The Bailout - Educating The Ignorant

[The Mask]

The US banking system, established by the Federal Reserve Act of 1913, works essentially like a

spring. When the Central Bank, the Federal Reserve, wishes to create new money, it simply does

so. There are no reserves to our money. The Fed then spends this money, usually to buy

Treasury Bonds from private owners of the bonds (more recently to bailout or help huge banks

buyout failing banks), which the sellers had purchased from the Treasury Department. These

bonds (and Treasury bills, TIPS and notes) were initially sold to the public to fund government

deficits. In our metaphor the money created by the Fed is the spring. The spring gets stretched in

the following manner.

Banks, privately-owned, are permitted to loan out 90% of this new Fed-created money once it is

deposited by the sellers of the bonds. That would not be a problem, except for the fact that the

borrowers almost always redeposit the money (or the people they pay with their loan proceeds

do). Once re-deposited, the banks can lend it out again. This re-loan, redeposit, re-loan,

redeposit, etc. scheme, authorized by the Federal Reserve Act of 1913, allows banks each time to

retain just 10% of the re-deposited loan proceeds as a reserve, ultimately allowing banks to lend

out 9 times the original amount deposited, and to charge interest on it as many times as it was

loaned. So instead of an interest rate of, for example, 6%, the banks may be collectively

receiving a total of 54% interest per year (6% x 9; usually it is somewhat less due to the lack of

qualified borrowers). Now you know why banks grow and prosper much more than other businesses,

that is, until they have stretched the spring to the maximum.

Once the economy is flooded with the bank-created money 9 times in excess of the money

originally created by the Fed, an expansion that increases the money supply, which reduces the

purchasing power of already-existing money (including wages and savings), interest rates begin

to drop (as there is more money to lend) and prices rise (inflation). The dollar begins to fall

relative to the money of other countries not in this same stage of money expansion. Money

begins to flow out of US Treasury bonds (due to lower interest rates and the lessening purchasing

power of the dollar due to inflation). Thus ends the expansionary or "boom" part of this artificial

"business cycle." To combat rising inflation and the falling dollar, the Fed begins raising interest

rates.

Then the spring of the economy - the money supply - having been stretched to the maximum,

begins its contraction, usually initiated by rising interest rates reaching a point that begins to

inhibit borrowing and also inflation. The economic "bust" part of the cycle begins. Loans

dwindle as interest rates rise and credit terms tighten. Various segments of the economy,

accustomed to easy credit, begin to contract due to higher interest rates; loans become harder to

get. Home prices fall, businesses begin to fail, bankruptcies increase. This "bust" part of the

cycle continues, and worsens, until inflation is "tamed," prices stabilize, and the dollar rises

relative to other currencies. Eventually, the higher interest rates begin to attract foreign money,

and the Treasury then is able to borrow what it needs at lower and lower interest rates. Interest

rates fall. The artificial cycle then begins anew.

This boom-bust economic cycle is totally unnecessary and is the fundamental cause of the

inherent instability in the US economy. It is due to too-rapid increases in the money supply due to

deficit spending and then the multiplier effect of fractional reserve banking (described above) and

to lenders greedy to take advantage of such a system that rewards lending with more and more

interest revenue; followed by a too-rapid contraction of the money supply (such as we are

experiencing now), necessary to combat the inflationary effects of the former phase, both the

direct result of the Federal Reserve Act of 1913. We urgently need to reform this system that

rewards greed and results in ever-increasing swings from boom-to-bust - destroying ordinary

businesses and farms in the process. We need to repeal or fundamentally reform the Federal

Reserve Act of 1913, and to replace it with a system that eliminates the ability of private banks to

"create" and multiply money as loans.

The major banks of this country - the ones the government is lending your money to, and from

which the Bailout Bill proposes to buy their bad assets (wouldn't you too like the opportunity to

sell off your bad investments to the government!), are busily swallowing up the banks in trouble

in this latest bust - one deeper because of more rapid prior monetary expansion and inflation. As

after all prior bust cycles, they will emerge larger and more powerful, and fewer. Wealth will be

even more concentrated under their control, which they will use in the next bust to further this

process, until eventually no one will own anything but the ability to borrow - to go deeper into

debt to banks than their neighbors. Not savings, but credit scores will determine the average

American's ability to engage in economic activity (such as buying a home or car). No one will

dare breathe a word against such power, concentrated in very few hands, and our republic will

end with a whimper.

