Stock market is a zero sum as long as stocks don't pay dividend. Participants are placing bets against each other. For example, if total money supply is 50 trillion, and we decide to invest all of this money in stocks, the market will go up. We will marvel at how high the stocks are. And when we sell them all to get our money back, we are going to get back exactly 50 trillion. But it will be redistributed between participants. Some will get more than they put in, some will get less. Not a penny more or less. Stocks are the place to be when the money supply is inflating, not when it is deflating.
Many baby boomers have stocks. When they need to sell, they need to find buyers. Given that the population's worker/retiree ratio is changing with more and more people retiring, the numbers of buyers will fall short. There won't be enough demand. Thus when an entire generation of boomers are selling, they are not going to get the prices they hope for.
We can demonstrate this with a simplified example.
Mary has 10K in the stock market (or let's say she has a restaurant). Joe has none. Adam has none. Joe offers to buy it for 10K because he thinks the restaurant will do well, Mary sells. Favorable things happen and Adam thinks he wants to buy the restaurant for 20K from Joe. Joe sells. Then things do not go as good as Adam hoped. He agrees to sell it to Mary for 10K.
At the end, stocks are priced at 10K only because people agreed on it. As they went up to 20K and then down to 10K, stocks did not generate new money. Only people agreed to buy sell them at different valuations and they used their existing money supply.
At the end Mary did not loose or gain. Joe gained 10K. Adam lost 10K.
DOW can trade at 20K tomorrow and it is not going to make a difference on how much money our economy has. It is not going make a recovery. It is not going to make it easier to have a job. It is not going to help us import stuff and enjoy a better life style. This is because when it is at 20K, 1 American will sell at that price and will feel rich, and 1 American will buy at that price and will hope to get richer. But at aggregate level, the gain on total economy is zero. Only Adam paid to Joe. Total money of Adam+Joe remains the same no matter what the stock price is.
So, are we at 10K or are we at 20K valuations now? Is it time to buy stocks? Here is the big picture:
http://www.tradingstocks.net/html/near_bottom.html
Friday, March 19, 2010
Thursday, March 11, 2010
How Free Markets Sank the US Economy
Here is a good article that describes how we got into this mess:
http://finance.yahoo.com/news/How-free-markets-sank-the-US-rb-3640236057.html
The true cause of the crash is not the free markets. The true cause is decades of government intervention in the form of FDIC, FED, Fannie Mae, Ginnie Mae and other government programs coupled with a bankrupt monetary system that demands usury and uses fractional reserve banking.
Here how banks create money out of thin air, and along the process create a debt bubble that is impossible to pay back and certain to cause a deflationary crash:
http://www.tradingstocks.net/html/banks_create_money.html
What about FDIC? FDIC is a broke corporation that cannot possibly guarantee all deposits. Yet they claim to do so. This claim blinds the depositors and removes any worry about their banks. This mentality is the cause of the collapse of the banking system.
If the bank deposits were not insured, then depositors would questions the bank actions. Banks would not get too big to fail while at the same time take excessive risk. Depositors worry would keep a check on bankers' greed. There would be a whole new breed of banks who just keep your money safe, with minimal or no risk and not pay interest at all.
But due to FDIC, people threw caution to the wind, and nobody questioned the bank. They blindly deposited their money thinking that FDIC guarantees it. Now FDIC is broke:
http://www.tradingstocks.net/html/fdic_insurance.html
Thus a government intervention in the form of FDIC ends up causing the exact opposite of it's intended result. Now the banks are bankrupt, they are insolvent due to their risky bets and the tax payer has to clean it up. Here is a free 13 page report that details the problem with the banks and their wrong portfolio decisions that lasted decades:
http://www.tradingstocks.net/html/2010_stock_market_forecast.html
What about FED? FED made credit easy, and America borrowed from the future. FED's easy money policy gives the wrong signal to the markets. Interest rates should be left to the markets. FED claims that it regulates the markets. But if we look at 20th century, we had a more volatile economy and stock market compared to 19th century when the FED did not exist! Real growth during 19th century was higher compared to 20th century. So what did FED really do?
