Keynes is mentioned and quoted several times in different places. For some strange reason Keynes is quoted and referenced in a positive light. It is absolutely not so. Keynesian economists insist the citizens must keep taking on more debt and spending. We have a phony economy and it is because of Keynesian economics. Rather than robbing citizens of their money, government robs their money of its purchasing power by following Keynesian economics. It is terribly missleading to present Keynes in a positive light.
One quote taking out of the contect of his work makes it sound like he was a Paul Revere warning the citizens. Not so. He was expressing his contempt for the common citizen as too dumb to know the difference.
WOW! Guess it's been a while since I played that game. Didn't realize that was a rule. Unfortunately that rule applies to real banks. They lend out $10 to every $1 we deposit. How does that make any sense from a consumer standpoint? From the banker's standpoint it's great. The problem comes when those debts are cashed in.
Page 10 first para...here we find that Keynes thing again. I for one can never accepr Keynes in a positive light. The way it is used here is like he is a Paul Revere warning us...a complete study of his work will paint him in a negative light.
This is agood place to include some words about "leveraging" and how banks leverage debt re their capital reserves and how they transfer risk to the taxpayers.
Rule #3 Learn to Control Cash Flow, another great rule. Debt, Money & Cash Flow. Need graphic of Cashflow Levels I, II & III to be taught in every school.
Why can't we have three graphics illustrating the rules? I have ideas...
Rule #1 Money is Knowledge
Rule #2 Learn How to Use Debt
Rule #3 Learn How to Control Cash Flow
Pages 8 & 9...good debt and bad debt. Great rule. Learn how to use good debt which is self liquidating debt that produces a cash flow to pay off the debt. This is a good place to include a basic graphic of the economic system showing the four legs of the system: Natural Resources, Capital, Labor and Technology.
Everything we have must be processed from the earths natural resources and these four basic elements serve that function. See e mail graghic (unable to include here).
This is a fantastic rule and needs graphics to enhance its importance.
Page 8. Life is a journey and is a continuous educational process. Basic financial education should be taught in our schools.
Last two sentences in third para..."rich take over education system...why schools do not teach about money".
"No truth meets more general acceptance than that the universe is ruled by law. Without law, it is self evident there would be chaos, and where chaos is, nothing is ... Very extensive research in connection with ... human activities indicates that practically all developments which result from social-economic processes follows a law that causes them to repeat themselves in similar and constantly recurring serials of waves or impulses of definite number and pattern ...The stock market illustrates the wave impulse common to socio-economic activity ... It has its law, just as is true of other things throughout the universe."
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest…Every individual intends only his own security;…by directing that industry in such a manner as it produce what may be of the greatest value, he intends only his own gain, and is led by an invisible hand to promote an end which was no part of his intention…promoting the interest of the society more effectively than when he really intends to promote it.” (Adam Smith)
It is the combined action of the population each individual acting in his/her own self interest that creates the conditions that are present at any given time...
Page 6, second para. "...the world is looking...to the Federal Reserve and the U.S. Treasury to solve..." I thought we hired representatives in congress to manage and solve problems? Elected represenatatives are the ones creating the problems.
Third para..."Federal Reserve unconstitutional..." Why not put in a quote from the Constitiution about money creation...yes indeed lets have a quote from our Constitution. The Feds should be abolished.
Page 4 fourth para. "...rule change meant they could print money on any ordinary piece of paper..." This is not stated correctly. Only the Central Bank (Federal Reserve) can print money out of thin air. However, fractional reserve banking does allow banks to creat money out of nothing by a factor of say 10. For example for every dollar of debt created it has a multiply factor of about 10. If you really want to educate you need to include some of the facts. What this exercise is scheduled to SELL is Cashflow Levels I, II & III and that is probably a good thing. Robert is one of the RICH with a net worth in excess of say 100 million.
Again, next to last para Keynes is quoted somewhat in a positive light. Not so, if this quote were examined within his works you would discover his dim view of people and how they could be manipulated. Keynes should not be presented in a positive light.
Keynes has been presented in a positive light and this is definitely not correct. He is famous for avocating the government step in and create money, deficit spending, to take up the slack in the markets. His economic theories encourage the government to debase the currency.
Again I refer to the e mail graphics (no way to include here) that show something extremely interesting and should be examined more closely. From say 1940 to say 1980 a period of some 40 years or say half a typical life time, the total credit market debt stayed around 150 percent. Without question when Nixon closed the international gold window in 1971 total credit market debt took off to the sky and today is about 360 percent and still climbing. This mountian of debt must unwind before any new bull market economy can once again began.
The third paragraph on page 2 is partially correct but misleading. Banks do go broke due to making bad loans. This paragraph need some work to get it closer to correct. Bank loan officers at one time had to try and make good loans because their future success depended on making good loans...the banks had to live with their loan book. That changed when Fannie & Freddie were created to buy the loans from the banks at which time Fannie & Freddie (you and me the taxpayers) assumed the risk. No longer did we have "loan officers" we had Walmart clerks pushing loans to anyone who walked in the door...because the risk was being passed on to the taxpayer. Does your Monopoly money game have any equivalent risk issues?
There is so much mis-information in this chapter it is hard to decide where to start. Perhaps page by page will help.
Page 1: The day the Dollar Died. This is stated in one form or another on pages 6 & 10 of the Intro and probably other places. Why not get it closer to correct and include a diagram similiar to the one sent to you by e amil that shows total credit market debt as percent of U.S. GDP along with Roosevelt confiscating all gold owned by U. S. Citizens in 1934 (3 years after I was born) and currency no longer backed by gold DOMESTICALLY. Nixon closed the "gold window" for dollars INTERNATIONALLY in 1971 BECAUSE THE FRENCH MADE A RUN ON CONVERTING THEIR DOLLARS TO GOLD. Neither Roosevelt or Nixon got Congressional approval...it was done by executive order...bypassing the PEOPLE's representatives.
I know you want to keep it simple, but why not get it close to historically correct.
It is completely true. We hear them saying that the financial system (banks) must be saved. Eventhough the industry, commerce and everything else are broke. What if they haven´t done that bailout thing and would have distributed those 7 trillion to each person in the planet. It is just a paradox. But think about it.
even when the bank says it is broke, it isn't...they accept a bailout from the government and turn around and loan it back to them again with interest.
Refer to The Obama Deception Full Length video online.
That's great! It sure does sound like our banking system!
How about fractional reserve banking? Sure, it was good idea back when banks were basically gold deposits and all currency was backed by a standard of gold. What banker wouldn't want to invest some of that standing metal into other revenue generating assets? But once removed from a standard and unlimited currency was able to be added into the financial system, it became an exponential monster!
Playing by old rules in a new system creates a very unstable environment. And although it may take many years for it to become apparent, any structure built on the wrong foundation will eventually crumble.
As I told you, I am from Switzerland. Many people think the Swiss banks are untouchable, but I only have one comment... Look at what happened to UBS in 2008.
UBS was making profits every quarter of the year, and last quarter they had a huge deficit. Guess what ? The Swiss government gave them money at the end of 2008 ! The real question is: What happened to all of the profits ?
I think it should be a good idea to include this story in the book with the real numbers !
Another mis-conception is that, if rich people have less, lower-income people will have more. Ignorant folk will cheer when they hear that the tax rates for high incomes are raised, but they do not realize the implications for them as employees and consumers.
If money is, or will be, worthless, and the house is not an asset, and we shouldn't diversify or invest in stocks and mutual funds... what can we do? Is there no way to acquire and protect wealth? I don't understand.
I think that banks being able to print money allows them to never go broke. I should say that the Federal Reserve has the ability to print money and then flush the financial system with money. I have not studied economics but I would imagine that if there is a lack of financial self imposed discipline within our financial environment than chaos will reign. Is that what we are seeing in our world today?
By sheer operational means, a bank can and should never "go broke". Not only is there a power bestowed that allows for more money to be printed, banks maintain their profitability by charging fees and interest to their patrons. Now, when confidence in banks is low (as it is right now), perhaps fewer people are utilizing the banking system as a whole. However, that's not what got us into this whole "banking" fiasco to begin with, is it?Again, let's go back to the people.
The banking industry and institutions aren't "bad". In fact, if you're not the consumer being raked over the coals, the concept of banking is actually pretty ingenius. Where else can you legally charge "broke" people for not having money? Where else can you legally take advantage of the fact that somebody may have made some bad decisions in their life (whether they be personal or professional) and charge them more money for those prior mistakes, regardless of what they're trying to learn and accomplish with their life at the present time? It's always amazed me that you get charged a fee for taking your own money out of your own savings account when there's no agreement between you and the bank that you're going to leave it in there for any given amount of time for them to use (as with investments like CDs and such). This being the case, it seems to me that, once again, the concept of banks, what they do, the services they provide, etc. aren't "bad". In fact, they suit most people just fine. It's the fact that there aren't enough solid boundaries (call them ethics, for the sake of argument) to enforce them to do the right things when there's nobody to make them. What's the old saying? "When the cat's away, the mice will play", right? Well, in the case of banks, there have been no cats and the mice have ruled the dominion.
What we're experiencing now in this area of our economy is an attempt at a correction of a situation that's been allowed to continue for far too long, and I must say that I strongly disagree with bailing them out. Yes, of course, I realize that not doing so would bring about other consequences and, probably, further hardships on many people. However, those to come after (both businesses and people who make up the general population) will not soon forget and, as a result, hopefully be less greedy (upper echelon) and choose to seek out a more formidable education about money, finances, banking institutions, etc. -- and ask questions instead of being one in a herd of many who have no idea where they're going.
I always knew banks had an unlimited amount of money... I thought the harvard grads running the banks just did something amazing in the stock market. I was always curious about how they operated but when I read the series on how to invest in gold and silver, it blew my mind about the reverse pyramids... I had heard of stock crashes and RE crashes in school but nothing of the why or how, just that it was a very bad time. Your book clarified alot of what I thought was going on. Thank you... now if only I can use it to my advantage....
Kind of sounds like this could circulate discussion back to the gold standard.
I know some individuals who don't use banks. They are generally cash rich and own property. The property is their bank. Cash in their pockets pays their necessities while they live under their means and the properties make them cash/wealth.
The sad part is banks create money in that sense. Every dollar deposited in the bank can be loaned out 2/1(2/1 is being nice) which to me is magical. So they need us to keep making deposits so they won't go broke.
I receive so many mailings about banks wanting me to open an account! Ours are better than X's! I believe that no bank is better than another because they all operate the same way. They want you to be in bad debt. They don't want you to have good debt because they lose control over you!
They are in the ideal position in a downturn as they may control both sides of any transaction. Say a deal is in trouble,not only can they change lending terms to place adverse conditions on a developer ie change allowable LVRs etc they are also in a position to fund the new purchaser into the deal. Their cash or 'skin' is never lost. You cant go broke if your interest and control is not lost
Banks like any organization are subject to the personality rule...what is that you ask? Performance plays a good part of being promoted to high positions within an institution, however, your personality (with a little bit of good looks) will take you to the top with the right combination. What's that have to do with this subject...well banks are no different and don't always have the most adept and financially savvy individual running them. These CEOs and managers run around in the same circles and most of them were swept away with the subprime wooing and of course the obscene profits. So, when you have a bunch of financial institutions run by personalities instead of the most educated/appropriate people then this is what you get.
In all actuality, the current banks in trouble aren't running out of cash, they just have to many toxic assets. And now with the bail out money they are just gun shy on lending, again due to the inexperience of the CEOs. What a circle of friends...?
Over 18 small banks in America have been taken over by the FED this year alone in 2009.
So yes, banks do go broke do to insolvency.
As far as creating debt to boost the economy? You make a very good point but, the reality to what is happening to the economy right now is to some degree the contraction of available credit, not that credit is available.