The US Congress struggles with ignorance of the complex, bank-created system enacted in 1913. It

struggles with the money the bank PACs flood into the political system to defeat their critics and

elect their shills. It struggles with mass media owned or controlled by the banks, which seek to

stir up panic in the populace, to stampede Congress into bank-developed "solutions" that only

make the fundamental problems worse and increase their wealth. Based on history, the banks

will not fail to see-saw the economy and the markets to match their strategies for fooling the

public, and putting pressure on the Congress to do their will. But we must resist. We must hold

out for genuine reform - for repeal or fundamental reform of the Federal Reserve Act of 1913.

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

[flying]

http://www.themoneymasters.com/MM_bailout.pdf

In its entirety?

[glyph]

The OP can cut-and-paste with the best of them.

[Jimjim]

Yes, he should be citing sources and just giving a link for the majority of the info.

[teatree]

Democratic Congressman: Representatives Were Threatened With Martial Law In America Over Bailout Bill:

http://www.prisonplanet.com/democratic-con...ilout-bill.html

[Carib]

Democratic Congressman: Representatives Were Threatened With Martial Law In America Over Bailout Bill:

http://www.prisonplanet.com/democratic-con...ilout-bill.html

Is`nt democrazy a great thing??` Excuse me, mean democracy.

[LaoPo]

http://www.themoneymasters.com/MM_bailout.pdf

In its entirety?

Link doesn't open ?

If it has to be opened in a new window...too much trouble for most (and me)

LaoPo

[flying]

http://www.themoneymasters.com/MM_bailout.pdf

In its entirety?

Link doesn't open ?

If it has to be opened in a new window...too much trouble for most (and me)

LaoPo

No it seems to be a Thai visa thing

Has been happening all day. The redirect is not working

But if I cute & paste the links they work.

This is with all links I tried today on this forum.

I will try to drop a note to a mod.

Testing

Edited October 4, 2008 by flying

[Misty]

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

Hi Mask,

Which country has an existing system that operates in the way you propose the US's should, under the so-called Monetary Reform Act?

Thanks, Misty

[yabaaaa]

The US banking system, established by the Federal Reserve Act of 1913, works essentially like a

spring. When the Central Bank, the Federal Reserve, wishes to create new money, it simply does

so. There are no reserves to our money. The Fed then spends this money, usually to buy

Treasury Bonds from private owners of the bonds (more recently to bailout or help huge banks

buyout failing banks), which the sellers had purchased from the Treasury Department. These

bonds (and Treasury bills, TIPS and notes) were initially sold to the public to fund government

deficits. In our metaphor the money created by the Fed is the spring. The spring gets stretched in

the following manner.

Banks, privately-owned, are permitted to loan out 90% of this new Fed-created money once it is

deposited by the sellers of the bonds. That would not be a problem, except for the fact that the

borrowers almost always redeposit the money (or the people they pay with their loan proceeds

do). Once re-deposited, the banks can lend it out again. This re-loan, redeposit, re-loan,

redeposit, etc. scheme, authorized by the Federal Reserve Act of 1913, allows banks each time to

retain just 10% of the re-deposited loan proceeds as a reserve, ultimately allowing banks to lend

out 9 times the original amount deposited, and to charge interest on it as many times as it was

loaned. So instead of an interest rate of, for example, 6%, the banks may be collectively

receiving a total of 54% interest per year (6% x 9; usually it is somewhat less due to the lack of

qualified borrowers). Now you know why banks grow and prosper much more than other businesses,

that is, until they have stretched the spring to the maximum.

Once the economy is flooded with the bank-created money 9 times in excess of the money

originally created by the Fed, an expansion that increases the money supply, which reduces the

purchasing power of already-existing money (including wages and savings), interest rates begin

to drop (as there is more money to lend) and prices rise (inflation). The dollar begins to fall

relative to the money of other countries not in this same stage of money expansion. Money

begins to flow out of US Treasury bonds (due to lower interest rates and the lessening purchasing

power of the dollar due to inflation). Thus ends the expansionary or "boom" part of this artificial

"business cycle." To combat rising inflation and the falling dollar, the Fed begins raising interest

rates.