In 19th century, we had periods where we had beneficial deflation. As productivity was increased, goods and services became cheaper. But FED openly says they want 2% inflation. This makes it easier to borrow (so that you can pay back with inflated dollars). People cannot save to buy a home, savings are reduced and spending is increased. This is not a healthy system. But FED wants this in order to channel wealth to the bankers. Without inflation, people would have the option to save and bankers would get a smaller share of the wealth with their usury.
What other harm does this FED policy of easy money do? As debt inflates, it becomes a monster that has to feed on itself. To pay old debt, new debt must increase exponentially. Otherwise, money supply, which is credit, is not enough to pay existing principal + interest. Here it is:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
FED is a government intervention into the free market rates. Without FED, as the debt bubble grew, rates would go up and it would provide an automatic check on further debt expansion. Debt would deflate quickly to sustainable levels with frequent deflations, thus we would have smaller recessions instead of huge bubbles and depressions that follow them.
Now that FED has messed with the economy for decades, instead of another recession, we have to go through a major depression for the mess to be cleaned and debt to deflate to a sustainable multiple of GDP.
All of this is the result of government intervention. We need small government, and free markets. We don't have that.
http://finance.yahoo.com/news/How-free-markets-sank-the-US-rb-3640236057.html
The true cause of the crash is not the free markets. The true cause is decades of government intervention in the form of FDIC, FED, Fannie Mae, Ginnie Mae and other government programs coupled with a bankrupt monetary system that demands usury and uses fractional reserve banking.
Here how banks create money out of thin air, and along the process create a debt bubble that is impossible to pay back and certain to cause a deflationary crash:
http://www.tradingstocks.net/html/banks_create_money.html
What about FDIC? FDIC is a broke corporation that cannot possibly guarantee all deposits. Yet they claim to do so. This claim blinds the depositors and removes any worry about their banks. This mentality is the cause of the collapse of the banking system.
If the bank deposits were not insured, then depositors would questions the bank actions. Banks would not get too big to fail while at the same time take excessive risk. Depositors worry would keep a check on bankers' greed. There would be a whole new breed of banks who just keep your money safe, with minimal or no risk and not pay interest at all.
But due to FDIC, people threw caution to the wind, and nobody questioned the bank. They blindly deposited their money thinking that FDIC guarantees it. Now FDIC is broke:
http://www.tradingstocks.net/html/fdic_insurance.html
Thus a government intervention in the form of FDIC ends up causing the exact opposite of it's intended result. Now the banks are bankrupt, they are insolvent due to their risky bets and the tax payer has to clean it up. Here is a free 13 page report that details the problem with the banks and their wrong portfolio decisions that lasted decades:
http://www.tradingstocks.net/html/2010_stock_market_forecast.html
What about FED? FED made credit easy, and America borrowed from the future. FED's easy money policy gives the wrong signal to the markets. Interest rates should be left to the markets. FED claims that it regulates the markets. But if we look at 20th century, we had a more volatile economy and stock market compared to 19th century when the FED did not exist! Real growth during 19th century was higher compared to 20th century. So what did FED really do?
In 19th century, we had periods where we had beneficial deflation. As productivity was increased, goods and services became cheaper. But FED openly says they want 2% inflation. This makes it easier to borrow (so that you can pay back with inflated dollars). People cannot save to buy a home, savings are reduced and spending is increased. This is not a healthy system. But FED wants this in order to channel wealth to the bankers. Without inflation, people would have the option to save and bankers would get a smaller share of the wealth with their usury.
What other harm does this FED policy of easy money do? As debt inflates, it becomes a monster that has to feed on itself. To pay old debt, new debt must increase exponentially. Otherwise, money supply, which is credit, is not enough to pay existing principal + interest. Here it is:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
FED is a government intervention into the free market rates. Without FED, as the debt bubble grew, rates would go up and it would provide an automatic check on further debt expansion. Debt would deflate quickly to sustainable levels with frequent deflations, thus we would have smaller recessions instead of huge bubbles and depressions that follow them.
Now that FED has messed with the economy for decades, instead of another recession, we have to go through a major depression for the mess to be cleaned and debt to deflate to a sustainable multiple of GDP.
