Where the money is going....

[RadioRaheem84]

http://blogs.law.harvard.edu/philg/2009/10/17/how-wall-street-is-making-its-billions/


Phil Greenspun's finance buddy explains (http://blogs.law.harvard.edu/philg/2009/10/17/how-wall-street-is-making-its-billions/) how JPMorgan Chase and Goldman Sachs made $6.8 billion in profit last quarter. Basically they borrowed money from the US Govt at 0% and then bought bonds from the US Govt that paid 2-3%.

What kind of bonds are they buying? Are they investing the money in American business? "No, they are mostly buying Treasuries." So the money is just being shuffled from one Federal bank account to another, with each Wall Street bank skimming off $1 billion per month for itself? "Pretty much."



Geez, is this country that backwards?

[RadioRaheem84]

Ever seen a nation where the elite boast about how they don't need the petty consumers money anymore? That high end luxury stuff is what sells and makes more money for the rich.

http://www.alternet.org/workplace/140093/remembering_when_citigroup_%22cared%22_about_inequ ality/

[cyu]

money is just being shuffled from one Federal bank account to another, with each Wall Street bank skimming off $1 billion per month for itself? "Pretty much."

Geez, is this country that backwards?


That's pretty much the entire history of banking. Excerpt from http://everything2.com/user/gate/writeups/Economic+Progress+Goes+%2522Poof%2522

Maynard, Karl, Ayn, and Alan each have 100 g.p. (that's gold pieces for you non-dungeons&dragons economists). Maynard and Karl put their gold in First Bank, while Ayn and Alan put their gold in National Bank.

Maynard: 100 gp
Karl: 100 gp
Ayn: 100 gp
Alan: 100 gp

First Bank can now give a 50 g.p. loan to Alan. Alan now has 150 g.p. in his bank account. When Maynard and Karl check their bank accounts, they still say 100 g.p. each.

Maynard: 100 gp
Karl: 100 gp
Ayn: 100 gp
Alan: 150 gp

National Bank now has 250 g.p. and makes a 100 g.p. loan to Maynard, who (according to his bank) now has 200 g.p. in his bank account.

Maynard: 200 gp
Karl: 100 gp
Ayn: 100 gp
Alan: 150 gp

Back and forth it goes. Money magically appears without a single paper bill being printed.

Now if everyone suddenly decides to withdraw their money at the same time, what happens? The two banks have "real" g.p. to cover the first 400 g.p. of withdrawals. After that, the banks collapse and all the "wealth" went poof.

It's not real wealth of course - what can you really do with g.p. other than trade it for what you really want, like food to eat, a place to live, energy, heat, clothing, video games, +1 backscratchers, AK-47s, gas masks, printing presses, tractors, assembly lines, or whatever.