world crashing in massive debt, so give out more loans

Look at this article:
en.wikinews.org...:_World_on_brink_of_recession;_prepares_special_loan_program

"Dominique Strauss-Kahn, Managing Director of the IMF, stressed nations must work together to avert a global recession and warns there is "no domestic solution" to the crisis."

"Furthermore, he announced the IMF has activated an emergency program Wednesday that allows the fund to provide loans more easily and quickly to emerging countries in economic trouble."

I don't understand... When a nation is crashing under massive debt, how does giving them more loans help them? Wouldn't that just increase their debt?

It seems to me that the world is crashing down around me, and our leaders are blindly marching straight into oblivion...

Actually loans are the only thing that will save the economy. That's the way it's set up. Money is debt. The only way to create more money is to create more debt. When loans dry up so does the money supply. So to maintain our previous rate of growth, more and more debt must be created.

I'm not saying it's a good system—it's awful—I'm just saying that's the way it is.

[edit on 10-10-2008 by k-string]

My friend that is the 700 hundred billion question.

We should learn from our personal mistakes but it seems that the moron and corrupted geniuses that run this nation believe that the only way to save the tax payer after scamming them for trillions of dollars is giving them more loans to keep borrowing themselves to death.

I shake my head trying to understand that line of thinking.

K-string regretfully the recent crisis is showing that massive borrowing and unrestricted credit doesn't work.

So perpetuating something that has prove unreliable to sustain an economy is nothing more than trying to revive a fire with water, it didn't work before and is just going to make cause the economy to keep sinking.

yeesh, banks are in trouble because they are not lending to each other, if banks don't lend to each other they can't lend to businesses, the businesses can't buy stuff to sell on and consumers can't borrow money to buy the stuff being sold.

the problem isn't a lack of cash, it's a lack of cash flow, cash isn't flowing. all these efforts are to try to get the banks lending to each other, to get the cash flowing again.

it's a crap system, as k-string said, but it is the system. debt isn't the issue, debt didn't cause the problem, lack of available credit is causing the problem.



[edit on 10-10-2008 by pieman]

You know I did something this week to see how bad the small businesses in neck of the wood were doing do the credit freeze.

Guess what all the small business owners that I know (that are many) they said that they were not having any problems getting credit and loans to run their business.

But they claim that is due to the fact that their banks are local banks and not big banks.

I wonder.

[edit on 10-10-2008 by marg6043]

But don't you see an enevitable collapse in that kind of system? Banks lending to banks, banks lending to businesses, banks lending to people? Theres not enough money to do that, eventually you run out. People shouldn't borrow money, they should work for it, same for businesses. We've grown this attitude "I should have money NOW" and this is the result.

*EDIT: im not saying lending is bad, its good in some cases I guess, but when it becomes this common, people drown themselves in it, and it strains the system.

[edit on 10-10-2008 by peskyhumans]

reply to post by marg6043

that kind of adds up. banks are still happy to lend to good debtors, i don't think the issue is with small business, i think it's mostly with the big businesses that supply them, at the moment. it will carry down to small businesses eventually though.

reply to post by peskyhumans

yes, i think the system is a crock, have done for about the last year or so. i read about how the system functioned here on ats and thought, "what a freaking crock", thats bound to crash sooner or later, probably sooner seeing as the banks are stooping so low in their attempts to get people to borrow.

thing is, i thought we were all missing something and the banks had a trick up their sleeve, but no, they didn't, the guy who made that post was correct. can't remember who made it, but well done you, whoever you are.

[edit on 10-10-2008 by pieman]

Originally posted by peskyhumans
Look at this article:
en.wikinews.org...:_World_on_brink_of_recession;_prepares_special_loan_program

"Dominique Strauss-Kahn, Managing Director of the IMF, stressed nations must work together to avert a global recession and warns there is "no domestic solution" to the crisis."

"Furthermore, he announced the IMF has activated an emergency program Wednesday that allows the fund to provide loans more easily and quickly to emerging countries in economic trouble."

I don't understand... When a nation is crashing under massive debt, how does giving them more loans help them? Wouldn't that just increase their debt?

It seems to me that the world is crashing down around me, and our leaders are blindly marching straight into oblivion...

You feel this way because you haven't done your duty as an American to educate yourself no the ins and outs of how the American Capitalist banking system works.

When loaning ends

The system dies

When laoning flourishes

so does the system

Do yourself a favor. Go to youtube or google videos

Look up the movie "money as debt"

Watch it

Then you will understand why they want to start loaning again ASAP

Originally posted by peskyhumans
But don't you see an enevitable collapse in that kind of system? Banks lending to banks, banks lending to businesses, banks lending to people? Theres not enough money to do that, eventually you run out. People shouldn't borrow money, they should work for it, same for businesses. We've grown this attitude "I should have money NOW" and this is the result.