Below is a perfect example of how the Canadian Bank's in Canada are exasperating the problem of our economy by not lending. And this has nothing to do with one's ability to pay the debt that they have accumulated.
The following is from my blogs Varying Viewpoint.blogspot.com. &
Varying Viewpoint.com.
The Bank of Canada lowers interest rates to make it more affordable for consumers to borrow.
The politicians say to the banks "lend money". The banks say "we are lending money". And yet the credit freeze is still frozen.
Well, the truth is banks are lending, but not in a way most people think, and the way they are lending now will not stop the downward trend of the economy. If anything it might exasperate it more to the down side.
The fact is, the banks have changed the rules on how they lend money and provide credit from just 6 months ago, which has nothing to do with one's own credit rating.
I'll give you an example of what and how the banks in Canada were doing business then as opposed to now, and you will see that lending money is not what it used to be.
Remember when home prices shot up 2-3 years ago and the economy was booming? Well if you were lucky enough to own a house before the boom, you were now in a position to tap in to the equity that your house had accumulated. Banks, as well as private lenders made perfectly sure that you knew as a home owner that you could draw a line of credit or a second mortgage on your house without re-mortgaging the whole house.
We purchased our home in March 2006 for $299,000.00. 15 months later I knew our house was worth about $625,000.00. I went to our bank the CIBC to get a line of credit against our house. We still had the original mortgage of about $288,000 with another lending institution. The CIBC appraised our house at $640,000 in June 2007 and gave us a line of credit of $200,000. When the Canadian banks were okaying loans of any sort, it being Lines of Credit, Personal loans, Mortgages, they have a system that they use to determine if the borrower can handle and or qualify for a specific amount of debt on a monthly basis. The borrower's debt can not exceed 40 or 42% of their gross income. Example, we (my wife and I) in 2007 earned $100.000/yr total before taxes and all other deductions. In the bank's eyes we qualify for $40,000 to $42,000/yr in debt payments. So if you take $100,000 that we earn on a yearly basses and divide by 12 months, our gross pay per month = $8,333.33. Now take $8,333.33 and divide it by 42% and that = $3,500.00 per month that the banks will allow us to owe in monthly payments towards all outstanding debt. So with our existing monthly mortgage payment of $2,172.79 which includes our property tax we would be allowed to incur additional monthly debt payments of up to $1,327.21. Now here is where it becomes interesting. In June 2007, and for as far back as I can remember, up until September 2008, when the banks calculated the monthly payment of a Line of Credit , they (the banks) only calculated the actual interest accrued monthly on that line of credit. So for example if we spent all that credit and owed the full $200,000 of that line of credit in 2007, with the then interest rate of 5.50%, that worked out to $916.66 in our minimum monthly interest payment without paying down the principal, and remember in the bank's eyes that's all we had to pay monthly. If the interest rate went up, our minimum monthly payment went up, if the interest rates went down our minimum monthly payment went down. So according to the bank, and this was with all the banks at that time in Canada up untill September 2008, our mortgage payment of $2,172.79 plus the minimum interest payment on our Line of Credit of $916.66 gave us a total of $3,089.46 in monthly debt, which was within the guide lines of the 42% monthly debt to gross income ratio.
Now this is very important, and you will need to remember this for later. In 2007 as per the banks, a $916.66/monthly payment times 12 months = $11,000.00/yr in debt payment for just the line of credit. At $11,000.00 in debt payment, that would eat up $26,000.00 of our gross income to qualify for this line of credit, leaving us with $74,000.00 in gross income for our mortgage and any other debt that we may incur. In other words as per the banking system in Canada up until September 2008, to have this line of credit at an interest rate of 5.50% we need to earn $26,000 in gross income per year just to qualify for this one loan (the line of credit).
Now that all sounds reasonable.
In early February 2009 I phoned CIBC to find out if we can transfer our mortgage over to them and get a better rate to boot. I gave CIBC actual and factual numbers of our income and debt over the phone and asked if this will work? "I don't see why not" the CIBC personal banker stated over the phone. I was apprehensive with her answer because of the amount of debt we had accumulated, and I wasn't sure if we would fit in with their module of acceptance of 42% monthly debt to gross income ratio. As much as I wanted our mortgage transfered over to CIBC and at a lower rate, I was not sure if she could swing it. Here's why. As of 2009 my wife and I earn $98,000.00/year, down from $100,000.00 in June 2007, not a big deal. But we accumulated a lot more debt over the past 2 years since we got the line of credit. First our mortgage monthly payment went up from $2,172.79 to $2,207.96 because of a property tax increased, no big deal. Second we maxed out our line of credit of $200,000.00, but the minimum monthly payment has gone down to $500.00 from $916.66, a saving of ($416.66/month). Third we have accumulated additional debt of $91,000.00, for various things like a vacation, car purchase, credit cards and investments. So as per the Canadian banks module that I knew as of June 2007 (which I had no reason to think had changed), I had figured if we consolidated all of our additional debt of $91,000.00 in to a personal loan we might be able to make it work, and as I already stated above so did our personal banker.
Here is how I though it could work (with what I knew).
First the mortgage. If the CIBC would take over the mortgage from the lending institution that currently holds it, they (the CIBC) would give us $4000.00 cash back and we can lock in our interest rate for 5 years at 4.39%, a far cry from the 7.25% which we are now paying. That would bring our monthly mortgage payment with property tax, down to $1663.62 from $2,209.96 a savings of ($546.34/month). Second, if we took that $4,000.00 cash back that the CIBC gave us for transferring over the mortgage, and put that against the $91,000 of our additional debt that would bring it down to $87,000 then consolidate that $87,000.00 in to a personal loan at 5.75% over 5 years (which is that maximum length of a personal loan that they will do), that would give us a monthly payment of $1,696.00. Third, remember the line of credit of $200,000.00, it is now at a 3.00% interest rate, with a minimum monthly payment of $500.00 from $916.66, a saving of ($416.66/month).So with our monthly mortgage payment with property tax of $1663.62 + our consolidation loan monthly payment of $1,696.00 and our line of credit minimum monthly payment of $500.00, our total debt monthly payment is $3,859.62 divide by our gross monthly income of $8,166.67 (remember that we earn $2,000 less per year then in 2007) which works out to 47.3% monthly debt to gross income ratio.I thought not bad, maybe they will squeeze it through? Remember I wasn't so sure, but our personal banker thought it was possible.
Now before I go on, I just want to be clear about why I thought that we could get a consolidation loan for our outstanding debt of $87,000.00 at 5.75% over 5 years. Three days before our appointment with our CIBC personal banker, I checked with someone I knew at another CIBC location to find out what the interest rates were on personal loans. I knew they would be higher then any mortgage or line of credit interest rate. He said "that would depend on your credit score" and he proceeded to show me right off his computer screen what the rates were. They ranged from 5.75% to 9.75% for a personal consolidation loan. I thought no problem, our credit ratting is perfect, we have not missed a payment of any kind in over the last 15 years. So there was no reason for me to think that we would not get the 5.75% interest rate on our personal loan.
Now here is what the banks are doing as of September 2008.
First, remember how the banks calculated the minimum monthly payment on a line of credit, which was interest only? Well nothing has changed as far as how they bill us or anyone else for that matter. We get our statement in the mail and there it is, an interest only minimum monthly payment on our $200,000.00 line of credit at 3.00% interest rate which works out to about $500.00/month. If I want to pay more which I'm sure most people do to some degree than just the minimum, we can. But when we went to the CIBC for our scheduled appointment, we got whipsawed. Our personal banker took all our information and guess what, no go! Here's why. According to our personal banker, when calculating the minimum monthly debt to gross income ratio, she put down $2,000.00 as a minimum monthly payment on our line of credit of $200,000.00. That's right, 1% of the total debt of the line of credit for our minimum monthly payment which works out to $2,000.00, not $500.00. I of course said "but I have the statement that CIBC sent us in the mail right here showing the minimum monthly payment of $500.00", she said, "doesn't matter I can't change it if I wanted to". She also said that "all the banks are doing this now since the credit freeze last September 2008". So, when I was doing my calculations at home before going to CIBC, I calculated that our line of credit minimum monthly payment of $500.00 x 12 months = $6,000.00/year in debt payment for just the line of credit. At $6,000.00 in debt payment, as per the debt ratio of 42% that would require $14,300.00 of our gross income to qualify for just this line of credit, leaving us with $83,700.00 in gross income for our mortgage and any other debt that we may have accumulated. Remember in 2007, the interest rates was 5.50% on our line of credit, with a $916.66/monthly payment x 12 months = $11,000.00/yr in debt payment for just the line of credit. At $11,000.00 in debt payment, that required $26,000.00 of our gross income at that time to qualify for this line of credit, leaving us with $74,000.00 in gross income for our mortgage and any other debt that we may accumulate. So of course I thought that our monthly debt to gross income ratio on our line of credit had improved, because of the fact, that the interest rate came down from 5.50% to 3.00%, which brought down our minimum monthly payment, which in turn brought down the monthly debt to gross income ratio on that line of credit from $26,000.00 per year to $14,300.00 per year for qualification purposes.
Guess what happens now with a fictitious $2,000.00 minimum monthly payment on that line of credit on debt to gross income ratio? Well, $2,000.00 x 12 months = $24,000.00/year at 42% of gross income to debt ratio, that requires $57,200.00 of our $98,000.00 gross income, just on a qualifying basis for only our line of credit. That would leave us just $40,800.00 of our remaining gross income, to cover our mortgage and other debts for qualification purposes of income to debt ratio for the year. So, when the $40,800.00 of are remaining yearly gross income is divided by 12 months = $3,400.00 in monthly gross income and divide that by 42% monthly debt to gross income ratio, that would leave us with just $1,428.00 per month to cover our mortgage and other debts. $1,428.00 per month doesn't even cover our currant mortgage payment let alone any of our other debt for qualification purposes only. But remember, that 1% $2,000.00 minimum monthly payment on our line of credit is fictitious.
Now here is what that really means to us and anybody else in Canada who has an existing line of credit. The difference of what CIBC bills us, and how they qualified us for this line of credit, back in 2007, with a now 3.00% interest rate, which works out to $500.00/month x 12 months = $6,000.00/year in payments, required a gross income of $14,300.00/year for qualification purposes as per the 42% debt to gross income ratio. But now with a 1% fictitious $2,000.00 minimum monthly payment on that same line of credit x 12 months = $24,000.00/year (remember this not what they bill us or any body else), we need $57,200.00/year in gross income as per the 42% debt to gross income ratio for this one loan for qualification purposes only. That's a difference of $42,900.00/year in gross income that we have to come up with just to qualify for our present line of credit, and again for qualification purposes only. To have just this current line of credit loan, we have to be earning $42,900.00/year more in gross income.
I don't know about you, but I don't see our yearly gross income going up from $98,000.00/yr to $140,900.00/yr just to qualify for the line of credit that we already have, (not in this economic environment)?
Now, I am sure some people will say that we screwed ourselves by spending more then we earned and going deeper into debt. After all just because we were given a line of credit of $200,000.00 didn't mean that we had to spend it all, and more. No, thats right we didn't. And I'm not whining about our debt situation. We spent freely and willingly. We purchased a car, went on vacation, spent a lot on our house, and we invested most of it. Not getting what we wanted from the bank is frustrating and in the end it will cost us a lot more in interest the way things are, but we will survive (providing we keep our jobs).
The point is, think about all those home owners across Canada, and maybe in the US as well who's homes went up in value over the last 4-5 years and got lines of credit?
