For many decades, the governments wanted to postpone their turn of the pending recession.
Economy feels good when masses borrow and spend.
Recession occurs when masses slow down borrowing and de-leveraging.
However, due to political reasons, no government wants a recession to occur on their watch.
This causes excessive debt to accumulate to disastrous proportions since free markets are not allowed to run due to government interventions such as FED, FDIC, Fannie Mae, Freddie Mac and other programs.
This is the game every democratically elected government plays in this country.
In the past recessions, the way FED and the government saved the economy was by inflating the money supply.
They do that by encouraging people to borrow.
When we borrow, banks create money.
They do not lend existing money.
This new money makes the economy good.
Everybody earns more in nominal prices, even though the US dollar loses value.
Since the creation of the FED in 1913, the US dollar lost almost 99% of its value.
FED and the government used housing as a way to make people borrow bigger and bigger mortgages and inflated the money supply.
Housing bubble was intentional! Banks and the government knew it would crash but they did anyway.
Why? Let me explain the whole story to you.
When people maxed out their borrowing capacity (can't afford the interest payments anymore), and home prices became absurd, they stopped borrowing.
What is the problem if we do not borrow? Can't we just not borrow and not expand the money supply for a while? Answer is NO! Why is that? Keep reading.
When we borrowed for many decades, we did not promise to pay back only the principal.
We promised to pay back principal+interest.
Interest portion is not even created yet! Borrowing must continue and must increase exponentially so that principal+interest exists and becomes available to earn so that we can earn it and pay back what we promised.
If borrowing stops, money supply falls short and people cannot possibly earn principal + interest, thus they cannot pay their debt.
This is why foreclosures happen and bankruptcies soar.
Unemployment, housing collapse is the result of deflating money supply.
In order to keep the music playing, the government allowed mortgage interest deduction from income.
This is a wealth transfer from taxpayer to the bankers.
They did not stop there.
After they ran out of prime borrowers, they went through sub-prime.
They had to increase borrowing exponentially, or deflation would start.
They allowed no 20% down.
The more you borrow, the better it was.
They let people borrow the closing costs.
They allowed liar loans.
All was good; sins were forgiven, if you were willing to be a homeowner (aka good citizen).
At last, they ran out of sub-prime borrowers as well and deflationary crash has started.
They have offered incentives to the homebuyers.
First cheap loans, then 8K home buyer credit.
These are schemes to make people borrow so that credit is inflated.
As bank credit contracts, it has the effect of deflating money supply, even though FED may print money.
Thus, it is GUARANTEED that some of the homes bought with a mortgage are going to end up in foreclosure.
You can go to the court and argue that your mortgage contract is an "impossible contract" if you like.
The moment banks see that principal + interest will not exist, they stop lending.
They see that some people will go bankrupt! Credit markets freeze! They are afraid.
Borrowers are equally afraid.
Deflation kicks in with full power.
When that happens, all prices, salaries fall.
It becomes very hard to pay back a fixed rate loan! That is what is happening.
Money supply is shrinking! Mistakes have been made for the last 50 years.
FED has inflated the money supply! The cause is in place.
The effect will follow.
Deflationary crash is coming.
They claim that nobody saw the crash coming.
That is a convenient lie.
The truth is that the causes of deflation are well known and crash was expected.
Deflationary crash is built into the interest based monetary system and fractional reserve banking as much as inflation.
Bankers and the government adjusted their stand as deflation came closer.
2005 change of bankruptcy laws was no coincidence! They did that intentionally in order to put a claim on borrowers' future income.
Now they have the low teaser mortgage rates to make people refinance so that non-recourse loans become recourse loans that the borrowers are responsible for paying.
In 2006, FED stopped publishing M3 numbers to hide possible deflation of money supply to be able to manipulate public opinion.
The fix is to abolish the FED, give the people (US treasury) the right to print its own money and pay no interest to no one for it.
Nationalize the banking system as it is a bankrupt system and requires taxpayer money to survive.
Let treasury print all the missing money and fully fund the national banks, then make fractional reserve requirement 100%!! (Banks should not lend money that they do not have).
From that point on, borrowers should borrow from the national banks (effectively borrow from other people, not the bankers), and pay interest to the people, not the bankers.
Please note that today's system is different than this.
Many people think banks are lending the deposits that we put in the banks.
No.
This is not the case.
Banks are lending 20 times the deposits! Thus interest is really being paid to the bankers and not the people who deposited their money.
This money multiplier effect is the cause of inflation that wiped out the value of US dollar for many decades.
This is because bankers do not lend their own money, or they do not lend existing money.
Banks create money out of thin air and demand interest for it.
Fractional reserve banking and interest demand is the cause of the deflationary crash.
By making false promises to pay, they create checkbook money.
If they can do it, the people's government can do it as well! And we can do it even better.
How? The government can print and spend an amount equal to the amount that the borrowers are expected to pay back as interest.
This way principal + interest will exist in the economy.
Thus borrowers can earn it and pay their debt.
This will fix deflation problem.
When the borrowers pay back the interest, it will be destroyed by the government; because it was printed and spent earlier already.
This way the money supply will remain flexible enough for growth, but it will also prevent inflation! But no government has the means to do these changes.
All they care is to grab power, postpone problems as much as they can and hope that crash happens on someone else's watch.
4 year government term is too short for a sustained effort to make meaningful changes.
So, do we have another choice? Yes.
Let the free markets run.
No bailouts, no too big to fail.
No FED, no FDIC, no Fannie, no Freddie.
Let free markets fix it through depression.