All of this is the result of government intervention. We need small government, and free markets. We don't have that.
Why we cannot monetize debt?
Here is an article that explains why the US cannot inflate its way out of debt:
http://money.cnn.com/2010/03/10/news/economy/inflation_debt/index.htm
It mentions valid reasons such as government obligations that go up with inflation. But it does not tell the simple truth:
We cannot monetize debt, because it is dishonest to do so.
Who would want to lend money in US dollars if they know they may get back worthless dollars? Once the credibility of the US dollars dissapears, it stops functioning as a reserve currency. People will not hold it for the long term. Similarly, they will not lend money in US dollars for the long term. What will that do?
Long term treasuries will cease to exist! US government will not be able to borrow in US dollars. This will drive up the cost of borrowing. We will have to pay higher real interest rates.
Credit dependent sectors such as housing will take a hit because lenders will not lend money for 30 years or 15 years. Mortgage rates will go sky high. This will have immediate deflationary effects on home prices. After the prices fall, they will NOT go up with inflation until they are low enough for cash down purchases. Once it becomes a cash market, bankers will be out of the loop. That is not what the FED wants. FED wants American's to be the slave of their mortgage for 30 years, practically a lifetime so that we work to sustain the lifestyle of bankers who create money out of thin air and give it to us:
http://www.tradingstocks.net/html/banks_create_money.html
This is why FED's main role has been to make credit expansion easy. The try to create the conditions where credit markets function properly. Inflating debt by the printing press at excessive levels goes against this goal.
Make no mistake, FED is printing money as seen in St. Louis FED charts:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
But this printed money supply barely compensates for the deflating credit that is again shown in charts in above link, at least for now inflation is in check.
There is also the FED's motive to keep bankers strong. They have given them much financial support. As the rest of the population goes bankrupt, unemployed, wall street is enjoying record bonus. How is this related to debt monetaziation? Here is how:
If FED prints too much money, then the value of credit expanded (the value of the money supply) will fall. Currently, the financial sector is getting record high portion of this money supply. If it's value falls, they will be the ones that will be hit hardest! That is why FED only inflates in favor of financial sector but not more than that. FED is fine with tax payer working a lifetime and paying high taxes that are used to save their bankers.
In other words, bankers are happy to get tax payer money during a deflationary crash! They are getting richer. Why would they want it to be changed? We will only monetize bankers' debt. Not your mortgage or mine.
http://money.cnn.com/2010/03/10/news/economy/inflation_debt/index.htm
It mentions valid reasons such as government obligations that go up with inflation. But it does not tell the simple truth:
We cannot monetize debt, because it is dishonest to do so.
Who would want to lend money in US dollars if they know they may get back worthless dollars? Once the credibility of the US dollars dissapears, it stops functioning as a reserve currency. People will not hold it for the long term. Similarly, they will not lend money in US dollars for the long term. What will that do?
Long term treasuries will cease to exist! US government will not be able to borrow in US dollars. This will drive up the cost of borrowing. We will have to pay higher real interest rates.
Credit dependent sectors such as housing will take a hit because lenders will not lend money for 30 years or 15 years. Mortgage rates will go sky high. This will have immediate deflationary effects on home prices. After the prices fall, they will NOT go up with inflation until they are low enough for cash down purchases. Once it becomes a cash market, bankers will be out of the loop. That is not what the FED wants. FED wants American's to be the slave of their mortgage for 30 years, practically a lifetime so that we work to sustain the lifestyle of bankers who create money out of thin air and give it to us:
http://www.tradingstocks.net/html/banks_create_money.html
This is why FED's main role has been to make credit expansion easy. The try to create the conditions where credit markets function properly. Inflating debt by the printing press at excessive levels goes against this goal.
Make no mistake, FED is printing money as seen in St. Louis FED charts:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
But this printed money supply barely compensates for the deflating credit that is again shown in charts in above link, at least for now inflation is in check.