Well if Bob in Calgary Alberta got a line of credit of $100,000.00 2 years ago and still has it. At todays interest rates of 3.00% his minimum monthly payment is only about $275.00. But what if Bob needs to get a loan from the bank, any loan even when applying for a credit card, his line of credit minimum monthly payment of about $275.00 is seen as a fictitious 1% minimum monthly payment, which works out to $1,000.00. Which in turn requires Bob's income to rise from say $60,000.00 to $81,000.00. Because Bob has that line of credit, he has to earn $21,000.00 more per year just to cover the (fictitious $1,000.00 minimum monthly payment on his line of credit). And this has nothing to do with his credit score.
If Stacy in Regina Saskatchewan got a line of credit of $250,000.00 against her house only a year ago and still has it. At todays interest rates of 3.00% her minimum monthly payment is only about $687.50. But Stacy needs a new car or a used car, and maybe the $250,000.00 she got from the bank a year ago went to start up a business, so it's tapped out, the money is invested and she's making her payments on time (remember this has nothing to do with her credit score). She tries to get a loan from the bank, remember any loan even when applying for a credit card. Stacy's actual minimum monthly payment on her line of credit is only about $687.50, but the bank sees her line of credit as a fictitious 1% minimum monthly phantom payment, which works out to $2,500.00, which in turn requires Stacy's income to rise from say $75,000.00/yr to $126,000.00/yr just because she has that line of credit. Stacy has to earn $51,000.00 more per year to cover the (fictitious $2,500.00 minimum monthly payment on his line of credit). And again this has nothing to do with her credit score.
So, what do you think a bank would do if a customer applied for a loan of any kind with them, and they proceeded to tell the bank that they earn $80,000.00/yr, but when the customer had to bring in their last 2 pay slips so the bank can verify that figure, and the bank looks at those pay slips, and the customer only earns $72,000.00/yr according to those pay slips, would it not be suprising if the bank did not use the word "Fraudulent"?
So how is it possible for banks to be giving out loans of any kind with this new fictitious 1% minimum monthly payment on lines of credit against the monthly debt to gross income ratio?
2 ways.
1. Don't have an existing line of credit for the bank to use their new fictitious 1% minimum monthly payment debt to gross income ratio.
2. If you have (still) enough equity in your home to re-mortgage your existing mortgage with your line of credit? Then the bank will absorb that line of credit into your mortgage and no more line of credit, no more fictitious 1% monthly payment debt to gross income ratio.
Mmmm, how nice for the banks. Most everybody knows how debt pay down works with lines of credit, credit cards, personal loans, any debt that is not a mortgage can be paid down to zero with no penalty.
If home owners are in a bind, have a line of credit and enough equity in their home, they can get that debt absorbed into their mortgage, but now they can never pay if off without a nice fat penalty, because it's a mortgage now.
Oh, by the way, home prices have fallen across the country, from 10-25%. Remember our house? The bank appraised it at $640,000.00 just 20 months ago. Now it worth about $550,000.00.
If you think that fictitious 1% minimum monthly payments are only on lines of credit? There's more.
Remember I wanted to consolidate that $87,000.00 of debt ($91,000.00 before the $4,000.00 cash back for transferring our mortgage) in to a personal loan at 5.75% over 5 years, that would give us a monthly payment of $1,696.00. When our personal banker was entering all of our other debts aside from our mortgage and line of credit debt, she was entering all our individual minimum monthly payments on those debts at a 3% minimum monthly payments, and not the actual minimum monthly payment as per the statements that we receive in the mail. Sound familiar? For example, one of our credit cards has a balance of about $9,920.00 with a minimum monthly payment of $72.00, (it's at 6.75%). Guess what she does? She, our personal banker, enters that minimum monthly payment at 3% which adds up to $297.60/month for that one credit card. As with the line of credit statement that we brought down with us, I too had the credit card statement which I showed her, that $72.00 was the minimum monthly payment on that credit card. She said, "doesn't matter I can't change it if I wanted to", just like before. Apparently this fictitious 3% minimum monthly payment on credit cards against the monthly debt to gross income ratio has always been like this, even before the credit freeze. So again more fictitious minimum monthly payments, but this time on credit cards. And again this has nothing to do with our credit score. A fictitious 3% minimum monthly payment on credit cards will go a long way to insuring that it will be vary difficult for people, even if they don't have a line of credit or a mortgage on a house, to receive any new credit from any bank in
Canada, within the 42% monthly debt to gross income ratio qualification system.
Lets say Robert in Toronto has $65,000.00 in credit card debt, but no other debt, no line of credit, no mortgage, no loan, just credit card debt, Well if Robert wants any additional debt of any kind from any bank, lets see how they will look at that? This should be easy, $65,000.00 x 3% per month = $1,950.00 as a fictitious minimum monthly payment that the bank states to Robert that they have to take in to consideration regardless of what his true minimum monthly payments are. So as the 42% monthly debt to gross income ratio goes, Robert has to be earning about $56,000.00/yr just to stay within that 42% monthly debt to gross income ratio. If Robert wants any more credit of any kind from any bank, he better be earning a lot more then his $56,000.00/yr.
Now unfortunately the fictitious numbers don't stop there with minimum monthly payments. Remember, with all the above examples that I have given so far, all of them have had NOTHING to do with one's own credit rating. The bank, unbeknownst to me, have their own credit rating system that they use before they even incorporate the customers own personal credit rating from the credit bureau.
When we were going over the numbers with our personal banker for the consolidation loan, she came up with a 9.75% interest rate for a monthly payment of $1,862.00. I said "how's that?". "I figured it out at home at 5.75% for a monthly payment of $1,696.00", a difference of ($166.00/month). After all I did assume that we would get the best rate because of our credit rating. I knew our credit rating would be rated quite high because we have not missed a payment of any kind in over the past 15 years. First she said "it's because of the amount of debt which has nothing to do with your personal credit rating", she also said "see this" as she pointed to her computer screen, "that's the rating that the bank gives you as a credit score". "How's that work?" I asked. She said "the more debt you have the lower the score". I asked "regardless of our credit rating?" She said "yes, this is the banks credit rating system on how much debt you have which has nothing to do with your personal credit rating, yet". I was curious, so again I asked "how dose that work?". She explained to me "for example if you have a Visa and the limit is $25,000.00 and your currant balance on that Visa is $20,000.00 your score goes down, because it's close to the limit". So again I asked "if $20,000.00 is my currant balance on Visa card with a $25,000.00 limit , at what point or how low does my balance have to be in relation to my limit to I get a higher credit score from the bank?". She said "your balance would have to be half or less of your current limit on that one credit card for you to get a better credit score from the bank, and that's the same for each and every one of your credit cards". So before the bank even does a personal credit check on us, they have their own fictitious credit score that they are implementing on us which has nothing to do with our credit history. After I got the gist of what was going on, our personal banker said, "lets do your personal credit check, that should bump up your score with what we have given you so far". It did and we did get a better rate, but not the 5.75% that I thought we should get, we got 8.50%, not even half way between the lowest and highest rates that was available. Remember that monthly debt to gross income ratio. Well with the banks own credit rating system that they use to push up the interest rates that they offer, it will in turn bring up the monthly payments which will then affect monthly debt to gross income ratio and will be just one more reason why the bank can't or won't be forking over very many loans in the near future.
So what does this tell you about the willingness of the banks in Canada on giving out loans?
Well, it tells me that if they are?, they are few and far between. It's definitely not business as usual.
And it doesn't seem to matter much at all to the banks about your willingness, ability and most of all your track record on paying your bills.
Bonus Material
I didn't want to get into this part of our experience at the bank with the above information because I didn't want to make it anymore complicated then it already is. Remember when our personal banker was going over the numbers for our consolidation loan, and I stated above she originally came up with a 9.75% interest rate for a monthly payment of $1,862.00? Well that was without the $316.73 in monthly insurance payments for just this one consolidation loan.
What really happened was when she quoted us what our monthly payment on our consolidation loan would be, she stated "$2,178.22/month over 5 years" I of course said "what?". Then she broke it down, $1,862.00 was for the loan, $195.70 was for CIBC Payment Protecter insurance and $121.03 was for life insurance, all per month. So I of course said "we already have life insurance through my wife's work". She looked at me as if I had three eyes, and proceeded to say "well that's a big loan". After a couple of minutes of insisting that we already had insurance, she removed those monthly insurance payments, which by the way, not only would have brought up our monthly debt to gross income ratio from us needing $53,500.00/yr to $62,500.00/yr in gross income for just that one loan, which made it ever more difficult for qualification purposes. But the cost of this $316.73 in monthly insurance payments would end up costing us about $3,800.76/yr x 5 years = $19,003.80 in unwanted, unwarranted additional total payment cost to us for this one loan from the bank. Our personal banker also did this when she gave us the monthly payment on our mortgage as well.
I wonder how many people that have already received mortgages and personal loans through the banks and were convinced that they needed these (non mandatory) monthly insurance premiums attached to their monthly loan payments?
The reason why I am pointing this out is, in the past when we did our last 2 consolidation loans with the same personal banker at the same bank, see were asked, "are your interested in adding some sort of insurance, due to job loss, disability, or death, that would be tacked on to your monthly payment over the course of the loan?". We declined it then as well. But now it is coming across as if, we not only need this, but I was beginning to wonder how willing our personal banker was about (if we qualified) ok'ing the loans without some sort of insurance being attached to it?
I don't know if this is happening anywhere else outside of Canada? But I have a feeling that at some point in time in the future, our Canadian banks will find away to make it mandatory for their customers to have some sort of insurance attached to every loan that they give out . After all, our Canadian banks have been in the insurance business for the last 10 years or so and have been selling this type of insurance to their Visa and Master card holders.
There's nothing like a crisis, especially a credit crisis for the banks to justify and peddle their insurance as a way to protect the customer, and of course themselves, who by the way just happen to be in the business of selling it.
How convenient!
Bonus Material II
We received a letter from Accredited Home Lenders on February 9 2009 stating that "they would not be renewing our mortgage, and that we had to find alternative financing by April 1 2009".
Well, I just phoned Accredited Home Lenders February 26 2009, to inform them that we were unable to transfer the mortgage over to another lending institution. I didn't mention this before because when I first wrote this, I thought if we didn't get the mortgage transfered, they Accredited Home Lenders would just allow us to keep making our monthly payments by renewing our mortgage for another year or so. I didn't realize the severity of our situation until we were unable to transfer our mortgage.
They stated over the phone that "we have until July 1 2009 to transfer our mortgage over to another lending institution or they Accredited Home Lenders will foreclose on us".
That's right, there calling in the loan even though we have not missed or were late on 1 monthly payment over the past 35 months (since we first purchased the house).
Apparently, they Accredited Home Lenders are in a little financial trouble and are not renewing any of the Canadian mortgages. There going down like so many other lending institutions, and they want their money.
If your interested, just Google them, you'll get the gist.
How much time does one have rigt now to accumulate as much wealth
befoe the financial storm really hits what levels of unemployment
are we looking at if its extremely high it will no doubt affect the ability of people to pay rent thus tremedouly affecting my cashflow whats your take robert?
My wife and I both work for a real estate company that sells bank owned homes. Its amazing how fianacially stupid the banks are! My wife who is a glorified secritary helps with the BPO's and takes a look at the comparisons of the homes than sets a price and the banks just agree to what price "a secretary wants to list it for." I have seen brokers who are listing these bank owned homes buy the properties themselves not telling the banks about the other offers sent in. The banks just seem to have no clue on what a real asset is, let alone how to control or manage a property. You would think there would pro's who would help take care of these homes istead of handing them over to real estate brokers who care less on the sellers needs. My testimony strengthened when I had dinner in a $17,000,000.00 dollar home. We were lucky enough to sit at the table the owner of the home was sitting at. We were also sitting with a top manager of Bank of America. The fist thing the bank manager asked the weathly man was, "what should we do with our money now that our 401k is gone? Should we pull out and invest in something else?" The rich man aswered and said "i dont know." In a tone of voice that was saying, "Your the Banker Dummy!" (the wealthy man found a niche in texas on deleloping and made millions) but it really opened my eyes on how the banks really have no clue whats going on. Who went to school and recieved no real finacail education. They can all do calculas but cant understand the foundation and basics of money!
