Thursday, October 24, 2013

The New Circle Of Wealth Does Not Involve The American People

The big bank and government relationship in the United States has become so grossly incestuous that I barely discuss it any more on this site. I would hope by now that people understand the simple process that makes up our banking system:

As asset prices move higher banks take on more and more leverage locking in profits from the asset price appreciation. These profits are paid out in the form of large salaries and bonuses to management and traders throughout the company.

On the way down, these assets collapse and the banks face major losses. The government (American tax payers) step in and pay for those losses.

Heads they win and tails we lose. Very simple.

Before 2008, the American people felt some benefit of this process because banks provided loans in the form of mortgages, small business loans and consumer credit.

This is no longer the case today. Banks now receive the printed money from the Federal Reserve and they immediately return that freshly printed money to the Federal Reserve's depositary account where it earns them a risk free 0.25% return. The excess reserves then provide a capital base for the large bank's trading and margins accounts, allowing them to gamble in the paper market casinos (stocks, bonds, derivatives and currencies). They have made tremendous profits gambling while asset prices have risen since 2009.

This circular process now cuts the American people completely out of the loop. Those that are closest to the QE flow receive the benefits. The rest see no improvement in the job market or their income levels while their costs of living rise.

Fortunately for the United States government and the big banks, the vast majority of the American public has no understanding of what is happening behind the scenes. They have been bought off with social transfer payments, told there was no longer a need to work or worry, and put in front of the television to watch Miley Cyrus, The Housewives Of Orange County and sporting events.

The bread and circuses from the Roman era has returned and history has repeated again as it always does.

I discuss this now because when the good times end again, as they always do, and these artificially propped up asset prices once again meet gravity combined with reality there is going to be a tremendous anger that returns across the country. Those that have not been paying attention (almost everyone) will demand to know what happened and begin calling for people's heads (as they were in the fall of 2008).

Many involved in this circular wealth transfer understand that this is coming and have packed their bags to remove themselves from the eyes and minds of the public. Others have stayed, believing perhaps they are god like and deserve the money they are stealing from the public. They spend as much time in front of the camera as possible, and the mainstream media once again glorifies them.

It is a system that now breeds and is led by sociopaths. While the American people worry that the country could someday enter a communist/socialist type state, they do not realize that we have already past that point and now represent a fascist state run by the largest banks.

A bit of humor after a sobering morning check to our reality.


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