"Why do governments claim businesses and
consumption need to be financed by debt? The answer is really very simple. The
wealthy increase their wealth by lending and they do it without even having to
use their own money by means of the Ponzi
scheme known as fractional reserve banking. And when debtors cannot meet
their obligations, their assets
are acquired by the wealthy at fire sale prices who then become even
wealthier." - John Kozy
"The world's biggest economies are reaching an
inflection point where the growth in debt loads is becoming unsustainable." -
"Debt is the source of all power and
wealth for the central banking system as they do
not actually produce any tradable good, such as industry; nor do they provide
any necessary service, such as government. Interest on debt is the source of
income and authority for the central banking system, and thus, it needs to
continually advance credit and expand debt.
In Marxist theory, the
nature of accumulation
plays a very important part, in that it holds a dual character.
known as accumulation by expanded
production, which, since 1864, has been mostly concerned with capturing production. In
this case money is made through extraction of fruits of the production of
The other nature of accumulation is
by dispossession, which is usually framed in terms of relations between
capitalist and non-capitalist modes of production.
accumulation derived from dispossessing someone of something.
Atlantic slave trade was an example of accumulation by dispossession, as
Africans were dispossessed of their lives and freedom.
Colonialism is another example, where
resources are extracted, dispossessing the nation of its own resources.
Perhaps it would be helpful to expand upon Marx's
ideas of accumulation by
dispossession in regards to the central banking
system. Central banking better represents an
example of accumulation by dispossession. Money is given in loans at interest,
to which the debtor is never meant to fully repay, and is dispossessed of
freedom and wealth through interest payments and debt bondage. Debt is just another word for slavery,
therefore, the the central banking system itself,
functions through a system of
Conventional understanding of
by dispossession describes it as an interaction between capitalist and
non-capitalist modes of production, where the capitalist mode will dispossess
the non-capitalist mode of production. Central
banking, the pinnacle of the capitalist system and the primary source and
avenue of its power, is an interaction between central banks and ALL modes of
production. Industry/commerce, governments/nations, and individuals/people, are
ALL dispossessed of their
freedom through debt bondage." - Andrew Gavin Marshall
the scenario: The borrower is a retailer that has been in business for 26
years. They have five retail outlets, employ 90 people, have revenue of over
$10 million and are well-respected members of their community. In 2007, its
bank approved a term loan to expand the business. The term loan balance is
$650,000. They also have a $1 million working capital line of credit for
inventory and they owe $800,000. The loan is supported by the personal
guarantees of the two business owners and UCC filings on the incorporation
assets, which is basically inventory. The last three years, financial
statements reflect a decrease in revenue (sales) and they have sustained
When the bank made the term loan, the business's financial
statements already reflected losses. Nonetheless, the bank wrote covenants into
their loan agreement that required the incorporation to produce a certain level
of profitability. If the incorporation did not meet this level of
profitability, the loan could be called for "technical default" of the
covenant. From day one, the bank waived this requirement. That is, until this
year, when they placed the loan in their "special assets/workout division" and
subsequently "called" the loan.
The bank demanded payment in full by
It is important to understand that this incorporation never
missed even one payment on either loan. The owners were working diligently to
reduce expenses. They hired seasoned retail consultants to guide them through
the process of restructuring their business so that they would be able to
remain in business. The owners showed every willingness to work with the bank
and make the changes that would bring them through this economic crisis with
all commitments met as agreed.
The owners were faced with the
realization that the bank was going to close them down. Their new loan
officers, the decision
makers, were in another state and communicated with them through e-mail.
Let's examine the stupidity and short-sightedness of this bank's
decision. If the bank demands
payment in full on the loan, they put the incorporation out of business. The
bank will then sell the inventory and perhaps get 50 cents on the dollar for
the inventory. Even so, the bank would still sustain a loss of $750,000.
Additionally, the 90 employees would now be out of work. And five pieces of
commercial property would become vacant and no longer produce cash flow (rent)
to the landlords. If the landlords cannot fill the space, and don't have the
rental income, it is likely that they will not be able to make their mortgage
payments on the commercial properties. The domino effect is astounding." - Joe
Nocera March 10, 2009
"Asset-price inflation fueled by the Federal Reserve is
giving way to debt deflation. The US and other countries have reached a limit
in which scheduled interest and amortization absorb the entire economic surplus
of so many individuals, corporations and government bodies that new
construction, investment and employment are grinding to a halt. Families,
real estate investors and
corporations are obliged to use their entire disposable income to pay their
creditors or face bankruptcy." -
Michael Hudson 06/08
March 23, 2009 Treasury
Franz Geithner, a protégé of
announced his latest plan which seeks to harness government and private
resources to purchase an initial half-trillion dollars of
debt of investment banks.
Geithner held out the expectation that the program eventually
could grow to $1 trillion.
At the end of 2008
assets, much of it securitized credit-card debt, at just the four biggest
US banks - Bank of America,
JP Morgan Chase and
Wells Fargo -
were about $5.2 trillion, according to their 2008 annual filings.
April 24, 2009 Nonperforming on-balance-sheet assets of
JP Morgan Chase grew 185
percent over the past year to $14.7 billion.
Bad assets of
Bank of America
increase 229 percent to $25.7 billion.
Problem assets at New York-based
Citigroup rose 128 percent to $27.4 billion, and
Wells Fargo jumped 180 percent to $12.6 billion.
municipal debt bonds Christopher "Kit" Taylor, the former chief regulator and executive
director of the Municipal Securities Rulemaking Board from 1978 to 2007, said
the members of the board wouldn't allow the group to set rules on credit
default swaps and derivatives for the $2.69 trillion municipal bond market.
"The big firms didn't want us touching derivatives. They said, 'Don't
talk about it, Kit.' I saw more bankers looking out for their self interest in
my last years at the MSRB. The attitude had changed from, 'What can we do for
the good of the market,' to, 'What can we I do to ensure the future of my
business.' The profit wasn't in the underwriting, it was in the swap. Right up
until the day we went to real-time disclosure, I was getting calls from bankers
wanting to delay it. The only ones who benefited from delaying transparency
were those who profited from the trades."- Christopher "Kit" Taylor
1975 Congress set up the Municipal Securities
Rulemaking Board to make rules for firms that underwrite trade and sell
The board is funded by fees paid by member firms, which
generated revenue of $22.2 million in fiscal 2008.
As a self-regulatory
organization, members of the industry are granted the authority to supervise
their own practices.
A 15-member board oversees the organization and 10
of the directors are from Wall Street firms.
Enforcement is handled by the US Securities and Exchange Commission.
August 1983 Washington Public Power Supply
System bonds to build five nuclear reactors default.
January 2010 Las Vegas Monorail bonds default.
November 9, 2011 Jefferson County Commission voted 4 to 1 to
declare bankruptcy on roughly $4 billion in municipal debt.
2011 28 defaults totaling $522 million.
June 28, 2012 Stockton files for Chapter 9
2012 21 defaults on muni debt
totaling $978 million, according to Richard Lehmann, publisher of Distressed
Debt Securities Newsletter.
July 18, 2013 Detroit
files for bankruptcy on a municipal debt of $20 billion.
Aug 04, 2015 Puerto Rico defaults on a $58 million
July 1, 2016 Puerto Rico defaults on $ 2
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