Besides not being taught what fiat currency is, the topic of taxes is hardly covered in spite of it being an employees #1 expense. How those taxes apply to the cashflow quadrant are also not discussed. The education system does not mention the other three quadrants, just the "E" quadrant.
The history of money is rarely discussed in detail as well.
I dont think any school teach people about how interest rates on loans or mortgages are apply and how much you end up paying.
usually people realise it, till they get tired of paying and still donot get to own their house.or just never are able to get out of debt on the loan.all because the famous interests and fees that are charged on monthly basis or yearly basis.
thanks to internet and your books can show you and teach you on the matter but not 100% of people use em.
I also think that schools shall teach about the use of credit cards since they handem like candies specially in the USA.
regards.
lalo.
I believe this to be a true statement, not just because of the manner in which the Fed allows banks to behave. It is also a reflection of what the masses have been conditioned to believe is financially intelligent. As long as people believe putting money in the bank is the right thing to do, the banks can count on money being available for their own use.
It's too true, and it's sad that since there is no value in our currency, it's impossible to stop this rampant printing and spending. Alexander Hamilton was the one who got it right, tie our currency to gold for some stability, and this will slow inflation dramatically. If there was some stability, we wouldn't be in nearly the mess we're in or the one we're creating.
In the context of miseducation the biggest miseducation is believing bullshit (the King has a devine right to rule.. no he's the toughest gangster in the land)
So whats the reality of our current predicament? Read the quote below by one of the guys who put the fed into place.
" Without realizing it, every American will insure us for any loss we may incur and in this manner; every American will unknowingly be our servant, however begrudgingly."
"[Very] soon, every American will be required to register their biological property in a National system designed to keep track of the people and that will operate under the ancient system of pledging. By such methodology, we can compel people to submit to our agenda, which will affect our security as a chargeback for our fiat paper currency. Every American will be forced to register or suffer not being able to work and earn a living. They will be our chattel, and we will hold the security interest over them forever, by operation of the law merchant under the scheme of secured transactions.
Americans, by unknowingly or unwittingly delivering the bills of lading to us will be rendered bankrupt and insolvent, forever to remain economic slaves through taxation, secured by their pledges. They will be stripped of their rights and given a commercial value designed to make us a profit and they will be non the wiser, for not one man in a million could ever figure our plans and, if by accident one or two would figure it out, we have in our arsenal plausible deniability. After all, this is the only logical way to fund government, by floating liens and debt to the registrants in the form of benefits and privileges.
This will inevitably reap to us huge profits beyond our wildest expectations and leave every American a contributor or to this fraud which we will call "Social Insurance." Without realizing it, every American will insure us for any loss we may incur and in this manner; every American will unknowingly be our servant, however begrudgingly. The people will become helpless and without any hope for their redemption and, we will employ the high office of the President of our dummy corporation to foment this plot against America."
Edward Mandell House - Private Memoirs: Meeting with Woodrow Wilson, US President 1913-1921
anyways hope this helps you guys with perspective.
How many financial mis-educations have we been subject to?
Off the top of my head here are just a couple:
1) Investing is about cash.
The problem (or one of them) is that investing is about cash flow. In The Richest Man in Babylon George Clason writes "A fat purse empties quickly if there is no golden stream to refill it" 90% of all the "investing" Americans have been doing has been about increasing their cash supply. Once they've made their cash, if they want more, they have to go out and do it again (does this sound familiar to anyone? J.O.B)
2)Investing is about acquiring assets.
The purpose of this of course is to get you to buy all those assets that the rich are selling. Then of course to get rid of their liabilities, they start telling you that they are assets too and sell you those as well. But where did they get those assets? They created them. Which of course makes people jealous, so those assets also have to be protected. Then once the assets were sold, the rich had all this worthless cash on them so they put that cash into safe storage by acquiring other assets, until they were ready to do what many may have set out to do in the first place: pass it on, or create their legacy.
The above story illustrates that the full power of investing is divided into 5 activities:
1) creating assets
2) protecting those assets
3) selling those assets
4) acquiring more assets so that one day you can
5) give it away and do something that will last for decades or centuries.
Broken link,
it seems the video in my previous Corrupt banking link was taken down soon after posting by youtube, here is an alternative link hope this works as the video is very interesting.
The Fundamental Problem
If the treasury issued and controlled the dollar, would they not also have a politically motivated vested interest in issuance in the absence of a valuer such as gold stock to value the dollar against as it once was ?
Getting the issuance value of the currency correct could become the hallmark of good government, or become shrouded in political intrigue.
The gold standard stabilized currency, but after that was desolved greed ensued and led to the mess we are in today,
If money issuance became regulated by some legal mechanisum, it would lead to a more stable economy, average people would have more disposable income to invest and confidence to do so, with financial education more could become open market investors and people by virtue of choice would stimulate social direction rather than be left to the self interest of the few who have left so many broke and homeless, with the tax payer confronted with future high inflation to pay for lining the banks shareholders vaults.
"Cash is trash" may be true today but not everyone can own gold or a diminishing supply of silver to trade on, the dollar needs a relatively stable value standard to move forward with.
and fedex oops sorry! The federal reserve should be regulated to issuance by the treasury and become government vaults of regulatory supply.
The problem is not so much that a bank can issue more money when needed. When productivity in the economy increases the money supply needs to increase, too.
The problem is that the money issued is OWNED by the bank. Whenever a bank creates value by "merely writing on an ordinary piece of paper" they essentially counterfeit value. Counterfeiting is a crime because the value of the money evaporates when people don't have to produce to acquire it.
Central banks have a massive incentive to inflate the money we all rely on. If you could simply print money and lend it, you would probably print and lend it feverishly, right? Even if you loaned it a low interest rate, the money is to be paid back to you. Every last cent of the capital on the loan is profit – not to mention the interest.
The central banks have a massive vested interest in inflating the currency. The more they inflate, the more they profit. However, the more they inflate, the less stable our economies become and the more wealth is embezzled from productive people's pockets.
At first, I thought only central banks can print money, so a regular bank can run out of money.
However, when you think about it deeply, one can argue that there are many ways for the bank to print money. Examples are like issuing bonds, getting international loans or even getting government help and get free money. This can summed as printing money.
In Turkey, we had a big economic crisis in 2001. This was mainly because highly leveraged banks and most of them collapsed. When a bank collapses, economy stops and everybody collapses. This means that the government and rich will never let banks to fail together. This leads to chaos and everybody hurts.
As a conclusion, I can state that the system enables banks to have money no matter what.
This is a quote from the Washington Post from the above article that is on their front page.
"The Federal Reserve yesterday escalated its massive campaign to stabilize the economy, saying it would flood the financial system with an additional $1.2 trillion. The decision by the Fed to buy government bonds and mortgage-related securities is designed to lower borrowing costs for home mortgages and other types of loans, thereby stimulating economic activity. The central bank, effectively, will print more money to pay for the purchases."
Take a look at the last sentence. They will just print more money to pay for the purchases" This is exactly what Robert is talking about.
So Robert - you've really got me hooked on the 'Conspiracy' - and it has me doing some research online... what's funny is that you don't have to search far, before you can find traces of the 'Conspiracy' - against our Education, our Money - and even those people who are in the spotlight about it all...
Check this one out... MSN's Article "Stop Listening to Suze Orman"
From the article... "The personal-finance guru favors supersimple mantras -- even when they're wrong -- and psychological explanations for all your money problems. Maybe it's time to stop trusting her."
I'm glad to see you've started posting a new video blog - it's great to hear from you direct!
Here's another great episode on the John Stewart show - I'm sure you've seen it. But for everyone else out there - Jim Cramer tries to defend himself on the Daily Show - it's great! Just another part of the grand conspiracy...
This statement is true of central banks, but not national, regional, and local banks. These "lower" banks can create loans from thin air, but because they engage in fractional reserve banking, holding only $5 to $8 of every 100 dollars deposited, if they experience a run on the bank, they do not have the liquid cash to cover the demand. Also, if they are highly leveraged--40 to 1--in credit default swaps, collateralized debt obligations, and/or other derivatives, they can go broke if they are unable to pay their counterparties. IndyMac went broke from a run on the bank.
Hi, I am just very concerned with the Fed's power over everything. Just recently I was tuned in to a movie that proves so many of the topics being discussed. I fear for the future of humanity. The best case scenario: the people realize what is going on and fight back and all hell breaks loose, resulting in the deaths of the all-powerful bastards trying to control us. The worst case: we all fall to their plans just like the many times in the past. May the universe help us all.
Robert, I can honestly say that sometimes this battle seems lost, but as humans there is always that tendency to fight when we believe in something. I just hope that your efforts do not fall on more death ears than sane ones. In regards to the video, the RFID chip runs on radio frequencies. Ring a bell? Oh yeah, how about the fact that Congress has passed a law forcing all tv companies to switch to cable? I wonder what they will use all those uncluttered frequencies for?
My personal goal, after getting out of this damn system's hold, is to start hitting the really impoverished places and those people who think that nothing has to be done because everything will work out. These communities need to be informed too! I am trying to be entrepreneurial but I am having a hard time. I would like someone to mentor me since I hate feeling trapped when I understand most of the things going on around me. I am willing to listen and act in any way I can. If someone sees this, please email me at mjimene04@yahoo.com
I am glad that we are born, but the unlimited greed in this world sometimes makes me extremely sad. I wish to have the power to do something too! One day I will, and no one can tell me otherwise.
Bank does not produce any products, and is not a manufacturer of any industry.
When Katie (my daughter) was four years old, I took her to a bank at a local branch. I sat with her in the bank for about twenty minutes. Then I asked her what she saw. She said that people were coming to the bank to "deposit" their money. I asked her then that why does bank take people's money? She told me that she did not know. I pointed to the office cubicles around us and there were people asking bank to loan them money.
Katie looked at the line of people "depositing" money and looked at people asking for money at the cubicles, then she said, that was not fair.
I thougt about that a lot. Is it really fair that bank get our money to loan to us? No. It is not. What's worse is that it is legally done. The bank, and their rich owners, have control over governments (I like to say that they are in bed together), and they legally print money that are not made or earned by anyone yet and give it to the banks. We, the avarage Joes, have to ask for them from the bank with interests. What a beautiful world, for the rich.
I instilled in Katie's head that in this world, only the rich wins. So, she will be rich. We will be rich.
Keynes is mentioned and quoted several times in different places. For some strange reason Keynes is quoted and referenced in a positive light. It is absolutely not so. Keynesian economists insist the citizens must keep taking on more debt and spending. We have a phony economy and it is because of Keynesian economics. Rather than robbing citizens of their money, government robs their money of its purchasing power by following Keynesian economics. It is terribly missleading to present Keynes in a positive light.
One quote taking out of the contect of his work makes it sound like he was a Paul Revere warning the citizens. Not so. He was expressing his contempt for the common citizen as too dumb to know the difference.
WOW! Guess it's been a while since I played that game. Didn't realize that was a rule. Unfortunately that rule applies to real banks. They lend out $10 to every $1 we deposit. How does that make any sense from a consumer standpoint? From the banker's standpoint it's great. The problem comes when those debts are cashed in.
Page 10 first para...here we find that Keynes thing again. I for one can never accepr Keynes in a positive light. The way it is used here is like he is a Paul Revere warning us...a complete study of his work will paint him in a negative light.
