Daily Archives: September 19, 2008

Impacts of the Financial Crisis

Only a small fraction of funding by investment banks, mortgage companies, brokerages, equity funds, hedge funds, commodities futures speculators, etc., comes from actual investor capital. The rest—up to ninety-seven percent, in the case of commodities futures contracts—is credit self-created by the banks.

Where did the banks get this credit? The answer is that they simply cranked it out through their fractional reserve privileges derived from their government charters. In fact the only way money comes into existence in this day and age is through a loan from a bank which must be repaid with interest. The loan is secured by the borrower’s collateral or promise to pay. But the cumulative interest load on the economy grows exponentially. As a part of the federal budget, for instance, interest on the national debt is around $500 billion a year and growing.

via Global Research: Impacts of the Financial Crisis: The U.S. Is Becoming an Impoverished Nation

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