Then the spring of the economy - the money supply - having been stretched to the maximum,

begins its contraction, usually initiated by rising interest rates reaching a point that begins to

inhibit borrowing and also inflation. The economic "bust" part of the cycle begins. Loans

dwindle as interest rates rise and credit terms tighten. Various segments of the economy,

accustomed to easy credit, begin to contract due to higher interest rates; loans become harder to

get. Home prices fall, businesses begin to fail, bankruptcies increase. This "bust" part of the

cycle continues, and worsens, until inflation is "tamed," prices stabilize, and the dollar rises

relative to other currencies. Eventually, the higher interest rates begin to attract foreign money,

and the Treasury then is able to borrow what it needs at lower and lower interest rates. Interest

rates fall. The artificial cycle then begins anew.

This boom-bust economic cycle is totally unnecessary and is the fundamental cause of the

inherent instability in the US economy. It is due to too-rapid increases in the money supply due to

deficit spending and then the multiplier effect of fractional reserve banking (described above) and

to lenders greedy to take advantage of such a system that rewards lending with more and more

interest revenue; followed by a too-rapid contraction of the money supply (such as we are

experiencing now), necessary to combat the inflationary effects of the former phase, both the

direct result of the Federal Reserve Act of 1913. We urgently need to reform this system that

rewards greed and results in ever-increasing swings from boom-to-bust - destroying ordinary

businesses and farms in the process. We need to repeal or fundamentally reform the Federal

Reserve Act of 1913, and to replace it with a system that eliminates the ability of private banks to

"create" and multiply money as loans.

The major banks of this country - the ones the government is lending your money to, and from

which the Bailout Bill proposes to buy their bad assets (wouldn't you too like the opportunity to

sell off your bad investments to the government!), are busily swallowing up the banks in trouble

in this latest bust - one deeper because of more rapid prior monetary expansion and inflation. As

after all prior bust cycles, they will emerge larger and more powerful, and fewer. Wealth will be

even more concentrated under their control, which they will use in the next bust to further this

process, until eventually no one will own anything but the ability to borrow - to go deeper into

debt to banks than their neighbors. Not savings, but credit scores will determine the average

American's ability to engage in economic activity (such as buying a home or car). No one will

dare breathe a word against such power, concentrated in very few hands, and our republic will

end with a whimper.

The US Congress struggles with ignorance of the complex, bank-created system enacted in 1913. It

struggles with the money the bank PACs flood into the political system to defeat their critics and

elect their shills. It struggles with mass media owned or controlled by the banks, which seek to

stir up panic in the populace, to stampede Congress into bank-developed "solutions" that only

make the fundamental problems worse and increase their wealth. Based on history, the banks

will not fail to see-saw the economy and the markets to match their strategies for fooling the

public, and putting pressure on the Congress to do their will. But we must resist. We must hold

out for genuine reform - for repeal or fundamental reform of the Federal Reserve Act of 1913.

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

Would be nice to see it summed up in a few words for the even more simple like me

[The Mask]

I would have pasted the link but it wasnt working for some reason.

This piece is taken from the people who produced the moneymasters documentary. You can watch it for free on google video, just search for it.

Regards,

[The Mask]

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

Hi Mask,

Which country has an existing system that operates in the way you propose the US's should, under the so-called Monetary Reform Act?

Thanks, Misty

No country does because the central banks are controlled by the same international cartel who create the 'business cycle' for their own personal profit

[Naam]

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

Hi Mask,

Which country has an existing system that operates in the way you propose the US's should, under the so-called Monetary Reform Act?

No country does because the central banks are controlled by the same international cartel who create the 'business cycle' for their own personal profit

it's the Borg from the gamma quadrant who are creating all these problems. we Klingons are aware of this fact since a long time and apply adequate defensive tactics. any Borg who poses as Klingon (like G.W., Greenspan, Paulson or McCain pose as Americans) is easily decloaked with a device our scientists developed a few years ago. once decloaked we catch them with steel nets (kinda.. sort of), circumcise them and send them to our colony "New Hope" to mine Trilithium.

[The Mask]

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

Hi Mask,

Which country has an existing system that operates in the way you propose the US's should, under the so-called Monetary Reform Act?

No country does because the central banks are controlled by the same international cartel who create the 'business cycle' for their own personal profit

it's the Borg from the gamma quadrant who are creating all these problems. we Klingons are aware of this fact since a long time and apply adequate defensive tactics. any Borg who poses as Klingon (like G.W., Greenspan, Paulson or McCain pose as Americans) is easily decloaked with a device our scientists developed a few years ago. once decloaked we catch them with steel nets (kinda.. sort of), circumcise them and send them to our colony "New Hope" to mine Trilithium.