This is agood place to include some words about "leveraging" and how banks leverage debt re their capital reserves and how they transfer risk to the taxpayers.
Rule #3 Learn to Control Cash Flow, another great rule. Debt, Money & Cash Flow. Need graphic of Cashflow Levels I, II & III to be taught in every school.
Why can't we have three graphics illustrating the rules? I have ideas...
Rule #1 Money is Knowledge
Rule #2 Learn How to Use Debt
Rule #3 Learn How to Control Cash Flow
Hope will not work...education will...
Pages 8 & 9...good debt and bad debt. Great rule. Learn how to use good debt which is self liquidating debt that produces a cash flow to pay off the debt. This is a good place to include a basic graphic of the economic system showing the four legs of the system: Natural Resources, Capital, Labor and Technology.
Everything we have must be processed from the earths natural resources and these four basic elements serve that function. See e mail graghic (unable to include here).
This is a fantastic rule and needs graphics to enhance its importance.
Page 8. Life is a journey and is a continuous educational process. Basic financial education should be taught in our schools.
Last two sentences in third para..."rich take over education system...why schools do not teach about money".
"No truth meets more general acceptance than that the universe is ruled by law. Without law, it is self evident there would be chaos, and where chaos is, nothing is ... Very extensive research in connection with ... human activities indicates that practically all developments which result from social-economic processes follows a law that causes them to repeat themselves in similar and constantly recurring serials of waves or impulses of definite number and pattern ...The stock market illustrates the wave impulse common to socio-economic activity ... It has its law, just as is true of other things throughout the universe."
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest…Every individual intends only his own security;…by directing that industry in such a manner as it produce what may be of the greatest value, he intends only his own gain, and is led by an invisible hand to promote an end which was no part of his intention…promoting the interest of the society more effectively than when he really intends to promote it.” (Adam Smith)
It is the combined action of the population each individual acting in his/her own self interest that creates the conditions that are present at any given time...
Need graphics...
Page 6, second para. "...the world is looking...to the Federal Reserve and the U.S. Treasury to solve..." I thought we hired representatives in congress to manage and solve problems? Elected represenatatives are the ones creating the problems.
Third para..."Federal Reserve unconstitutional..." Why not put in a quote from the Constitiution about money creation...yes indeed lets have a quote from our Constitution. The Feds should be abolished.
Page 4 fourth para. "...rule change meant they could print money on any ordinary piece of paper..." This is not stated correctly. Only the Central Bank (Federal Reserve) can print money out of thin air. However, fractional reserve banking does allow banks to creat money out of nothing by a factor of say 10. For example for every dollar of debt created it has a multiply factor of about 10. If you really want to educate you need to include some of the facts. What this exercise is scheduled to SELL is Cashflow Levels I, II & III and that is probably a good thing. Robert is one of the RICH with a net worth in excess of say 100 million.
Again, next to last para Keynes is quoted somewhat in a positive light. Not so, if this quote were examined within his works you would discover his dim view of people and how they could be manipulated. Keynes should not be presented in a positive light.
Keynes has been presented in a positive light and this is definitely not correct. He is famous for avocating the government step in and create money, deficit spending, to take up the slack in the markets. His economic theories encourage the government to debase the currency.
Again I refer to the e mail graphics (no way to include here) that show something extremely interesting and should be examined more closely. From say 1940 to say 1980 a period of some 40 years or say half a typical life time, the total credit market debt stayed around 150 percent. Without question when Nixon closed the international gold window in 1971 total credit market debt took off to the sky and today is about 360 percent and still climbing. This mountian of debt must unwind before any new bull market economy can once again began.
The third paragraph on page 2 is partially correct but misleading. Banks do go broke due to making bad loans. This paragraph need some work to get it closer to correct. Bank loan officers at one time had to try and make good loans because their future success depended on making good loans...the banks had to live with their loan book. That changed when Fannie & Freddie were created to buy the loans from the banks at which time Fannie & Freddie (you and me the taxpayers) assumed the risk. No longer did we have "loan officers" we had Walmart clerks pushing loans to anyone who walked in the door...because the risk was being passed on to the taxpayer. Does your Monopoly money game have any equivalent risk issues?
There is so much mis-information in this chapter it is hard to decide where to start. Perhaps page by page will help.
Page 1: The day the Dollar Died. This is stated in one form or another on pages 6 & 10 of the Intro and probably other places. Why not get it closer to correct and include a diagram similiar to the one sent to you by e amil that shows total credit market debt as percent of U.S. GDP along with Roosevelt confiscating all gold owned by U. S. Citizens in 1934 (3 years after I was born) and currency no longer backed by gold DOMESTICALLY. Nixon closed the "gold window" for dollars INTERNATIONALLY in 1971 BECAUSE THE FRENCH MADE A RUN ON CONVERTING THEIR DOLLARS TO GOLD. Neither Roosevelt or Nixon got Congressional approval...it was done by executive order...bypassing the PEOPLE's representatives.
I know you want to keep it simple, but why not get it close to historically correct.
I know that perpetual motion is a much sought after thing in physics. Maybe it is not so different with money?
It is completely true. We hear them saying that the financial system (banks) must be saved. Eventhough the industry, commerce and everything else are broke. What if they haven´t done that bailout thing and would have distributed those 7 trillion to each person in the planet. It is just a paradox. But think about it.
even when the bank says it is broke, it isn't...they accept a bailout from the government and turn around and loan it back to them again with interest.
Refer to The Obama Deception Full Length video online.
Robert,
Please check the following movie either at any of the following links:
http://www.youtube.com/watch?v=AJMDuPBMGTY&feature=PlayList&p=146ABC112D...
or
http://www.zeitgeistmovie.com/
I am sure you'll find them really interesting. They're about all you have written and add more important information.
Blessings,
Isaac
That's great! It sure does sound like our banking system!
How about fractional reserve banking? Sure, it was good idea back when banks were basically gold deposits and all currency was backed by a standard of gold. What banker wouldn't want to invest some of that standing metal into other revenue generating assets? But once removed from a standard and unlimited currency was able to be added into the financial system, it became an exponential monster!
Playing by old rules in a new system creates a very unstable environment. And although it may take many years for it to become apparent, any structure built on the wrong foundation will eventually crumble.
As I told you, I am from Switzerland. Many people think the Swiss banks are untouchable, but I only have one comment... Look at what happened to UBS in 2008.
UBS was making profits every quarter of the year, and last quarter they had a huge deficit. Guess what ? The Swiss government gave them money at the end of 2008 ! The real question is: What happened to all of the profits ?
I think it should be a good idea to include this story in the book with the real numbers !
David
I have always felt the I would like to be a bank. Pick up money from the government and be a bank to collect the interest/transaction fee etc.
Another mis-conception is that, if rich people have less, lower-income people will have more. Ignorant folk will cheer when they hear that the tax rates for high incomes are raised, but they do not realize the implications for them as employees and consumers.
If money is, or will be, worthless, and the house is not an asset, and we shouldn't diversify or invest in stocks and mutual funds... what can we do? Is there no way to acquire and protect wealth? I don't understand.
I think that banks being able to print money allows them to never go broke. I should say that the Federal Reserve has the ability to print money and then flush the financial system with money. I have not studied economics but I would imagine that if there is a lack of financial self imposed discipline within our financial environment than chaos will reign. Is that what we are seeing in our world today?
By sheer operational means, a bank can and should never "go broke". Not only is there a power bestowed that allows for more money to be printed, banks maintain their profitability by charging fees and interest to their patrons. Now, when confidence in banks is low (as it is right now), perhaps fewer people are utilizing the banking system as a whole. However, that's not what got us into this whole "banking" fiasco to begin with, is it?Again, let's go back to the people.
The banking industry and institutions aren't "bad". In fact, if you're not the consumer being raked over the coals, the concept of banking is actually pretty ingenius. Where else can you legally charge "broke" people for not having money? Where else can you legally take advantage of the fact that somebody may have made some bad decisions in their life (whether they be personal or professional) and charge them more money for those prior mistakes, regardless of what they're trying to learn and accomplish with their life at the present time? It's always amazed me that you get charged a fee for taking your own money out of your own savings account when there's no agreement between you and the bank that you're going to leave it in there for any given amount of time for them to use (as with investments like CDs and such). This being the case, it seems to me that, once again, the concept of banks, what they do, the services they provide, etc. aren't "bad". In fact, they suit most people just fine. It's the fact that there aren't enough solid boundaries (call them ethics, for the sake of argument) to enforce them to do the right things when there's nobody to make them. What's the old saying? "When the cat's away, the mice will play", right? Well, in the case of banks, there have been no cats and the mice have ruled the dominion.
What we're experiencing now in this area of our economy is an attempt at a correction of a situation that's been allowed to continue for far too long, and I must say that I strongly disagree with bailing them out. Yes, of course, I realize that not doing so would bring about other consequences and, probably, further hardships on many people. However, those to come after (both businesses and people who make up the general population) will not soon forget and, as a result, hopefully be less greedy (upper echelon) and choose to seek out a more formidable education about money, finances, banking institutions, etc. -- and ask questions instead of being one in a herd of many who have no idea where they're going.
I always knew banks had an unlimited amount of money... I thought the harvard grads running the banks just did something amazing in the stock market. I was always curious about how they operated but when I read the series on how to invest in gold and silver, it blew my mind about the reverse pyramids... I had heard of stock crashes and RE crashes in school but nothing of the why or how, just that it was a very bad time. Your book clarified alot of what I thought was going on. Thank you... now if only I can use it to my advantage....
Kind of sounds like this could circulate discussion back to the gold standard.
I know some individuals who don't use banks. They are generally cash rich and own property. The property is their bank. Cash in their pockets pays their necessities while they live under their means and the properties make them cash/wealth.
The sad part is banks create money in that sense. Every dollar deposited in the bank can be loaned out 2/1(2/1 is being nice) which to me is magical. So they need us to keep making deposits so they won't go broke.
I receive so many mailings about banks wanting me to open an account! Ours are better than X's! I believe that no bank is better than another because they all operate the same way. They want you to be in bad debt. They don't want you to have good debt because they lose control over you!
They are in the ideal position in a downturn as they may control both sides of any transaction. Say a deal is in trouble,not only can they change lending terms to place adverse conditions on a developer ie change allowable LVRs etc they are also in a position to fund the new purchaser into the deal. Their cash or 'skin' is never lost. You cant go broke if your interest and control is not lost
Banks like any organization are subject to the personality rule...what is that you ask? Performance plays a good part of being promoted to high positions within an institution, however, your personality (with a little bit of good looks) will take you to the top with the right combination. What's that have to do with this subject...well banks are no different and don't always have the most adept and financially savvy individual running them. These CEOs and managers run around in the same circles and most of them were swept away with the subprime wooing and of course the obscene profits. So, when you have a bunch of financial institutions run by personalities instead of the most educated/appropriate people then this is what you get.
In all actuality, the current banks in trouble aren't running out of cash, they just have to many toxic assets. And now with the bail out money they are just gun shy on lending, again due to the inexperience of the CEOs. What a circle of friends...?
I've decided to be my own bank...
Over 18 small banks in America have been taken over by the FED this year alone in 2009.
So yes, banks do go broke do to insolvency.
As far as creating debt to boost the economy? You make a very good point but, the reality to what is happening to the economy right now is to some degree the contraction of available credit, not that credit is available.
Below is a perfect example of how the Canadian Bank's in Canada are exasperating the problem of our economy by not lending. And this has nothing to do with one's ability to pay the debt that they have accumulated.
The following is from my blogs Varying Viewpoint.blogspot.com. &
Varying Viewpoint.com.