We will come out stronger.
Economy feels good when masses borrow and spend.
Recession occurs when masses slow down borrowing and de-leveraging.
However, due to political reasons, no government wants a recession to occur on their watch.
This causes excessive debt to accumulate to disastrous proportions since free markets are not allowed to run due to government interventions such as FED, FDIC, Fannie Mae, Freddie Mac and other programs.
This is the game every democratically elected government plays in this country.
In the past recessions, the way FED and the government saved the economy was by inflating the money supply.
They do that by encouraging people to borrow.
When we borrow, banks create money.
They do not lend existing money.
This new money makes the economy good.
Everybody earns more in nominal prices, even though the US dollar loses value.
Since the creation of the FED in 1913, the US dollar lost almost 99% of its value.
FED and the government used housing as a way to make people borrow bigger and bigger mortgages and inflated the money supply.
Housing bubble was intentional! Banks and the government knew it would crash but they did anyway.
Why? Let me explain the whole story to you.
When people maxed out their borrowing capacity (can't afford the interest payments anymore), and home prices became absurd, they stopped borrowing.
What is the problem if we do not borrow? Can't we just not borrow and not expand the money supply for a while? Answer is NO! Why is that? Keep reading.
When we borrowed for many decades, we did not promise to pay back only the principal.
We promised to pay back principal+interest.
Interest portion is not even created yet! Borrowing must continue and must increase exponentially so that principal+interest exists and becomes available to earn so that we can earn it and pay back what we promised.
If borrowing stops, money supply falls short and people cannot possibly earn principal + interest, thus they cannot pay their debt.
This is why foreclosures happen and bankruptcies soar.
Unemployment, housing collapse is the result of deflating money supply.
In order to keep the music playing, the government allowed mortgage interest deduction from income.
This is a wealth transfer from taxpayer to the bankers.
They did not stop there.
After they ran out of prime borrowers, they went through sub-prime.
They had to increase borrowing exponentially, or deflation would start.
They allowed no 20% down.
The more you borrow, the better it was.
They let people borrow the closing costs.
They allowed liar loans.
All was good; sins were forgiven, if you were willing to be a homeowner (aka good citizen).
At last, they ran out of sub-prime borrowers as well and deflationary crash has started.
They have offered incentives to the homebuyers.
First cheap loans, then 8K home buyer credit.
These are schemes to make people borrow so that credit is inflated.
As bank credit contracts, it has the effect of deflating money supply, even though FED may print money.
Thus, it is GUARANTEED that some of the homes bought with a mortgage are going to end up in foreclosure.
You can go to the court and argue that your mortgage contract is an "impossible contract" if you like.
The moment banks see that principal + interest will not exist, they stop lending.
They see that some people will go bankrupt! Credit markets freeze! They are afraid.
Borrowers are equally afraid.
Deflation kicks in with full power.
When that happens, all prices, salaries fall.
It becomes very hard to pay back a fixed rate loan! That is what is happening.
Money supply is shrinking! Mistakes have been made for the last 50 years.
FED has inflated the money supply! The cause is in place.
The effect will follow.
Deflationary crash is coming.
They claim that nobody saw the crash coming.
That is a convenient lie.
The truth is that the causes of deflation are well known and crash was expected.
Deflationary crash is built into the interest based monetary system and fractional reserve banking as much as inflation.
Bankers and the government adjusted their stand as deflation came closer.
2005 change of bankruptcy laws was no coincidence! They did that intentionally in order to put a claim on borrowers' future income.
Now they have the low teaser mortgage rates to make people refinance so that non-recourse loans become recourse loans that the borrowers are responsible for paying.
In 2006, FED stopped publishing M3 numbers to hide possible deflation of money supply to be able to manipulate public opinion.
The fix is to abolish the FED, give the people (US treasury) the right to print its own money and pay no interest to no one for it.
Nationalize the banking system as it is a bankrupt system and requires taxpayer money to survive.
Let treasury print all the missing money and fully fund the national banks, then make fractional reserve requirement 100%!! (Banks should not lend money that they do not have).
From that point on, borrowers should borrow from the national banks (effectively borrow from other people, not the bankers), and pay interest to the people, not the bankers.
Please note that today's system is different than this.
Many people think banks are lending the deposits that we put in the banks.
No.
This is not the case.
Banks are lending 20 times the deposits! Thus interest is really being paid to the bankers and not the people who deposited their money.
This money multiplier effect is the cause of inflation that wiped out the value of US dollar for many decades.
This is because bankers do not lend their own money, or they do not lend existing money.
Banks create money out of thin air and demand interest for it.
Fractional reserve banking and interest demand is the cause of the deflationary crash.
By making false promises to pay, they create checkbook money.
If they can do it, the people's government can do it as well! And we can do it even better.
How? The government can print and spend an amount equal to the amount that the borrowers are expected to pay back as interest.
This way principal + interest will exist in the economy.
Thus borrowers can earn it and pay their debt.
This will fix deflation problem.
When the borrowers pay back the interest, it will be destroyed by the government; because it was printed and spent earlier already.
This way the money supply will remain flexible enough for growth, but it will also prevent inflation! But no government has the means to do these changes.
All they care is to grab power, postpone problems as much as they can and hope that crash happens on someone else's watch.
4 year government term is too short for a sustained effort to make meaningful changes.
So, do we have another choice? Yes.
Let the free markets run.
No bailouts, no too big to fail.
No FED, no FDIC, no Fannie, no Freddie.
Let free markets fix it through depression.
We will come out stronger.