I know that being in Pattaya automatically qualifies you as brain damaged but you should really just sit in the corner and take your brain medicine. Commenting on things beyond your understanding is dangerous for your mental well being

[JimsKnight]

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

Hi Mask,

Which country has an existing system that operates in the way you propose the US's should, under the so-called Monetary Reform Act?

No country does because the central banks are controlled by the same international cartel who create the 'business cycle' for their own personal profit

it's the Borg from the gamma quadrant who are creating all these problems. we Klingons are aware of this fact since a long time and apply adequate defensive tactics. any Borg who poses as Klingon (like G.W., Greenspan, Paulson or McCain pose as Americans) is easily decloaked with a device our scientists developed a few years ago. once decloaked we catch them with steel nets (kinda.. sort of), circumcise them and send them to our colony "New Hope" to mine Trilithium.

I know that being in Pattaya automatically qualifies you as brain damaged but you should really just sit in the corner and take your brain medicine. Commenting on things beyond your understanding is dangerous for your mental well being

Get your panzer fired up Naam, this guys being a gimp.

[Naam]

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

Hi Mask,

Which country has an existing system that operates in the way you propose the US's should, under the so-called Monetary Reform Act?

No country does because the central banks are controlled by the same international cartel who create the 'business cycle' for their own personal profit

it's the Borg from the gamma quadrant who are creating all these problems. we Klingons are aware of this fact since a long time and apply adequate defensive tactics. any Borg who poses as Klingon (like G.W., Greenspan, Paulson or McCain pose as Americans) is easily decloaked with a device our scientists developed a few years ago. once decloaked we catch them with steel nets (kinda.. sort of), circumcise them and send them to our colony "New Hope" to mine Trilithium.

I know that being in Pattaya automatically qualifies you as brain damaged but you should really just sit in the corner and take your brain medicine. Commenting on things beyond your understanding is dangerous for your mental well being

Get your panzer fired up Naam, this guys being a gimp.

no need for panzers Honourable Knight. know-it-all guys who spread the gospel of the big global conspiracy come with a built-in selfdestruct mechanism because they expose themselves to ridicule.

significant for these chaps is that they spread assumptions, do not state facts but -when confronted- resort to cheap diversions like "being in Pattaya automatically qualifies you as brain damaged".

:D

[LaoPo]

......in the beginning I thought...Oh well...another boring thread, but I changed my mind:

LaoPo

[The Mask]

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

Hi Mask,

Which country has an existing system that operates in the way you propose the US's should, under the so-called Monetary Reform Act?

No country does because the central banks are controlled by the same international cartel who create the 'business cycle' for their own personal profit

it's the Borg from the gamma quadrant who are creating all these problems. we Klingons are aware of this fact since a long time and apply adequate defensive tactics. any Borg who poses as Klingon (like G.W., Greenspan, Paulson or McCain pose as Americans) is easily decloaked with a device our scientists developed a few years ago. once decloaked we catch them with steel nets (kinda.. sort of), circumcise them and send them to our colony "New Hope" to mine Trilithium.

I know that being in Pattaya automatically qualifies you as brain damaged but you should really just sit in the corner and take your brain medicine. Commenting on things beyond your understanding is dangerous for your mental well being

Get your panzer fired up Naam, this guys being a gimp.

no need for panzers Honourable Knight. know-it-all guys who spread the gospel of the big global conspiracy come with a built-in selfdestruct mechanism because they expose themselves to ridicule.

significant for these chaps is that they spread assumptions, do not state facts but -when confronted- resort to cheap diversions like "being in Pattaya automatically qualifies you as brain damaged".

:D

Your nonsensical babbling about Star Trek was a cheap diversionary tactic, to draw attention away from the fact that you actually have ZERO knowledge of the subject.

[innovator]

Naam: The ball is in your court.....we are all waiting for you to drop your Star Trek tactics and face The Mask directly with your financial knowledge.

Good luck.

Give us something useful this time, not just a movie script. Some of us really don't understand this topic and would like real information. It is not very useful for us to be reading about Captain Picard and his ventures, unless you can use these movie clips to help us to understand the truth and implications about the bailout.

Thanks.

[Naam]

1. Naam: The ball is in your court.....we are all waiting for you to drop your Star Trek tactics and face The Mask directly with your financial knowledge. Good luck.