The Bank of Canada lowers interest rates to make it more affordable for consumers to borrow.
The politicians say to the banks "lend money". The banks say "we are lending money". And yet the credit freeze is still frozen.
Well, the truth is banks are lending, but not in a way most people think, and the way they are lending now will not stop the downward trend of the economy. If anything it might exasperate it more to the down side.
The fact is, the banks have changed the rules on how they lend money and provide credit from just 6 months ago, which has nothing to do with one's own credit rating.
I'll give you an example of what and how the banks in Canada were doing business then as opposed to now, and you will see that lending money is not what it used to be.
Remember when home prices shot up 2-3 years ago and the economy was booming? Well if you were lucky enough to own a house before the boom, you were now in a position to tap in to the equity that your house had accumulated. Banks, as well as private lenders made perfectly sure that you knew as a home owner that you could draw a line of credit or a second mortgage on your house without re-mortgaging the whole house.
We purchased our home in March 2006 for $299,000.00. 15 months later I knew our house was worth about $625,000.00. I went to our bank the CIBC to get a line of credit against our house. We still had the original mortgage of about $288,000 with another lending institution. The CIBC appraised our house at $640,000 in June 2007 and gave us a line of credit of $200,000. When the Canadian banks were okaying loans of any sort, it being Lines of Credit, Personal loans, Mortgages, they have a system that they use to determine if the borrower can handle and or qualify for a specific amount of debt on a monthly basis. The borrower's debt can not exceed 40 or 42% of their gross income. Example, we (my wife and I) in 2007 earned $100.000/yr total before taxes and all other deductions. In the bank's eyes we qualify for $40,000 to $42,000/yr in debt payments. So if you take $100,000 that we earn on a yearly basses and divide by 12 months, our gross pay per month = $8,333.33. Now take $8,333.33 and divide it by 42% and that = $3,500.00 per month that the banks will allow us to owe in monthly payments towards all outstanding debt. So with our existing monthly mortgage payment of $2,172.79 which includes our property tax we would be allowed to incur additional monthly debt payments of up to $1,327.21. Now here is where it becomes interesting. In June 2007, and for as far back as I can remember, up until September 2008, when the banks calculated the monthly payment of a Line of Credit , they (the banks) only calculated the actual interest accrued monthly on that line of credit. So for example if we spent all that credit and owed the full $200,000 of that line of credit in 2007, with the then interest rate of 5.50%, that worked out to $916.66 in our minimum monthly interest payment without paying down the principal, and remember in the bank's eyes that's all we had to pay monthly. If the interest rate went up, our minimum monthly payment went up, if the interest rates went down our minimum monthly payment went down. So according to the bank, and this was with all the banks at that time in Canada up untill September 2008, our mortgage payment of $2,172.79 plus the minimum interest payment on our Line of Credit of $916.66 gave us a total of $3,089.46 in monthly debt, which was within the guide lines of the 42% monthly debt to gross income ratio.
Now this is very important, and you will need to remember this for later. In 2007 as per the banks, a $916.66/monthly payment times 12 months = $11,000.00/yr in debt payment for just the line of credit. At $11,000.00 in debt payment, that would eat up $26,000.00 of our gross income to qualify for this line of credit, leaving us with $74,000.00 in gross income for our mortgage and any other debt that we may incur. In other words as per the banking system in Canada up until September 2008, to have this line of credit at an interest rate of 5.50% we need to earn $26,000 in gross income per year just to qualify for this one loan (the line of credit).
Now that all sounds reasonable.
In early February 2009 I phoned CIBC to find out if we can transfer our mortgage over to them and get a better rate to boot. I gave CIBC actual and factual numbers of our income and debt over the phone and asked if this will work? "I don't see why not" the CIBC personal banker stated over the phone. I was apprehensive with her answer because of the amount of debt we had accumulated, and I wasn't sure if we would fit in with their module of acceptance of 42% monthly debt to gross income ratio. As much as I wanted our mortgage transfered over to CIBC and at a lower rate, I was not sure if she could swing it. Here's why. As of 2009 my wife and I earn $98,000.00/year, down from $100,000.00 in June 2007, not a big deal. But we accumulated a lot more debt over the past 2 years since we got the line of credit. First our mortgage monthly payment went up from $2,172.79 to $2,207.96 because of a property tax increased, no big deal. Second we maxed out our line of credit of $200,000.00, but the minimum monthly payment has gone down to $500.00 from $916.66, a saving of ($416.66/month). Third we have accumulated additional debt of $91,000.00, for various things like a vacation, car purchase, credit cards and investments. So as per the Canadian banks module that I knew as of June 2007 (which I had no reason to think had changed), I had figured if we consolidated all of our additional debt of $91,000.00 in to a personal loan we might be able to make it work, and as I already stated above so did our personal banker.
Here is how I though it could work (with what I knew).
First the mortgage. If the CIBC would take over the mortgage from the lending institution that currently holds it, they (the CIBC) would give us $4000.00 cash back and we can lock in our interest rate for 5 years at 4.39%, a far cry from the 7.25% which we are now paying. That would bring our monthly mortgage payment with property tax, down to $1663.62 from $2,209.96 a savings of ($546.34/month). Second, if we took that $4,000.00 cash back that the CIBC gave us for transferring over the mortgage, and put that against the $91,000 of our additional debt that would bring it down to $87,000 then consolidate that $87,000.00 in to a personal loan at 5.75% over 5 years (which is that maximum length of a personal loan that they will do), that would give us a monthly payment of $1,696.00. Third, remember the line of credit of $200,000.00, it is now at a 3.00% interest rate, with a minimum monthly payment of $500.00 from $916.66, a saving of ($416.66/month).So with our monthly mortgage payment with property tax of $1663.62 + our consolidation loan monthly payment of $1,696.00 and our line of credit minimum monthly payment of $500.00, our total debt monthly payment is $3,859.62 divide by our gross monthly income of $8,166.67 (remember that we earn $2,000 less per year then in 2007) which works out to 47.3% monthly debt to gross income ratio.I thought not bad, maybe they will squeeze it through? Remember I wasn't so sure, but our personal banker thought it was possible.
Now before I go on, I just want to be clear about why I thought that we could get a consolidation loan for our outstanding debt of $87,000.00 at 5.75% over 5 years. Three days before our appointment with our CIBC personal banker, I checked with someone I knew at another CIBC location to find out what the interest rates were on personal loans. I knew they would be higher then any mortgage or line of credit interest rate. He said "that would depend on your credit score" and he proceeded to show me right off his computer screen what the rates were. They ranged from 5.75% to 9.75% for a personal consolidation loan. I thought no problem, our credit ratting is perfect, we have not missed a payment of any kind in over the last 15 years. So there was no reason for me to think that we would not get the 5.75% interest rate on our personal loan.
Now here is what the banks are doing as of September 2008.
First, remember how the banks calculated the minimum monthly payment on a line of credit, which was interest only? Well nothing has changed as far as how they bill us or anyone else for that matter. We get our statement in the mail and there it is, an interest only minimum monthly payment on our $200,000.00 line of credit at 3.00% interest rate which works out to about $500.00/month. If I want to pay more which I'm sure most people do to some degree than just the minimum, we can. But when we went to the CIBC for our scheduled appointment, we got whipsawed. Our personal banker took all our information and guess what, no go! Here's why. According to our personal banker, when calculating the minimum monthly debt to gross income ratio, she put down $2,000.00 as a minimum monthly payment on our line of credit of $200,000.00. That's right, 1% of the total debt of the line of credit for our minimum monthly payment which works out to $2,000.00, not $500.00. I of course said "but I have the statement that CIBC sent us in the mail right here showing the minimum monthly payment of $500.00", she said, "doesn't matter I can't change it if I wanted to". She also said that "all the banks are doing this now since the credit freeze last September 2008". So, when I was doing my calculations at home before going to CIBC, I calculated that our line of credit minimum monthly payment of $500.00 x 12 months = $6,000.00/year in debt payment for just the line of credit. At $6,000.00 in debt payment, as per the debt ratio of 42% that would require $14,300.00 of our gross income to qualify for just this line of credit, leaving us with $83,700.00 in gross income for our mortgage and any other debt that we may have accumulated. Remember in 2007, the interest rates was 5.50% on our line of credit, with a $916.66/monthly payment x 12 months = $11,000.00/yr in debt payment for just the line of credit. At $11,000.00 in debt payment, that required $26,000.00 of our gross income at that time to qualify for this line of credit, leaving us with $74,000.00 in gross income for our mortgage and any other debt that we may accumulate. So of course I thought that our monthly debt to gross income ratio on our line of credit had improved, because of the fact, that the interest rate came down from 5.50% to 3.00%, which brought down our minimum monthly payment, which in turn brought down the monthly debt to gross income ratio on that line of credit from $26,000.00 per year to $14,300.00 per year for qualification purposes.
Guess what happens now with a fictitious $2,000.00 minimum monthly payment on that line of credit on debt to gross income ratio? Well, $2,000.00 x 12 months = $24,000.00/year at 42% of gross income to debt ratio, that requires $57,200.00 of our $98,000.00 gross income, just on a qualifying basis for only our line of credit. That would leave us just $40,800.00 of our remaining gross income, to cover our mortgage and other debts for qualification purposes of income to debt ratio for the year. So, when the $40,800.00 of are remaining yearly gross income is divided by 12 months = $3,400.00 in monthly gross income and divide that by 42% monthly debt to gross income ratio, that would leave us with just $1,428.00 per month to cover our mortgage and other debts. $1,428.00 per month doesn't even cover our currant mortgage payment let alone any of our other debt for qualification purposes only. But remember, that 1% $2,000.00 minimum monthly payment on our line of credit is fictitious.
Now here is what that really means to us and anybody else in Canada who has an existing line of credit. The difference of what CIBC bills us, and how they qualified us for this line of credit, back in 2007, with a now 3.00% interest rate, which works out to $500.00/month x 12 months = $6,000.00/year in payments, required a gross income of $14,300.00/year for qualification purposes as per the 42% debt to gross income ratio. But now with a 1% fictitious $2,000.00 minimum monthly payment on that same line of credit x 12 months = $24,000.00/year (remember this not what they bill us or any body else), we need $57,200.00/year in gross income as per the 42% debt to gross income ratio for this one loan for qualification purposes only. That's a difference of $42,900.00/year in gross income that we have to come up with just to qualify for our present line of credit, and again for qualification purposes only. To have just this current line of credit loan, we have to be earning $42,900.00/year more in gross income.
I don't know about you, but I don't see our yearly gross income going up from $98,000.00/yr to $140,900.00/yr just to qualify for the line of credit that we already have, (not in this economic environment)?
Now, I am sure some people will say that we screwed ourselves by spending more then we earned and going deeper into debt. After all just because we were given a line of credit of $200,000.00 didn't mean that we had to spend it all, and more. No, thats right we didn't. And I'm not whining about our debt situation. We spent freely and willingly. We purchased a car, went on vacation, spent a lot on our house, and we invested most of it. Not getting what we wanted from the bank is frustrating and in the end it will cost us a lot more in interest the way things are, but we will survive (providing we keep our jobs).
The point is, think about all those home owners across Canada, and maybe in the US as well who's homes went up in value over the last 4-5 years and got lines of credit?
Well if Bob in Calgary Alberta got a line of credit of $100,000.00 2 years ago and still has it. At todays interest rates of 3.00% his minimum monthly payment is only about $275.00. But what if Bob needs to get a loan from the bank, any loan even when applying for a credit card, his line of credit minimum monthly payment of about $275.00 is seen as a fictitious 1% minimum monthly payment, which works out to $1,000.00. Which in turn requires Bob's income to rise from say $60,000.00 to $81,000.00. Because Bob has that line of credit, he has to earn $21,000.00 more per year just to cover the (fictitious $1,000.00 minimum monthly payment on his line of credit). And this has nothing to do with his credit score.
