Home Forums Hunting & Shooting Hunter's Campfire The US has been a Socialist Country for Years

As usual, good post.

"If the bank is backed by an FDIC guarantee, then moral hazard becomes a player"

Exactly. Losses are socialized while profits are privatized. No motive for prudent conduct.

Thanks, although I sometimes wonder why I bother.

A big poke in the eye of every taxpayer. Welfare to the FATCATS.

well, not exactly fellows. inflation benefits borrowers, not lenders. I'm not talking about the current spread between fed funds and t-bills, I'm talking about the vast majority of lending which is largely fixed rate, secured lending to consumers and businesses.

and fractional reserves....by which you mean cash reserves....are the mainstay of all modern banking systems. is that bad now, too? as long as the underwriting process isn't corrupted by government distortion, it works fine.


bankers have more to lose than win from inflation, all things being equal.

Bankers gain more money in interest than they lose to borrowers via inflation. That's how the game is played. They know how much interest to charge based on anticipated inflation.

IIRC, the spread is how banks make their money, i.e the difference between what they charge in interest and what they pay for deposits. They also make money on fees etc. which they charge on other services. They can get squeezed if they have exposure to large numbers of long term fixed rate loans, and the interest on those is equal to or negative compared to what they have to pay out for time deposits such as CD's and savings accounts. Nowadays that's less of a problem for the banks as they can securitize their mortgages and sell them off to someone else. This lays off the risk onto whatever sucker happens to purchase them.

Before the 1930's they could actually call such loans, and if the mortgagee couldn't cough up the cash, he was foreclosed on and the property sold off. They can still do that for loans other than residential mortgages if I'm not mistaken.

Other than residential fixed rate mortgages though, most other loans for businesses and construction are indexed off of the prime rate, and go for a shorter term, usually 5 years. Some are fixed rate and some are not, and all take into account risk premiums based on the collateral and creditworthiness of the borrower. Their short term nature protects the bank against some inflation risk, but not against a default or non performance by the borrower. Again, they can securitize these loans and lay off the risk on someone else.

Securitization is what the OTC derivatives market is all about. The problem is that other banks, pension plans, foreign and state governments, and municipalities consumed much of the used dog food that they sold, and it is only through suspension of FASB 157 that they have been able to keep insolvency at bay.

As for cash reserves, since 2006, banks are only required to keep 10% reserves for transaction deposits like checking and debit accounts, but none for time deposits like CD's, money market, and savings accounts.

Fractional reserve banking can be a debacle if the rules are relaxed as they have been since 1999. With no difference between commercial and investment banks, the entire bank can put it's depositors at risk by investing in dodgy products such as OTC derivatives. Leverage is a way to bring in large profits, but it can also kill you with small losses, which is where we are today. Again, the only reason that the large banks and some regionals have remained solvent is because of suspension of mark to market accounting rules.

I realize that this is wandering from the topic of inflation killing bankers, but the securitization of most debt products has laid off the inflation risk to other parties. The ones who will get killed during inflationary times will be local banks and credit unions who typically keep their mortgages, or banks who purchased securitized debt products trying to get a few basis points in yield over treasuries. I mean they were rated AAA, weren't they?

Perhaps we could start with your definition of socialism, the classic def is when the government [gubmint to you probably] owns the means of production.

I certainly agree that we arent going in the right direction and fully support dismantling the nanny state but seriously derby, to call this a fascist government is kinda silly.

One of the things lacking in political discussion is precision in terminology.

If you really, ReAlLY, REALLY feel the government is fascist then why arent you in the streets with an AR15?

The answer is obvious, you are just exagerating a wee bit, which is ok, but dont expect many to agree with you.

Just my two cents.

Not sure why gun talk brings out whacko economics but it seems to breed it.

So - according to your definition - Americans - should stop calling Canada "socialist".

I'm good with that...

This is the General Discussion portion of the site; as such, any subject, including "whacko economics" is allowed here within the rules set by the moderator. If you don't like it, feel free to go elsewhere.

Instead of dismissing what I have to say out of hand, you might try and join in the discussion and elaborate on just exactly what you think are sane economics. Considering the near bankruptcy of your locale, it should be an interesting read.

Fascism is another type of socialism. Under fascism the government doesn't own the means of production it regulates the means of production.

Since about the early 1900's the US has been heading toward more and more fascism. Since Obama and some would even say Bush the national government has moved into an economic system called state capitalism by which is meant the state owns some of the means of production. If the national government continues this course of action and actually owns all means of production than the nation will become a full fledged Marxist socialism.

I seriously doubt that the nation will become a full fledged Marxist state. I do think the nation will remain a fascist state with some state capitalism.

As to taking to the streets with an AR-15 I don't own one and probably would never would own one. I'd be more apt to have an M-1 carbine. One person taking to the streets I'm afraid would be a waste of time and my life. The nation isn't ready yet to face the fact the we are a fascist nation. If that fact ever dawns on the nation I pity the politicians.

Think we're on the same page there Brian. Pretty much what I was thinkin.

Good disscusion on banking. I wil mention that during the recent banking crises, Canadian Banks received not 1 dime from the public purse, unlike the US and Great Britin. Hawkeyes sumation is right on the money.

Your singing my song Brian..........Now where is Bart and HeavyWalker hiding?