2. Give us something useful this time

1. ball in my court? the little coward didn't even have the guts to explain his "brain damage" remark but kept on diverting by focussing on my "ZERO knowledge"

2. how can i give you anything useful on something that does not exist? moreover there is no financial knowledge required to judge

quote: "the central banks are controlled by the same international cartel who create the 'business cycle' for their own personal profit"

[The Mask]

1. Naam: The ball is in your court.....we are all waiting for you to drop your Star Trek tactics and face The Mask directly with your financial knowledge. Good luck.

2. Give us something useful this time

1. ball in my court? the little coward didn't even have the guts to explain his "brain damage" remark but kept on diverting by focussing on my "ZERO knowledge"

2. how can i give you anything useful on something that does not exist? moreover there is no financial knowledge required to judge

quote: "the central banks are controlled by the same international cartel who create the 'business cycle' for their own personal profit"

My goodness, you cannot even spell 'focusing', do I really need to qualify my statement about brain damage?

I would be happy to debate any point in the article, please just tell me what needs clarification.

[Naam]

It is not very useful for us to be reading about Captain Picard and his ventures, unless you can use these movie clips to help us to understand the truth and implications about the bailout.

it goes without saying that Captain Picard stories are not useful at all to explain the bailout and its implications. the Borg story was pointed at the "cartel which controls the central banks". the implications of the bail-out are not yet known and the same goes for the implications of "sub-slime" globally. all what we know presently is that we are facing a worldwide crisis which will most probably have a negative impact on all of us. anything beyond that i leave to prophets to explain. the only problem is that there are hundreds of prophets (more to come) with hundreds of different opinions and the old saying applies "opinions are like àrseholes, everybody got one!"

[Naam]

1. Naam: The ball is in your court.....we are all waiting for you to drop your Star Trek tactics and face The Mask directly with your financial knowledge. Good luck.

2. Give us something useful this time

1. ball in my court? the little coward didn't even have the guts to explain his "brain damage" remark but kept on diverting by focussing on my "ZERO knowledge"

2. how can i give you anything useful on something that does not exist? moreover there is no financial knowledge required to judge

quote: "the central banks are controlled by the same international cartel who create the 'business cycle' for their own personal profit"

My goodness, you cannot even spell 'focusing', do I really need to qualify my statement about brain damage?

I would be happy to debate any point in the article, please just tell me what needs clarification.

listen carefully my uneducated american friend who has (that's of course my personal opinion) graduated from a midwestern elementary school:

"focussing" is correct english whereas "focusing" is american slang. the same goes for labelling, cancelling, et al!

i freely admit that my english postings sometimes have typos or misspellings. that is quite normal for a person who speaks and writes fluently six languages and uses three of them on a day-to-day basis AND who studied english as a third language. my first language was of course klingon

the last petty and false remark disqualifies you as a person with whom (NOT who!) one can have a meaningful discussion.

and now back to the dark corner you came from! and no permission to wank just because nobody can see you there!

[Pakboong]

Any genuine reform of our monetary system must include two basic elements: fractional reserve lending (such as described

above) must be prohibited, and private banks must be forbidden from creating money, whether as

loans or otherwise. The Monetary Reform Act does both. It also incorporates means of doing this

that include paying off the huge national debt, and stabilizing the economy.

Hi Mask,

Which country has an existing system that operates in the way you propose the US's should, under the so-called Monetary Reform Act?

Thanks, Misty

Most Islamic countries operate without usery.

[teatree]

If anyone wants to become more informed on the subject may I suggest they read the following:

Tragedy and Hope - Carroll Quigley (Bill Clinton's Mentor)

Quigley was a man on the 'inside' and wrote openly about the Anglo-American establishment and its desire for world governance

The Creature From Jekyll Island - G Edward Griffin

A book about the establishment and function of the Federal Reserve

Or you could try watching the following videos on youtube or google video:

Money As Debt

The Money Masters

Type in G Edward Griffin in the search bar and there is a talk by him summarising his book

[glyph]

"Would be nice to see it summed up in a few words for the even more simple like me"

Can do. There are learned monographs that describe the US Federal Reserve System in detail. Unfortunately, the OP descided to use a biased source that sprang up recently. As the OP warned, his post is for those that are ignorant and, if you read through it, you'll still be as ignorant as you were before.

