even the things they need. So they go out and get another loan, or possibly a credit card to help fund their life style.
The purpose of a loan is to increase productivity, not to buy a big screen TV. If you get a loan to buy you a car that can get you to a better job, with better pay, then it might be worth it. That way your increase in income helps you pay off your loan as well as the interest. The other time that a loan should be used is when there is collateral involved. Although it’s a bit more risqué, you could use a loan to purchase a piece of property. It’s true that the value of property can go up and down, but rarely will a piece of property go worthless. (This is all just my opinion on sound money and sound money practice based on what I've learned in Economics.)
The problem is that banks, and credit cards started giving out loans for purchases that won’t accumulate wealth. Yes people have forgotten how to save up for the things they want in life, but that doesn’t mean that the banks have to loan them money for those purchases.
I think that starting a private bank that does not loan out money that doesn’t exist is a very bad idea right now. For one thing, you won’t be able to keep up with other banks who loan out every cent they have and then some. Just because your bank has sound money does not mean it won’t be affected by the inflation of money brought upon by other banks. And finally, the FDIC just cracked down on a bank for, “Not making enough crappy loans.” (see the final link.) The last thing you’d want to get messed up in right now would be banking. It might be best to wait it out and see if our country goes back to sound money purchases.
How to Profit from the Next Great Depression. Written by Dr. John L. King. Published in 1988.
Macroeconomics, 7th Edition by Colander, David
http://video.google.com/videoplay?docid=-9050474362583451279 *This video is worth watching if you have the time. Although it did repeat a lot of what my economics book said and the book by John King.
http://sayanythingblog.com/readers/entry/bank_faulted_for_not_making_enough_crappy_loans/
Banks were given the opportunity to borrow from the Federal Reserve in order to loan out more money. Contrary to popular belief, banks only need a 1 to 20 ratio in order to loan out money. So if they have one dollar in a savings account they can loan out $20. At a first glance that doesn’t make sense, until you think about it…
When you take a loan from a bank, most often they type in the amount of the loan into an account and then they hand you the check book. How to Profit from the Next Great Depression says, “The automatic loan you can get through the check-guarantee provision on your checking account rarely comes as cash. Instead you write you checks against that legal overdraft in order to pay bills.”
The fact that we don’t take cash, allows banks to loan out money that doesn’t actually exist. It worked for a while (and maybe it’s still working… depends on who you ask.) until banks started loaning out money that wouldn’t capitalize.
Look at it this way- Banks will loan out money to help you buy that big screen TV. Most people are too naïve to realize that the minimum payment combined with the interest rate will require them to pay for months- if not years- on a TV. By the time all is said and done they will have paid enough in interest to buy two, sometimes even three TVs. Of course it’s not a problem, if that’s what they chose to do- but money spent on paying for a TV over and over again, means they don’t have money for other things they want and sometimes even the things they need. So they go out and get another loan, or possibly a credit card to help fund their life style.
The purpose of a loan is to increase productivity, not to buy a big screen TV. If you get a loan to buy you a car that can get you to a better job, with better pay, then it might be worth it. That way your increase in income helps you pay off your loan as well as the interest. The other time that a loan should be used is when there is collateral involved. Although it’s a bit more risqué, you could use a loan to purchase a piece of property. It’s true that the value of property can go up and down, but rarely will a piece of property go worthless. (This is all just my opinion on sound money and sound money practice based on what I've learned in Economics.)
The problem is that banks, and credit cards started giving out loans for purchases that won’t accumulate wealth. Yes people have forgotten how to save up for the things they want in life, but that doesn’t mean that the banks have to loan them money for those purchases.
I think that starting a private bank that does not loan out money that doesn’t exist is a very bad idea right now. For one thing, you won’t be able to keep up with other banks who loan out every cent they have and then some. Just because your bank has sound money does not mean it won’t be affected by the inflation of money brought upon by other banks. And finally, the FDIC just cracked down on a bank for, “Not making enough crappy loans.” (see the final link.) The last thing you’d want to get messed up in right now would be banking. It might be best to wait it out and see if our country goes back to sound money purchases.
How to Profit from the Next Great Depression. Written by Dr. John L. King. Published in 1988.
Macroeconomics, 7th Edition by Colander, David
http://video.google.com/videoplay?docid=-9050474362583451279 *This video is worth watching if you have the time. Although it did repeat a lot of what my economics book said and the book by John King.
http://sayanythingblog.com/readers/entry/bank_faulted_for_not_making_enough_crappy_loans/
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M$Report Abuse
1. I think that it is a shared responsibility/fault. There were people that took out loans that the knew they couldn't afford. There were people that took out loans that they could afford, but the housing prices were inflated and now owe more than their home is worth. There were banks/loan officers that engaged in predatory lending and took advantage of the ignorance of people getting loans. The whole idea of credit swaps was based on faulty math. Lastly, the government is at fault for failing to regulate the industry properly and failing to enforce the regulations that they had on the books. No company should be able to get so big that it 'can't fail'.
2. At this point if you had the capital to start a private bank that could lend money, you would probably be in the catbird's seat. You would be one of the very few entities lending.
2. At this point if you had the capital to start a private bank that could lend money, you would probably be in the catbird's seat. You would be one of the very few entities lending.
You can leave an optional "tip" with Mahalo's virtual currency, Mahalo Dollars. If you are asking a difficult question that might require some research, or if you'd like a wide variety of feedback, a higher tip often leads to more answers to your question.
M$
