Say Goodbye to Wall Street

Discussion in 'Wall St. News' started by wildfirepow, Oct 1, 2009.

  1. Equity versus Credit

    This is the difference between gold and dollars. One is limited and the other is unlimited. Gold and equity are limited. Dollars and credit are unlimited. The two cannot be mixed without a negative outcome for society.

    Imagine two neighbors. Both are unemployed, yet neither are worried about it at the moment. One neighbor has a stash of gold coins. The other has a FICO score of 800. One has equity, the other has credit. For the time being they can each live on what they have. Eventually both will have to get a job, but hopefully you can see the difference.

    Gold Credit?

    In my post, The End of a Currency, I wrote about a perfect gold standard in which there was no monetary inflation and no monetary interest on loans. Someone asked, "why would anyone make a loan in this perfect system?" The simple answer is that they would not.

    The more complicated answer is that savers would not loan their gold in the way we think of loans today, with only a piece of paper obliging the borrower to return the gold plus some interest. And certainly not with a mere piece of paper requiring the return of only the principle. Even if it would be worth more when it was returned, the same positive result could be had by burying one's gold, eliminating risk.

    No, the way that gold would "go to work" in this perfect gold standard is only through equity investment. One man might provide the gold while another would provide the labor and knowledge and together they would share in the profit or loss of the joint venture.

    On a side note, all major religions originally promoted only this kind of economic activity. Loans for a specific nominal return that included interest were forbidden. Christianity called it usury. Judaism called it neshekh, meaning "a bite". And Islam called it riba, meaning "excess or addition".[1][2])

    Which Came First, the Chicken or the Egg?

    Which came first? The greed of the banksters to make usurious loans to the people? Or the demand of the people to borrow frivolous capital for whatever economic activity they chose without sharing profits?

    Adam Smith (1723-1790) taught us that economies emerge as bottom-up spontaneous self-organized order that naturally arises from social interactions, not from top-down bureaucratic design. This is also true of banks.

    Banks emerge in economies because man has the innate desire for a credit-based system in which he can engage his own economic folly at someone else's risk. Given pure equity, the individual man will not lend, but still demands to borrow. And as a society, we (rightly or wrongly) end up demanding that the risk of loss is spread far and wide. We say, "don't mind borrowing it, but damned if I'm gonna lose it!" (See: FDIC)

    And with the recent bailout of the banks, it is repelling to think that we are responsible. It is true. We are all, as a society, responsible for the actions taken. It was a foregone conclusion a long time ago. That if losses ever loomed large enough to bring down the system, society at large would end up covering the losses. This is the very nature of the system we have built as a society. A system that sprung up from man's desire to borrow, not from man's desire to lend or steal. That came later.

    I do not make these statements in support of the bankers or the bailouts. I find them just as revolting as the next guy. But as a pragmatist, I am looking for a realistic explanation of what is happening.


    As a credit-based system emerges along side an equity-based monetary system, all kinds of problems arise for society, not the least of which is inflation. The interest portion of all loans requires growth in the money supply over time. And on a large economic scale, this growth can be quite substantial.

    As the lenders' credit-paper notes are "seasoned" over time they begin to circulate as near-money at a discount to the original equity they represented. And as the "money supply" grows, so does the disparity of value between credit and equity. At first, governments always keep the two tied at par through legal tender laws, but this only drives real equity into hiding and credit must expand even faster to cover the loss of equity from the monetary system. But sooner or later the credit portion must be devalued against the equity portion and ultimately, the link between the two is severed.

    Society as a whole decides what society's official money is. And once the link between credit and equity is stretched to the breaking point, credit alone is declared to be official money. Thus begins the ultimate unrestrained inflation.

    Complete article-:
  2. the1


    Good article but it doesn't state anything new. The Day of Reckoning is out there but when? No one knows. The current monopoly money system will probably be replaced with another one before the Day of Reckoning occurs. In the meantime, enjoy high unemployment and get your card out and go shopping.
  3. The full article is too long and cannot be posted in forum so I have shorten it. Read website url for complete article.
  4. Yup... it's a paradigm shift, the world as we know it will be completely different, wall street will no longer exist.. blaaaah blaaaaah blaaaah blahhhhh

    What garbage
  5. No one knows where Bush's Trillions in TARP funds has gone.

    Every guy prior to the crash in wall st. is still playing the same game of musical chairs

    Ratings agencies are still lying

    The products from mainstream financial news media are still best used as kitty litter

    A $1000 campaign contribution allows you to author your own little congressional rider.

    Democracy has been for sale.

    Right now the highest bidder is Wall St.

    The Illiterati may hoop and holler, but will continue re-electing their favorite imbecile to congress. They haven't learned anything new. What they need is another Bush.
  6. There is no day of reckoning because successive generations will continue to print money, extend credit, and believe in whatever fantasy it is that drives the economy of that era. The most that happens is an occasional correction, and even that is soon forgotten wit the fantasy and lure of "easy money" through long term investing.
  7. Additonally, the American govenrment continues to drug its' citizens into submission and slumber through fast food, 250 cable tv channels, fashion chic, unsustainable long term credit plans, BMWs, Mercedes, and all so that companies like Haliburton and others can milk the economy and reap huge profits for the privileged few.
    And no, I am not an extremist raghead in a third world country.
  8. Stock markets attract new investors by displaying "unrealized gains". Old investors earn money from new investor's money. Stock markets are the biggest ponzi in disguise.
  9. You just demonstrated your lack of education.
  10. You do not have to be educated to understand the stock markets. Everybody knows what goes on in stock markets.
    #10     Oct 1, 2009