There is also the FED's motive to keep bankers strong. They have given them much financial support. As the rest of the population goes bankrupt, unemployed, wall street is enjoying record bonus. How is this related to debt monetaziation? Here is how:
If FED prints too much money, then the value of credit expanded (the value of the money supply) will fall. Currently, the financial sector is getting record high portion of this money supply. If it's value falls, they will be the ones that will be hit hardest! That is why FED only inflates in favor of financial sector but not more than that. FED is fine with tax payer working a lifetime and paying high taxes that are used to save their bankers.
In other words, bankers are happy to get tax payer money during a deflationary crash! They are getting richer. Why would they want it to be changed? We will only monetize bankers' debt. Not your mortgage or mine.
Thursday, March 4, 2010
Robber Barons? Or Real Money - Gold
I read this article that talks about the golden age of Robber Barons: American industrial age from 1861 to 1901.
http://finance.yahoo.com/taxes/article/108963/bring-back-the-robber-barons
The article suggests that the market entrepreneurs find ways to create jobs that others, particularly politicians do not see.
1861 to 1901 was remarkable for something else. We had a sound money system that was based on gold. Entire world used gold, a relatively honest monetary system. If we look at the 19th century stock market charts, we see that the fluctuations measured in real money are less. The market seems to be more stable.
FED was created in 1913. After the FED was created, we had violent fluctuations in the markets. Great Depression era, 1929 to 1940s was huge fluctuation, down and up. Similarly 1970s, when measured in real money was a huge decline in stock prices, as bad as Great Depression. And since 1999, Gold-DOW has lost more than 80% and is becoming as bad as Great Depression. Here is Gold-DOW chart:
http://www.tradingstocks.net/html/gold_dow_vs_nominal_dow.html
During 1861 to 1901 period, we had beneficial price deflation because as productivity increased, price of goods and services have fallen where as life style has improved. This is the opposite of what we are having now. FED targets 2% inflation. Prices rise faster than wages and the life style of Americans are going down.
I think one can argue that a sound money system that better respects people's hard earned money encourages honest work, encourages entrepreneurship. On the contrary, an economy based on trading paper, making gambling bets and winning at others expense is doomed to fail, as mentioned here:
http://kondratieffwinter.blogspot.com/2010/02/death-of-capitalism.html
Thus, my point is that the society and the social mood at aggregate is responsible for picking one way or the other. By tolerating the FED, by allowing the banks to create money out of thin air:
http://www.tradingstocks.net/html/banks_create_money.html
and by trading paper instead of producing real value, by borrowing and investing on granite counter tops we enslave ourselves to the Barons of Wall Street. The real entrepreneur spirit will not flourish under these conditions.
It is not the Robber Barons who make things better. It is the social mood itself who creates the right conditions so that these Barons can come forward and succeed. Here is how the social mood drives the markets, the economy, politics and the culture:
http://www.tradingstocks.net/html/socionomics.html
According to socionomic theory, the cycles of social mood define the booms and busts in the economy. The market declines first as the social mood turns sour. This is why earnings are good at the market top and bad at the bottom.
Similarly, in the midst of bad news and earnings, as the social mood improves, the market starts to rally. Just like we did back in March 2009.
These fluctuations in social mood define whether Robber Barons will be back or not. Not the other way around. If the market starts selling of now, expect more job losses, more housing crash, terrible earnings. When things look the darkest, it will be the bottom, and we will start climbing out of the depression. Then we may have the Robber Barons appear again. But we have not seen that dark bottom yet:
http://www.tradingstocks.net/html/near_bottom.html
Ultimately, as part of the change, we need to overhaul our monetary system to use sound money that keeps it's value and respects the people's effort to earn it. We need to shrink the financial sector that lives off of commissions from the real economy. We cannot have 30% of the population shuffle money around and rely on the production of others to create value. Real economy cannot carry the interest burden that is being charged to sustain the life style of fat cat bankers. We need gold, we need deflation. We don't need the FED, we don't need the bankers. They are a burden on us to carry. Usury was forbidden for good reason.
http://finance.yahoo.com/taxes/article/108963/bring-back-the-robber-barons
The article suggests that the market entrepreneurs find ways to create jobs that others, particularly politicians do not see.