If Stacy in Regina Saskatchewan got a line of credit of $250,000.00 against her house only a year ago and still has it. At todays interest rates of 3.00% her minimum monthly payment is only about $687.50. But Stacy needs a new car or a used car, and maybe the $250,000.00 she got from the bank a year ago went to start up a business, so it's tapped out, the money is invested and she's making her payments on time (remember this has nothing to do with her credit score). She tries to get a loan from the bank, remember any loan even when applying for a credit card. Stacy's actual minimum monthly payment on her line of credit is only about $687.50, but the bank sees her line of credit as a fictitious 1% minimum monthly phantom payment, which works out to $2,500.00, which in turn requires Stacy's income to rise from say $75,000.00/yr to $126,000.00/yr just because she has that line of credit. Stacy has to earn $51,000.00 more per year to cover the (fictitious $2,500.00 minimum monthly payment on his line of credit). And again this has nothing to do with her credit score.
So, what do you think a bank would do if a customer applied for a loan of any kind with them, and they proceeded to tell the bank that they earn $80,000.00/yr, but when the customer had to bring in their last 2 pay slips so the bank can verify that figure, and the bank looks at those pay slips, and the customer only earns $72,000.00/yr according to those pay slips, would it not be suprising if the bank did not use the word "Fraudulent"?
So how is it possible for banks to be giving out loans of any kind with this new fictitious 1% minimum monthly payment on lines of credit against the monthly debt to gross income ratio?
2 ways.
1. Don't have an existing line of credit for the bank to use their new fictitious 1% minimum monthly payment debt to gross income ratio.
2. If you have (still) enough equity in your home to re-mortgage your existing mortgage with your line of credit? Then the bank will absorb that line of credit into your mortgage and no more line of credit, no more fictitious 1% monthly payment debt to gross income ratio.
Mmmm, how nice for the banks. Most everybody knows how debt pay down works with lines of credit, credit cards, personal loans, any debt that is not a mortgage can be paid down to zero with no penalty.
If home owners are in a bind, have a line of credit and enough equity in their home, they can get that debt absorbed into their mortgage, but now they can never pay if off without a nice fat penalty, because it's a mortgage now.
Oh, by the way, home prices have fallen across the country, from 10-25%. Remember our house? The bank appraised it at $640,000.00 just 20 months ago. Now it worth about $550,000.00.
If you think that fictitious 1% minimum monthly payments are only on lines of credit? There's more.
Remember I wanted to consolidate that $87,000.00 of debt ($91,000.00 before the $4,000.00 cash back for transferring our mortgage) in to a personal loan at 5.75% over 5 years, that would give us a monthly payment of $1,696.00. When our personal banker was entering all of our other debts aside from our mortgage and line of credit debt, she was entering all our individual minimum monthly payments on those debts at a 3% minimum monthly payments, and not the actual minimum monthly payment as per the statements that we receive in the mail. Sound familiar? For example, one of our credit cards has a balance of about $9,920.00 with a minimum monthly payment of $72.00, (it's at 6.75%). Guess what she does? She, our personal banker, enters that minimum monthly payment at 3% which adds up to $297.60/month for that one credit card. As with the line of credit statement that we brought down with us, I too had the credit card statement which I showed her, that $72.00 was the minimum monthly payment on that credit card. She said, "doesn't matter I can't change it if I wanted to", just like before. Apparently this fictitious 3% minimum monthly payment on credit cards against the monthly debt to gross income ratio has always been like this, even before the credit freeze. So again more fictitious minimum monthly payments, but this time on credit cards. And again this has nothing to do with our credit score. A fictitious 3% minimum monthly payment on credit cards will go a long way to insuring that it will be vary difficult for people, even if they don't have a line of credit or a mortgage on a house, to receive any new credit from any bank in
Canada, within the 42% monthly debt to gross income ratio qualification system.
Lets say Robert in Toronto has $65,000.00 in credit card debt, but no other debt, no line of credit, no mortgage, no loan, just credit card debt, Well if Robert wants any additional debt of any kind from any bank, lets see how they will look at that? This should be easy, $65,000.00 x 3% per month = $1,950.00 as a fictitious minimum monthly payment that the bank states to Robert that they have to take in to consideration regardless of what his true minimum monthly payments are. So as the 42% monthly debt to gross income ratio goes, Robert has to be earning about $56,000.00/yr just to stay within that 42% monthly debt to gross income ratio. If Robert wants any more credit of any kind from any bank, he better be earning a lot more then his $56,000.00/yr.
Now unfortunately the fictitious numbers don't stop there with minimum monthly payments. Remember, with all the above examples that I have given so far, all of them have had NOTHING to do with one's own credit rating. The bank, unbeknownst to me, have their own credit rating system that they use before they even incorporate the customers own personal credit rating from the credit bureau.
When we were going over the numbers with our personal banker for the consolidation loan, she came up with a 9.75% interest rate for a monthly payment of $1,862.00. I said "how's that?". "I figured it out at home at 5.75% for a monthly payment of $1,696.00", a difference of ($166.00/month). After all I did assume that we would get the best rate because of our credit rating. I knew our credit rating would be rated quite high because we have not missed a payment of any kind in over the past 15 years. First she said "it's because of the amount of debt which has nothing to do with your personal credit rating", she also said "see this" as she pointed to her computer screen, "that's the rating that the bank gives you as a credit score". "How's that work?" I asked. She said "the more debt you have the lower the score". I asked "regardless of our credit rating?" She said "yes, this is the banks credit rating system on how much debt you have which has nothing to do with your personal credit rating, yet". I was curious, so again I asked "how dose that work?". She explained to me "for example if you have a Visa and the limit is $25,000.00 and your currant balance on that Visa is $20,000.00 your score goes down, because it's close to the limit". So again I asked "if $20,000.00 is my currant balance on Visa card with a $25,000.00 limit , at what point or how low does my balance have to be in relation to my limit to I get a higher credit score from the bank?". She said "your balance would have to be half or less of your current limit on that one credit card for you to get a better credit score from the bank, and that's the same for each and every one of your credit cards". So before the bank even does a personal credit check on us, they have their own fictitious credit score that they are implementing on us which has nothing to do with our credit history. After I got the gist of what was going on, our personal banker said, "lets do your personal credit check, that should bump up your score with what we have given you so far". It did and we did get a better rate, but not the 5.75% that I thought we should get, we got 8.50%, not even half way between the lowest and highest rates that was available. Remember that monthly debt to gross income ratio. Well with the banks own credit rating system that they use to push up the interest rates that they offer, it will in turn bring up the monthly payments which will then affect monthly debt to gross income ratio and will be just one more reason why the bank can't or won't be forking over very many loans in the near future.
So what does this tell you about the willingness of the banks in Canada on giving out loans?
Well, it tells me that if they are?, they are few and far between. It's definitely not business as usual.
And it doesn't seem to matter much at all to the banks about your willingness, ability and most of all your track record on paying your bills.
Bonus Material
I didn't want to get into this part of our experience at the bank with the above information because I didn't want to make it anymore complicated then it already is. Remember when our personal banker was going over the numbers for our consolidation loan, and I stated above she originally came up with a 9.75% interest rate for a monthly payment of $1,862.00? Well that was without the $316.73 in monthly insurance payments for just this one consolidation loan.
What really happened was when she quoted us what our monthly payment on our consolidation loan would be, she stated "$2,178.22/month over 5 years" I of course said "what?". Then she broke it down, $1,862.00 was for the loan, $195.70 was for CIBC Payment Protecter insurance and $121.03 was for life insurance, all per month. So I of course said "we already have life insurance through my wife's work". She looked at me as if I had three eyes, and proceeded to say "well that's a big loan". After a couple of minutes of insisting that we already had insurance, she removed those monthly insurance payments, which by the way, not only would have brought up our monthly debt to gross income ratio from us needing $53,500.00/yr to $62,500.00/yr in gross income for just that one loan, which made it ever more difficult for qualification purposes. But the cost of this $316.73 in monthly insurance payments would end up costing us about $3,800.76/yr x 5 years = $19,003.80 in unwanted, unwarranted additional total payment cost to us for this one loan from the bank. Our personal banker also did this when she gave us the monthly payment on our mortgage as well.
I wonder how many people that have already received mortgages and personal loans through the banks and were convinced that they needed these (non mandatory) monthly insurance premiums attached to their monthly loan payments?
The reason why I am pointing this out is, in the past when we did our last 2 consolidation loans with the same personal banker at the same bank, see were asked, "are your interested in adding some sort of insurance, due to job loss, disability, or death, that would be tacked on to your monthly payment over the course of the loan?". We declined it then as well. But now it is coming across as if, we not only need this, but I was beginning to wonder how willing our personal banker was about (if we qualified) ok'ing the loans without some sort of insurance being attached to it?
I don't know if this is happening anywhere else outside of Canada? But I have a feeling that at some point in time in the future, our Canadian banks will find away to make it mandatory for their customers to have some sort of insurance attached to every loan that they give out . After all, our Canadian banks have been in the insurance business for the last 10 years or so and have been selling this type of insurance to their Visa and Master card holders.
There's nothing like a crisis, especially a credit crisis for the banks to justify and peddle their insurance as a way to protect the customer, and of course themselves, who by the way just happen to be in the business of selling it.
How convenient!
Bonus Material II
We received a letter from Accredited Home Lenders on February 9 2009 stating that "they would not be renewing our mortgage, and that we had to find alternative financing by April 1 2009".
Well, I just phoned Accredited Home Lenders February 26 2009, to inform them that we were unable to transfer the mortgage over to another lending institution. I didn't mention this before because when I first wrote this, I thought if we didn't get the mortgage transfered, they Accredited Home Lenders would just allow us to keep making our monthly payments by renewing our mortgage for another year or so. I didn't realize the severity of our situation until we were unable to transfer our mortgage.
They stated over the phone that "we have until July 1 2009 to transfer our mortgage over to another lending institution or they Accredited Home Lenders will foreclose on us".
That's right, there calling in the loan even though we have not missed or were late on 1 monthly payment over the past 35 months (since we first purchased the house).
Apparently, they Accredited Home Lenders are in a little financial trouble and are not renewing any of the Canadian mortgages. There going down like so many other lending institutions, and they want their money.
If your interested, just Google them, you'll get the gist.
How much time does one have rigt now to accumulate as much wealth
befoe the financial storm really hits what levels of unemployment
are we looking at if its extremely high it will no doubt affect the ability of people to pay rent thus tremedouly affecting my cashflow whats your take robert?
My wife and I both work for a real estate company that sells bank owned homes. Its amazing how fianacially stupid the banks are! My wife who is a glorified secritary helps with the BPO's and takes a look at the comparisons of the homes than sets a price and the banks just agree to what price "a secretary wants to list it for." I have seen brokers who are listing these bank owned homes buy the properties themselves not telling the banks about the other offers sent in. The banks just seem to have no clue on what a real asset is, let alone how to control or manage a property. You would think there would pro's who would help take care of these homes istead of handing them over to real estate brokers who care less on the sellers needs. My testimony strengthened when I had dinner in a $17,000,000.00 dollar home. We were lucky enough to sit at the table the owner of the home was sitting at. We were also sitting with a top manager of Bank of America. The fist thing the bank manager asked the weathly man was, "what should we do with our money now that our 401k is gone? Should we pull out and invest in something else?" The rich man aswered and said "i dont know." In a tone of voice that was saying, "Your the Banker Dummy!" (the wealthy man found a niche in texas on deleloping and made millions) but it really opened my eyes on how the banks really have no clue whats going on. Who went to school and recieved no real finacail education. They can all do calculas but cant understand the foundation and basics of money!