*EDIT: im not saying lending is bad, its good in some cases I guess, but when it becomes this common, people drown themselves in it, and it strains the system.

[edit on 10-10-2008 by peskyhumans]

You truly are financially uneducated.

There is no MONEY!!!!

Think about it

Gold standard went away in 1933

We use "Legal Tender"

Otherwise known as useless paper with no intrinsic value

Watch that movie, Money as Debt

And then come back and try to talk about banks and lending and the economy

But until you eduate yourself

Leave this for the people that do understand, when you get it, we're glad to take you back

So what are we seeing now? Is it that people don't want loans any more so the money supply is contracting? Is the rate of debt increasing too much faster than the rate of money creation?

reply to post by intelligent life

what, you think because you watched one you tube vid you understand the international monitory system, and you patronise a fellow member on those grounds? get over yourself.

money is worth what people are willing to pay for it on the international markets, gold is also only worth what people are willing to pay for it, money being linked to the value of gold has no particular advantage except to add a tangible element to your currency.

it doesn't make it any more valuable or stable as the american government would still be able to say that a dollar is worth one gram of gold less than it was worth yesterday so we can print off more money to the value of the gold we have in the federal reserve.

the gold standard was prooven to be a myth about six secounds after it was scrapped because the value of the various currencies that scrapped it didn't crash in value.

Originally posted by k-string
So what are we seeing now? Is it that people don't want loans any more so the money supply is contracting? Is the rate of debt increasing too much faster than the rate of money creation?

i think, and this is an i think kind of thing, that what has basically ( ) happened is that about 20 years ago some bright spark in the banks came up with an idea. instead of waiting until a debt matures to collect the interest why not sell the debt to investors and release capital now.

these debts were put on the open market for a price that would be, for instance, the debt +2%, on maturity the investor would get the debt +4%. naturally, the debts were bought and the practice spread.

this became standard practice, and as you can imagine, because the banks no longer needed to worry about the safety of the loan they were giving, they no longer worried to much about checking to see if the loan could be re-payed, it didn't really matter to them if it was paid or not, this time tomorrow they'ld have sold off the debt anyway.

this is where it get really twisted, the biggest buyers of any banks debt were other banks, it was really just a way to massage the books, if you sold ten debts you got $50 and if you bought ten debts you made $50 (although over time,) so the bank just made $100, woohoo.

all the same, the value of a debt is dependent on how risky it is, so to get the best price for a riskey debt it would be buried in a package, and everybody bought these packages, and sold them, and bought them back, and split them up and shuffled them about a bit and sold them on again.

everything carried on nice and rosy for a bit and then the housing market crashed and people started to default on the risky debts, but the problem was that with all the shuffling and shaking and ducking and diving, no-one knew which banks owned which debts exactly, some of them didn't even know for sure which debts they owned, so they all got a bit paranoid over who owed what to whom and who exactly was in danger of losing what.

we'll leave that for a second to stew and i'll explain how a bank operates. a bank takes money from savers and lends it to borrowers, and as long as the borrowers keep paying and the savers keep saving, the bank makes money on the difference in interest it pays to the savers and takes from the borrowers. the thing is, savers tend to save at a steady rate, and borrowers tend to pay the money back, and most people only have a small percentage of their money in cash at any one time anyway.

because of all this, it is possible for banks to lend more than they actually have, basically by lending the same money to two different people. this is a legal practice and it is what is ment by saying there is no money, only debt.

this is all smoke and mirrors, and the only way to make it work is to borrow the money to make a loan, so one bank borrows from another and borrows from another and so on.

it's a house of cards, it relies on everything being just so if it is to stand up.

back to the paranoia, what has happened is that banks don't know which of the other banks is a good debtor and which is a risky debtor, and because they need to actually get the money back that they lend to other banks, they can't sell the debt, they are unwilling to lend to each other. if they can't borrow from each other, they can't lend to me or you, so we can't buy stuff, so businesses don't make a profit, so they can't save, so the bank has less money to lend and so on, until the house of cards collapses.

the only way to stop the thing collapsing right now is to get the banks lending to each other, to get the money moving about a bit, but it's still just a house of cards, and at this stage it's a really big and complex one, so it's bound to collapse sooner or later.

bet your sorry you asked now.

What most people don't understand about the 'bailout' is that there are strings attached. For every loan the government passes out, they are staking shares out of your company. What happens when the government gets enough shares of all the banks? They control them....

This is all about control...

UK. This is a good one. We've guaranteed all foreign depositors in our banks and lost £6 billion to Iceland, lots of government funds too, never trust the internet, get an address). I remember a very angry mood as an adolscent fifteen or so years ago, but I figured that it would be John Major that would have his moment of life or death with Iceland. (I kid yee not, I wrote a poem about the British invasion of Iceland, and it being Major's 'proof' of power, probably stoned).