1861 to 1901 was remarkable for something else. We had a sound money system that was based on gold. Entire world used gold, a relatively honest monetary system. If we look at the 19th century stock market charts, we see that the fluctuations measured in real money are less. The market seems to be more stable.
FED was created in 1913. After the FED was created, we had violent fluctuations in the markets. Great Depression era, 1929 to 1940s was huge fluctuation, down and up. Similarly 1970s, when measured in real money was a huge decline in stock prices, as bad as Great Depression. And since 1999, Gold-DOW has lost more than 80% and is becoming as bad as Great Depression. Here is Gold-DOW chart:
http://www.tradingstocks.net/html/gold_dow_vs_nominal_dow.html
During 1861 to 1901 period, we had beneficial price deflation because as productivity increased, price of goods and services have fallen where as life style has improved. This is the opposite of what we are having now. FED targets 2% inflation. Prices rise faster than wages and the life style of Americans are going down.
I think one can argue that a sound money system that better respects people's hard earned money encourages honest work, encourages entrepreneurship. On the contrary, an economy based on trading paper, making gambling bets and winning at others expense is doomed to fail, as mentioned here:
http://kondratieffwinter.blogspot.com/2010/02/death-of-capitalism.html
Thus, my point is that the society and the social mood at aggregate is responsible for picking one way or the other. By tolerating the FED, by allowing the banks to create money out of thin air:
http://www.tradingstocks.net/html/banks_create_money.html
and by trading paper instead of producing real value, by borrowing and investing on granite counter tops we enslave ourselves to the Barons of Wall Street. The real entrepreneur spirit will not flourish under these conditions.
It is not the Robber Barons who make things better. It is the social mood itself who creates the right conditions so that these Barons can come forward and succeed. Here is how the social mood drives the markets, the economy, politics and the culture:
http://www.tradingstocks.net/html/socionomics.html
According to socionomic theory, the cycles of social mood define the booms and busts in the economy. The market declines first as the social mood turns sour. This is why earnings are good at the market top and bad at the bottom.
Similarly, in the midst of bad news and earnings, as the social mood improves, the market starts to rally. Just like we did back in March 2009.
These fluctuations in social mood define whether Robber Barons will be back or not. Not the other way around. If the market starts selling of now, expect more job losses, more housing crash, terrible earnings. When things look the darkest, it will be the bottom, and we will start climbing out of the depression. Then we may have the Robber Barons appear again. But we have not seen that dark bottom yet:
http://www.tradingstocks.net/html/near_bottom.html
Ultimately, as part of the change, we need to overhaul our monetary system to use sound money that keeps it's value and respects the people's effort to earn it. We need to shrink the financial sector that lives off of commissions from the real economy. We cannot have 30% of the population shuffle money around and rely on the production of others to create value. Real economy cannot carry the interest burden that is being charged to sustain the life style of fat cat bankers. We need gold, we need deflation. We don't need the FED, we don't need the bankers. They are a burden on us to carry. Usury was forbidden for good reason.
Monday, March 1, 2010
How do politicians lie?
I came across this article that talks about how the politicians lie:
http://finance.yahoo.com/expert/article/economist/225007
and my comments about it may end up being then the article itself so I will post them here.
I am going to list more lies now. My explanations need to be considered in light of the following fact:
Banks create money when we borrow:
http://www.tradingstocks.net/html/banks_create_money.html
QUESTION: Why does the government allow mortgage interest deduction from income tax?
Official Answers:
1. Home owners make good citizens.
2. It is American dream to own your home.
3. This makes homes more affordable.
Let us analyze these answers and make the truth known now:
1. Good citizens are able to afford homes, not other way around.
2. Is it American dream to be slave to your mortgage for 30 years?
3. This does NOT make homes more affordable. It makes homes more expensive. Here is why:
Due to easier borrowing costs, this makes the home prices go higher, because people race with each other to borrow more. At the end, the buyer pays more to the seller. In the process, bankers get a bigger share out of the home sales. What does this mean?? Some percent of the population lives off of commission and interest based financial services and the rest of us have to earn more to sustain THEIR life style. Banks create money out of thin air and give it out as mortgage. They then demand interest for it. Until you pay, bank owns the home, with the money it created out of thin air!