The mortgage crisis occurred when lending institutions lowered the acceptance threshold for home mortgages, and people who could not afford homes, bought them. As the adjustable lending rate went from a "teaser" rate (for example, 3% for two years), and then to the current market level (6%, approximately), the buyers could not afford the homes. Despite being warned about the market rate before they bought their homes, the buyers still signed on the dotted line.

[teatree]

"Would be nice to see it summed up in a few words for the even more simple like me"

Can do. There are learned monographs that describe the US Federal Reserve System in detail. Unfortunately, the OP descided to use a biased source that sprang up recently. As the OP warned, his post is for those that are ignorant and, if you read through it, you'll still be as ignorant as you were before.

The mortgage crisis occurred when lending institutions lowered the acceptance threshold for home mortgages, and people who could not afford homes, bought them. As the adjustable lending rate went from a "teaser" rate (for example, 3% for two years), and then to the current market level (6%, approximately), the buyers could not afford the homes. Despite being warned about the market rate before they bought their homes, the buyers still signed on the dotted line.

That is only a part of the problem. The crisis may have started because of the sub-prime mortgage mess but it is the derivatives that have made the serious situation that it is now. The banks took the mortgages as if they were solid gold and leveraged them countless times until nobody really knows the extent of the black hole we are staring into. They are starting to realise that the leveraged 'assets' they are holding are not actually worth anything. To put the blame solely at the feet of the home buyers shows you pay too much attention to the propaganda spewed out by CNN , BBC etc.

[Naam]

Most Islamic countries operate without usery.

that's not quite correct. all islamic countries (including fundamentalist Iran and Saudi Arabia) have and are still issueing bonds which pay interest (in arabic "ribah"). islamic scholars are divided whether this ancient expression means usury (excessive respectively unreasonable high interest) or just any plain interest. a number of papers were written on the subject (in 1980 i wrote one too) but until today "it was agreed to disagree"

nevertheless debit and credit interest did always exist in islamic countries but was called "commission"

what has cropped up during the last decade and has caught on is a new financial instrument called "suquq" (pronounced "sukuk") based on Qr'an teachings that an investor should receive a fair profit share if he risks his money by "participating in a commercial venture".

bottom line: it's all window dressing, nothing has changed except that fundamentalists are appeased

[Naam]

"Would be nice to see it summed up in a few words for the even more simple like me"

Can do. There are learned monographs that describe the US Federal Reserve System in detail. Unfortunately, the OP descided to use a biased source that sprang up recently. As the OP warned, his post is for those that are ignorant and, if you read through it, you'll still be as ignorant as you were before.

The mortgage crisis occurred when lending institutions lowered the acceptance threshold for home mortgages, and people who could not afford homes, bought them. As the adjustable lending rate went from a "teaser" rate (for example, 3% for two years), and then to the current market level (6%, approximately), the buyers could not afford the homes. Despite being warned about the market rate before they bought their homes, the buyers still signed on the dotted line.

That is only a part of the problem. The crisis may have started because of the sub-prime mortgage mess but it is the derivatives that have made the serious situation that it is now. The banks took the mortgages as if they were solid gold and leveraged them countless times until nobody really knows the extent of the black hole we are staring into. They are starting to realise that the leveraged 'assets' they are holding are not actually worth anything. To put the blame solely at the feet of the home buyers shows you pay too much attention to the propaganda spewed out by CNN , BBC etc.

BINGO Teatree! your explanation hits the nail on the head

[Pakboong]

Most Islamic countries operate without usery.

that's not quite correct. all islamic countries (including fundamentalist Iran and Saudi Arabia) have and are still issueing bonds which pay interest (in arabic "ribah"). islamic scholars are divided whether this ancient expression means usury (excessive respectively unreasonable high interest) or just any plain interest. a number of papers were written on the subject (in 1980 i wrote one too) but until today "it was agreed to disagree"

nevertheless debit and credit interest did always exist in islamic countries but was called "commission"

what has cropped up during the last decade and has caught on is a new financial instrument called "suquq" (pronounced "sukuk") based on Qr'an teachings that an investor should receive a fair profit share if he risks his money by "participating in a commercial venture".

bottom line: it's all window dressing, nothing has changed except that fundamentalists are appeased

Nam, I agree, but in principal, usery as such is forbidden. There are ways around everything and those ways will be found and used. Kind of like forbidding prostitution in Thailand.

Edited October 5, 2008 by Pakboong