September 18, 2008

Money: The Financial Sector is crashing

By posted in

U.S. Dollar SignWe have a situation here in the U.S. in which the financial sector is crashing.

In the good old days, one used to be able to save money at an acceptable interest rate that was paid by a commercial bank — oh, around 5%, if I recall correctly. One had trust that the bank wouldn't go under. You could go to a trustworthy bank and get a loan and that bank would service the loan and collect what was due, etc.

Now, you get a fraction of a percent. And the bank gets to gamble with your money for little exchange to you.

In the old days one used to buy stock and sit on it and it would usually make some money. You had some extra money, money you wouldn't mind losing, that you would consciously GAMBLE. In the good old days you could buy into a corporation and that corporation would pay dividends and it would be something that could be counted on.

That is no longer the case. The CEO gets millions for ruining a corporation after leaving in disgrace.

I watch CNBC and I hear the "money speak" from money pundits who preach that confidence is waning, dropping, there's fear, etc. I say it is more like hard working citizens are losing trust in their financial institutions because these behemoths have basically gone too far into debt to be able to recover and so are failing and taking the hard workers with them.

To me, it's more like the confidence has dropped from the huge confidence game that is now being exposed.

I see that it is actually legal, in the United States, to cook the books. These large financial institutions can hide their actual debt and their actual cash on hand and can misrepresent their actual position. And it is evident that they're not so rich. False money. Perhaps, funny money!

And then there are the great white sharks, real flesh eaters, known as naked short sales brokers, who ALSO may still be working in the two remaining investment banks that are also teetering at the precipice, furiously feeding off the crashing corporations as they come apart like massive explosions dispersing debris all over the planet.

We're now hearing about a Depression on the horizon as the Federal Reserve Bank tells our government that AIG is going to obtain its loan. Apparently AIG is going to sell off assets in such a way as it won't be a fire sale and deleverage! Well, "deleveraging" means to pay off your debts.

AIG was leveraged too far into debt. So was Lehman Bros, Bear Sterns, Fanny Mae, Freddie Mac, Washington Mutual, and the list is going to climb.

Add to that list the US Government. The US government is the mother and father of all these leveraged corporations! How is our government going to deleverage? What if our government goes bankrupt? Will some international banker foreclose on the United States?

All these fantastic sums of money! I wonder if all that money even exists. It's so easy to cook the books or misrepresent what was really made and what one's debt actually is.

And you can't necessarily come to the hard workers who have just lost their shirts and demand money, especially if they are out of work.

Those same workers who pay their bills, they usually know what they have to make, they do a reasonable job of balancing the checkbook.

This is a leveraged world. Is there going to be a world going-out-of-business sale?

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