guyfawkes91 wrote:
>> Well, if that's the case, let THEM pitch in and send US the $700
>> billion!
>>
>>
> They already did, that is the central problem. They want their money
> back.
>
> For a long time America has been living by borrowing money from the
> rest of the world. That has funded a real estate bubble and a stock
> market bubble. Banks around the world need to keep dollars because the
> dollar is the main trading currency. But if they have bank deposits
> they want to earn interest, so they buy T-bills or to get a better
> rate of return they buy mortgage backed securities. But the mortgages
> aren't worth what it says on the paper because people have been
> telling fibs about the value of the real estate and the income stream.
> So banks, US and foreign are sitting on lots of paper that might not
> be worth what it says it is. Now banks can lend money up to a multiple
> of their capital base. If a bank has capital of 10Bn then it can write
> loans and take deposits up to about 100bn. It needs that capital
> because banks borrow short and lend long, so if everyone turns up to
> ask for the money they've put in the bank they can't easily go and get
> it from the people they've lent money to. (Watch "It's a Wonderful
> Life", it explains it quite well). If they have assets they think are
> worth 100bn, but in fact they're only worth 90bn then they have to
> take a loss onto their books. If they take a loss of 10bn and they
> have only 10bn capital that wipes out their capital so they can't lend
> money.
>
> Banks lend money to each other overnight all the time to make sure
> that the books balance at the end of each day. But if there's a danger
> that the bank might not be in business next morning when the loan is
> due then you don't want to lend to them. But no one knows who might
> have these toxic securities on their books, so no one is sure that if
> they lend to another bank they will get their money back. If the loan
> can't be repaid then they have to take it as a loss, which could wipe
> out their own capital base. So the credit markets have seized up. The
> last time this happened was in the dark days of the 30's when so many
> banks went out of business that the US very nearly went back to
> barter. At one point so many banks were closed all over the place no
> one could cash a cheque for days on end. Effectively money had stopped
> working. That's why people who know their history are shitting
> themselves.
>
> Think of it like a giant version of the TMO. The TMO has been living
> on donations from rich people for decades. These people have assumed
> that their money has been going to support pandits and teaching TM in
> India and other projects. When they find out that actually it's been
> used to buy mansions, and fund high living for Maharishi's family and
> the number of pandits seems to be a lot less than you might expect
> from the money that's gone into India, then they don't feel so much
> inclined to give money to the TMO. So the supply of money dries up and
> projects like the Smith Center in Kansas have to be mothballed.
>
> Well it's like that with the rest of the world and America. The rest
> of the world has been putting their hard won cash into dollar assets,
> and now they find those assets aren't worth much. So they don't want
> to put their money in dollars assets anymore. But the American economy
> depends on other countries pumping money in to keep it afloat. Just
> like the TMO depends on rich people pumping money in. If it depended
> on earning its way in the world it wouldn't survive. Would you change
> dollars for Mahas if you knew that the TMO might not be able to honor
> the bill?
>
> The problem is that the rest of the world uses the dollar as its
> reserve currency and now they find it ain't worth what they thought it
> was. Serious stuff.
What we need is a "reality based" economy not the voodoo economics of
the last 30 years or so. Very painful but that's what it should have
been all along rather than ponzi schemes.