If mortgage was not available, then home prices would be much cheaper. Why? Because you would not have to pay for the lifestyle of a fat cat banker for 30 years!
Greenspan kept the rates lower. Did this make homes affordable? No. Bush wanted affordable housing for all Americans. Did we not get the greatest housing bubble in history? Yes.
The government wants the fat cat bankers to earn a lot of money. Those bankers elect who governs this country with the money they get from usury. Money talks in this democracy. This is why America wants democracy around the world, so that the power of their bankers and capitalist elite can reach all corners of the world. If they ask the politicians, they would say "Democracy is good for the people". It may be. But that is not the reason why they send our soldiers to fight for it.
Why did they allow sub-prime? They allowed sub-prime because if they did not, deflationary would have come sooner. Here is the underlying debt problem that causes deflation:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
For many decades FED made it easy to borrow. This is how US dollar was inflated. When we borrow, banks create money. This new money inflates the money supply. That punishes the savers such that it becomes very hard to buy your home cash down. This is what the FED and the government wants. That is FED targets 2% inflation. Why not target 0%??? 2% is low enough so that you don't rebel, but it is high enough that you cannot save to buy a home! If you were to save to buy your home, bankers would not make money. They would not have a 30 year claim on your earnings!
But they are running a ponzi scheme:
http://www.tradingstocks.net/html/housing_market_bubble_bust_cyc.html
That is because when the entire population owes money to the banks, the money supply is not enough to pay that debt. Thus the borrowing had to increase exponentially in order to pay principal + interest of old debt. They wanted the ponzi scheme to get bigger (too big to fail) and run longer so that their bankers could keep earning interest without creating real value. After we ran out of prime borrowers, they allowed sub-prime. So that more borrowers could be brought to the ponzi scheme. No 20% down was OK so that you could borrow the full amount! Liar loans were OK as long as you were willing to be a "Good Citizen, aka Home Owner". So that the total debt we owe to the banks could get even bigger with higher interest demand! When we ran out of sub-prime borrowers, deflationary crash started.
Then they called it too big to fail! Their bankers were too important to take a pay cut. They allowed Lehman bankruptcy to convince the congress to give them a blank check. And they used tax payer money to replace their lost income. They saved the banks, that are the cause of the entire collapse, at tax payer expense!
In order to sustain their ponzi scheme they now pay 8K home buyer credit essentially hoping that you will borrow to buy a home. This is again at tax payer expense. All of these corrupt practices favor only 1 group of people: The bankers. In order to better our quality of life the first thing we need to do is to shrink the financial sector! Free markets signaled that, but the government was not willing to listen.
Banks are holding us like a hostage of the money supply that they control. They create money at will! And we end up paying for it in good days and in bad days! Who are the banks to create money out of thin air? Who is the FED to print our money?? Why does the United States Treasury borrow from the FED?? Government should belong to the people and people should be able to print their own money!! If money supply is to be expanded via borrowing, interest shall be paid to the people, not this banker or that one!
It is not a coincidence that wall street and these bankers are getting their record bonus in the middle of this depression! All of that pay comes from Joe the plumber, George the computer programmer, Mary the factory worker.
This is a corrupt system. It is bankrupt from the beginning. Banks, by creating check book money out of thin air, are making impossible promises. When these promises come due, tax payer is asked to pay for it! This rotten system is going to crash with a big noise. Prepare for the day of reckoning. Here is why:
http://www.tradingstocks.net/html/prepare_for_market_crash.html
http://finance.yahoo.com/expert/article/economist/225007
and my comments about it may end up being then the article itself so I will post them here.
I am going to list more lies now. My explanations need to be considered in light of the following fact:
Banks create money when we borrow:
http://www.tradingstocks.net/html/banks_create_money.html
QUESTION: Why does the government allow mortgage interest deduction from income tax?
