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“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.” - John Kenneth Galbraith, in his book “Money: Whence It Came, Where It Went”, 1975
Companies are financed through equity and loans - equity coming from shareholders / owners and loans coming from the banks. What happened, was the banks had lent out all their available cash, but still had loans due back to them. They had the assets but not the liquidity.
Then when a business tries to buy something to sell on (with credit), the bank says no. When someone tries to get a credit card to buy something from the business, the bank says no. Because the banks basically ran out of cash, it dried it up everywhere else. Nothing truly catastrophic happened, it was a case of runaway borrowing where people would get more and more credit until the banks had no more to give, and all of a sudden the businesses that were operating solely on credit gave in, the people who had everything on credit become bankrupt, etc. etc.
In a way it's like building a bigger and bigger eck of cards. It's going to fall down one day. The good news is it's not the end of the world as some would have you think, and it's not a conspiracy as others would have you think. We will emerge better off than we were before, it's just a typical business cycle of free market economies.
You mean until it happens again.
Well yes, but it will continue to happen because it's a free market. Don't pretend it's someone else doing this, it was our over reliance on credit to get by.
I do not consider any of the western economies to be free market. I suppose it depends on your definition.
There is an insider who appears to agree with me with his latest writings. You may not be familiar with him but he was the US Assistant Secretary of the Treasury in the 80s.
A somewhat lengthy essay but I found it worth the read.
http://www.counterpunch.org/roberts02242009.html
But it's not our own fault ...thats the official line your supposed to follow.
David Rockerfeller called in Fifteen billion dollars in loans from Leham brothers ...to be paid withing seven days.
He has said that yes he knew this was impossible and yes he knew it would have a domino effect.
It has been done exactly the same way as in the great depression.
Flood the market with credit ...withdraw the credit without notice.
Some of you seem to believe there have been free markets operating?
A breath of fresh air.
Inspirational.
Believable.
Powerful.
But ...don't be fooled.
American hollywood style democracy always plays the same scenes of good cop bad cop.
We're back with good cop again.
It's all bollox of course.
Your meant to believe this is left wing America but it isn't.
It's what has to be done ...the changes that have to be made.
The adjustments to the tiller ...all done in a manner that convinces the people they have choice ...they don't.