Besides not being taught what fiat currency is, the topic of taxes is hardly covered in spite of it being an employees #1 expense. How those taxes apply to the cashflow quadrant are also not discussed. The education system does not mention the other three quadrants, just the "E" quadrant.
The history of money is rarely discussed in detail as well.
Wade
I dont think any school teach people about how interest rates on loans or mortgages are apply and how much you end up paying.
usually people realise it, till they get tired of paying and still donot get to own their house.or just never are able to get out of debt on the loan.all because the famous interests and fees that are charged on monthly basis or yearly basis.
thanks to internet and your books can show you and teach you on the matter but not 100% of people use em.
I also think that schools shall teach about the use of credit cards since they handem like candies specially in the USA.
regards.
lalo.
hope this comments can be of good use.
John Kenneth Galbraith once famously said, “The process by which money is created is so simple that the mind is repelled.”
I believe this to be a true statement, not just because of the manner in which the Fed allows banks to behave. It is also a reflection of what the masses have been conditioned to believe is financially intelligent. As long as people believe putting money in the bank is the right thing to do, the banks can count on money being available for their own use.
I agree with Wooddell. That Rolling Stone article is a must read. The Fed & Treasury have too much power.
http://www.rollingstone.com/politics/story/26793903/the_big_takeover/print
It's too true, and it's sad that since there is no value in our currency, it's impossible to stop this rampant printing and spending. Alexander Hamilton was the one who got it right, tie our currency to gold for some stability, and this will slow inflation dramatically. If there was some stability, we wouldn't be in nearly the mess we're in or the one we're creating.
In the context of miseducation the biggest miseducation is believing bullshit (the King has a devine right to rule.. no he's the toughest gangster in the land)
So whats the reality of our current predicament? Read the quote below by one of the guys who put the fed into place.
" Without realizing it, every American will insure us for any loss we may incur and in this manner; every American will unknowingly be our servant, however begrudgingly."
"[Very] soon, every American will be required to register their biological property in a National system designed to keep track of the people and that will operate under the ancient system of pledging. By such methodology, we can compel people to submit to our agenda, which will affect our security as a chargeback for our fiat paper currency. Every American will be forced to register or suffer not being able to work and earn a living. They will be our chattel, and we will hold the security interest over them forever, by operation of the law merchant under the scheme of secured transactions.
Americans, by unknowingly or unwittingly delivering the bills of lading to us will be rendered bankrupt and insolvent, forever to remain economic slaves through taxation, secured by their pledges. They will be stripped of their rights and given a commercial value designed to make us a profit and they will be non the wiser, for not one man in a million could ever figure our plans and, if by accident one or two would figure it out, we have in our arsenal plausible deniability. After all, this is the only logical way to fund government, by floating liens and debt to the registrants in the form of benefits and privileges.
This will inevitably reap to us huge profits beyond our wildest expectations and leave every American a contributor or to this fraud which we will call "Social Insurance." Without realizing it, every American will insure us for any loss we may incur and in this manner; every American will unknowingly be our servant, however begrudgingly. The people will become helpless and without any hope for their redemption and, we will employ the high office of the President of our dummy corporation to foment this plot against America."
Edward Mandell House - Private Memoirs: Meeting with Woodrow Wilson, US President 1913-1921
anyways hope this helps you guys with perspective.
Udesh
How many financial mis-educations have we been subject to?
Off the top of my head here are just a couple:
1) Investing is about cash.
The problem (or one of them) is that investing is about cash flow. In The Richest Man in Babylon George Clason writes "A fat purse empties quickly if there is no golden stream to refill it" 90% of all the "investing" Americans have been doing has been about increasing their cash supply. Once they've made their cash, if they want more, they have to go out and do it again (does this sound familiar to anyone? J.O.B)
2)Investing is about acquiring assets.
The purpose of this of course is to get you to buy all those assets that the rich are selling. Then of course to get rid of their liabilities, they start telling you that they are assets too and sell you those as well. But where did they get those assets? They created them. Which of course makes people jealous, so those assets also have to be protected. Then once the assets were sold, the rich had all this worthless cash on them so they put that cash into safe storage by acquiring other assets, until they were ready to do what many may have set out to do in the first place: pass it on, or create their legacy.
The above story illustrates that the full power of investing is divided into 5 activities:
1) creating assets
2) protecting those assets
3) selling those assets
4) acquiring more assets so that one day you can
5) give it away and do something that will last for decades or centuries.
Broken link,
it seems the video in my previous Corrupt banking link was taken down soon after posting by youtube, here is an alternative link hope this works as the video is very interesting.
http://www.conspiracyoftherich.com/discuss/1/65
The Fundamental Problem
If the treasury issued and controlled the dollar, would they not also have a politically motivated vested interest in issuance in the absence of a valuer such as gold stock to value the dollar against as it once was ?
Getting the issuance value of the currency correct could become the hallmark of good government, or become shrouded in political intrigue.
The gold standard stabilized currency, but after that was desolved greed ensued and led to the mess we are in today,
If money issuance became regulated by some legal mechanisum, it would lead to a more stable economy, average people would have more disposable income to invest and confidence to do so, with financial education more could become open market investors and people by virtue of choice would stimulate social direction rather than be left to the self interest of the few who have left so many broke and homeless, with the tax payer confronted with future high inflation to pay for lining the banks shareholders vaults.
"Cash is trash" may be true today but not everyone can own gold or a diminishing supply of silver to trade on, the dollar needs a relatively stable value standard to move forward with.
and fedex oops sorry! The federal reserve should be regulated to issuance by the treasury and become government vaults of regulatory supply.
The problem is not so much that a bank can issue more money when needed. When productivity in the economy increases the money supply needs to increase, too.
The problem is that the money issued is OWNED by the bank. Whenever a bank creates value by "merely writing on an ordinary piece of paper" they essentially counterfeit value. Counterfeiting is a crime because the value of the money evaporates when people don't have to produce to acquire it.
Central banks have a massive incentive to inflate the money we all rely on. If you could simply print money and lend it, you would probably print and lend it feverishly, right? Even if you loaned it a low interest rate, the money is to be paid back to you. Every last cent of the capital on the loan is profit – not to mention the interest.
The central banks have a massive vested interest in inflating the currency. The more they inflate, the more they profit. However, the more they inflate, the less stable our economies become and the more wealth is embezzled from productive people's pockets.
http://www.youtube.com/watch?v=bymJC2mxd_w
The Money Masters http:/www.youtube.com/watch?v=vL6xCOAolZE
Corrupt Banking System http://www.youtube.com/watch?v=cy-fD78zyvI
Let me issue and control a nations money and I care not who writes the laws.
Amshel Rothchild. (1790)
this Huxlian world could be made better for all, but the few wealth builders would loose the edge of profiteering from such volatility.
would investors be happy in such a brave new world ?
please watch the videos if your unsure what I mean.
At first, I thought only central banks can print money, so a regular bank can run out of money.
However, when you think about it deeply, one can argue that there are many ways for the bank to print money. Examples are like issuing bonds, getting international loans or even getting government help and get free money. This can summed as printing money.
In Turkey, we had a big economic crisis in 2001. This was mainly because highly leveraged banks and most of them collapsed. When a bank collapses, economy stops and everybody collapses. This means that the government and rich will never let banks to fail together. This leads to chaos and everybody hurts.
As a conclusion, I can state that the system enables banks to have money no matter what.
-- Serkan
"Fed to Pump $1.2 Trillion Into Markets"
This is a quote from the Washington Post from the above article that is on their front page.
"The Federal Reserve yesterday escalated its massive campaign to stabilize the economy, saying it would flood the financial system with an additional $1.2 trillion. The decision by the Fed to buy government bonds and mortgage-related securities is designed to lower borrowing costs for home mortgages and other types of loans, thereby stimulating economic activity. The central bank, effectively, will print more money to pay for the purchases."
Take a look at the last sentence. They will just print more money to pay for the purchases" This is exactly what Robert is talking about.
You can read the entire article here:
www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031802283...
So Robert - you've really got me hooked on the 'Conspiracy' - and it has me doing some research online... what's funny is that you don't have to search far, before you can find traces of the 'Conspiracy' - against our Education, our Money - and even those people who are in the spotlight about it all...
Check this one out... MSN's Article "Stop Listening to Suze Orman"
http://articles.moneycentral.msn.com/RetirementandWills/CreateaPlan/stop...
From the article... "The personal-finance guru favors supersimple mantras -- even when they're wrong -- and psychological explanations for all your money problems. Maybe it's time to stop trusting her."
Hi Robert -
I'm glad to see you've started posting a new video blog - it's great to hear from you direct!
Here's another great episode on the John Stewart show - I'm sure you've seen it. But for everyone else out there - Jim Cramer tries to defend himself on the Daily Show - it's great! Just another part of the grand conspiracy...
http://www.thedailyshow.com/full-episodes/index.jhtml?episodeId=220533
This statement is true of central banks, but not national, regional, and local banks. These "lower" banks can create loans from thin air, but because they engage in fractional reserve banking, holding only $5 to $8 of every 100 dollars deposited, if they experience a run on the bank, they do not have the liquid cash to cover the demand. Also, if they are highly leveraged--40 to 1--in credit default swaps, collateralized debt obligations, and/or other derivatives, they can go broke if they are unable to pay their counterparties. IndyMac went broke from a run on the bank.
Hi, I am just very concerned with the Fed's power over everything. Just recently I was tuned in to a movie that proves so many of the topics being discussed. I fear for the future of humanity. The best case scenario: the people realize what is going on and fight back and all hell breaks loose, resulting in the deaths of the all-powerful bastards trying to control us. The worst case: we all fall to their plans just like the many times in the past. May the universe help us all.
This is the link to the video:
http://video.google.com/googleplayer.swf?docId=5547481422995115331&hl=en-CA
Robert, I can honestly say that sometimes this battle seems lost, but as humans there is always that tendency to fight when we believe in something. I just hope that your efforts do not fall on more death ears than sane ones. In regards to the video, the RFID chip runs on radio frequencies. Ring a bell? Oh yeah, how about the fact that Congress has passed a law forcing all tv companies to switch to cable? I wonder what they will use all those uncluttered frequencies for?
My personal goal, after getting out of this damn system's hold, is to start hitting the really impoverished places and those people who think that nothing has to be done because everything will work out. These communities need to be informed too! I am trying to be entrepreneurial but I am having a hard time. I would like someone to mentor me since I hate feeling trapped when I understand most of the things going on around me. I am willing to listen and act in any way I can. If someone sees this, please email me at mjimene04@yahoo.com
I am glad that we are born, but the unlimited greed in this world sometimes makes me extremely sad. I wish to have the power to do something too! One day I will, and no one can tell me otherwise.
Bank does not produce any products, and is not a manufacturer of any industry.
When Katie (my daughter) was four years old, I took her to a bank at a local branch. I sat with her in the bank for about twenty minutes. Then I asked her what she saw. She said that people were coming to the bank to "deposit" their money. I asked her then that why does bank take people's money? She told me that she did not know. I pointed to the office cubicles around us and there were people asking bank to loan them money.
Katie looked at the line of people "depositing" money and looked at people asking for money at the cubicles, then she said, that was not fair.
I thougt about that a lot. Is it really fair that bank get our money to loan to us? No. It is not. What's worse is that it is legally done. The bank, and their rich owners, have control over governments (I like to say that they are in bed together), and they legally print money that are not made or earned by anyone yet and give it to the banks. We, the avarage Joes, have to ask for them from the bank with interests. What a beautiful world, for the rich.
I instilled in Katie's head that in this world, only the rich wins. So, she will be rich. We will be rich.