Official Answers:
1. Home owners make good citizens.
2. It is American dream to own your home.
3. This makes homes more affordable.
Let us analyze these answers and make the truth known now:
1. Good citizens are able to afford homes, not other way around.
2. Is it American dream to be slave to your mortgage for 30 years?
3. This does NOT make homes more affordable. It makes homes more expensive. Here is why:
Due to easier borrowing costs, this makes the home prices go higher, because people race with each other to borrow more. At the end, the buyer pays more to the seller. In the process, bankers get a bigger share out of the home sales. What does this mean?? Some percent of the population lives off of commission and interest based financial services and the rest of us have to earn more to sustain THEIR life style. Banks create money out of thin air and give it out as mortgage. They then demand interest for it. Until you pay, bank owns the home, with the money it created out of thin air!
If mortgage was not available, then home prices would be much cheaper. Why? Because you would not have to pay for the lifestyle of a fat cat banker for 30 years!
Greenspan kept the rates lower. Did this make homes affordable? No. Bush wanted affordable housing for all Americans. Did we not get the greatest housing bubble in history? Yes.
The government wants the fat cat bankers to earn a lot of money. Those bankers elect who governs this country with the money they get from usury. Money talks in this democracy. This is why America wants democracy around the world, so that the power of their bankers and capitalist elite can reach all corners of the world. If they ask the politicians, they would say "Democracy is good for the people". It may be. But that is not the reason why they send our soldiers to fight for it.
Why did they allow sub-prime? They allowed sub-prime because if they did not, deflationary would have come sooner. Here is the underlying debt problem that causes deflation:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
For many decades FED made it easy to borrow. This is how US dollar was inflated. When we borrow, banks create money. This new money inflates the money supply. That punishes the savers such that it becomes very hard to buy your home cash down. This is what the FED and the government wants. That is FED targets 2% inflation. Why not target 0%??? 2% is low enough so that you don't rebel, but it is high enough that you cannot save to buy a home! If you were to save to buy your home, bankers would not make money. They would not have a 30 year claim on your earnings!
But they are running a ponzi scheme:
http://www.tradingstocks.net/html/housing_market_bubble_bust_cyc.html
That is because when the entire population owes money to the banks, the money supply is not enough to pay that debt. Thus the borrowing had to increase exponentially in order to pay principal + interest of old debt. They wanted the ponzi scheme to get bigger (too big to fail) and run longer so that their bankers could keep earning interest without creating real value. After we ran out of prime borrowers, they allowed sub-prime. So that more borrowers could be brought to the ponzi scheme. No 20% down was OK so that you could borrow the full amount! Liar loans were OK as long as you were willing to be a "Good Citizen, aka Home Owner". So that the total debt we owe to the banks could get even bigger with higher interest demand! When we ran out of sub-prime borrowers, deflationary crash started.
Then they called it too big to fail! Their bankers were too important to take a pay cut. They allowed Lehman bankruptcy to convince the congress to give them a blank check. And they used tax payer money to replace their lost income. They saved the banks, that are the cause of the entire collapse, at tax payer expense!
In order to sustain their ponzi scheme they now pay 8K home buyer credit essentially hoping that you will borrow to buy a home. This is again at tax payer expense. All of these corrupt practices favor only 1 group of people: The bankers. In order to better our quality of life the first thing we need to do is to shrink the financial sector! Free markets signaled that, but the government was not willing to listen.
Banks are holding us like a hostage of the money supply that they control. They create money at will! And we end up paying for it in good days and in bad days! Who are the banks to create money out of thin air? Who is the FED to print our money?? Why does the United States Treasury borrow from the FED?? Government should belong to the people and people should be able to print their own money!! If money supply is to be expanded via borrowing, interest shall be paid to the people, not this banker or that one!
It is not a coincidence that wall street and these bankers are getting their record bonus in the middle of this depression! All of that pay comes from Joe the plumber, George the computer programmer, Mary the factory worker.
This is a corrupt system. It is bankrupt from the beginning. Banks, by creating check book money out of thin air, are making impossible promises. When these promises come due, tax payer is asked to pay for it! This rotten system is going to crash with a big noise. Prepare for the day of reckoning. Here is why:
http://www.tradingstocks.net/html/prepare_for_market_crash.html
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