This Feudal Democracy section is a set of 9 chapters explaining why present political systems are not, and can NEVER be, truly democratic. The flaws are embedded within the design of the system itself. The only solution is true Democracy.
Feudal Democracy eBook
Chapter 7 - The Financial System
Notice
Firstly, I need to make some things very clear. I am NOT an accountant. I am NOT an economist. I am NOT a banker. I am NOT an investor. I am NOT a financier. I am NOT a stockbroker. Therefore all the text in this chapter is - the TRUTH and nothing but the truth.
This chapter is about the banking system, and the banking crisis in Ireland 2012, and also the investment and financial system - for the most part not the Government finances. When I use the term financial institutions this may include the banks or not depending on the particular topic. Nevertheless what is important here is the overview of the financial system with its weak regulations and controls and its subsequent threat to the democratic political system and its citizens.
Many of the sections below will overlap but I will try my best not to keep repeating myself, though I may end up being as unsuccessful at that in this chapter as in the previous ones - sorry.
Example: Adam and Eve (apple traders)
Adam and Eve are speculators. Adam sees Eve with an apple (intrinsic worth - an apple). He wants to buy the apple because he thinks it may be worth more in the future as he is gambling on the weather turning bad with the result being a bad harvest and thus an increase in the price of apples. He borrows $100 and buys the apple from Eve.
Now Eve who just a few minutes ago had an apple which was not of much value, except for eating now has some wealth - €100. She sees that there is a demand for apples and decides to borrow some money to buy that apple for €200. Adam sells the apple for €200 and has made a profit, this shows he was a sharp trader. On paper he is worth €200.
Eve now is worth €200 because she owns that apple which is now worth €200. Now that Adam is worth €200 he can borrow more money to buy that precious and valuable apple for €400. Eve sells the apple for €400 and is becoming very wealthy. Adam is shrewed - he started with nothing and now has an apple which is worth €400.
This goes on and on and on and on, doubling in value each transaction. The price of the apple has risen and risen so high, beyond the hundred thousand euro value, that the banks themselves, in order to keep the financial goldmine bandwagon on the road have themselves borrowed money in order to sustain Adam's and Eve's speculation.
Not only that but because Adam and Eve see themselves as being super fabulous investors and speculators and at times are trading the apple for hundreds of thousands of euro, and thus in their mind making hundreds of thousands of euro profit, they have given themselves huge salaries and bonuses and are arranging huge pensions for themselves - they 'deserve it'.
Not only that, but the bankers who have borrowed huge amounts of money also see themselves as deserving huge salary increases, very generous bonuses and they make sure that the oh so successful bank increases its contribution to their pension funds.
In the long run, on the 15th transaction it finally ends up where the apple is in the hands of Adam again, He has paid €1,638,400 for it. Eve has just sold the apple and is worth €1,638,400. Eve owes the banks €546,100, plus the interest, plus all the salary and all the bonuses etc she has given herself. Adam owes the banks €1,092,300, plus the interest, plus all the salary and all the bonuses etc he has given himself. The apple, in trading terms, is worth €1,638,400. The overall loans amount to well over €2,000,000 - don't forget the bankers have also been generous to themselves for their wise financial prowess!
On the face of it it appears as if fortunes have been made. It certainly looks as if capitalism works! An ordinary apple is now worth €1,638,400. But it only takes someone to predict that the weather is going to remain good, and that the apple harvest is going to be a bumper one, that everyone finally realises that the apple is only - an apple. Everyone panics because the price is going to fall. In no time at all the whole imaginary fortune disappears into the dust. Once the doubt appeared the speculative trading value of the apple was worth - nothing, well - an apple.
But worse still, and this is where the real trouble starts, between them Adam and Eve owe the banks well over €1,638,400. Eve should be able to repay most of her loans, depending on how generous she was to herself. Adam can't repay those loans because he only has an apple worth - an apple. In effect he is bankrupt. He has NOTHING. The apple was never ever really objectively worth €1,638,400. They could only have afforded those astronomic prices because it was all borrowed money - it wasn't real. It was never real.
So now one of the banks (Adam's) has lost, approximately €1,500,000 FOR NOTHING.
At the end of it all at least one of the banks is ruined and Adam cannot repay his loans because he will NEVER have that kind of amounts of money. One of the banks will go to the Government and persuade them to use the citizen's money to bail them out.
But there actually have been gains. Adam, Eve and the bankers have had a wonderful lifestyle on generous salaries for that mad period and no matter what happens the bankers will retire with 'comfortable' pensions paid for during the time they were bankrupting the company. Eve's bank may nearly break even.
End of story - in more ways than one!
Some will say that this example is ridiculous. It IS ridiculous. Yet it reflects exactly what the stock markets and financial dealings have become. Some they will say that this is the story of capitalism. Is it? The answer is no. This is not capitalism. This is gambling. This isn't real. No real wealth was used. No real wealth was created.
Buying stocks as a long term investment makes sense. It is good for society. It helps create jobs. It encourages new business. It encourages growth. This is good! This is Capitalism.
Capitalism is where money is used to 'buy' work and create wealth. Capitalism in the real sense of the term benefits everyone, as long as it is regulated. Work is created and those with the wealth which created that work make profit. True capitalism, as long as it is controlled, works for everyone, those with money and those with the ability to work.
With capitalism the Nation prospers, for jobs are created, taxes are paid, wealth is used to make a profit, enterprise in encouraged and rewarded, and overall the lives of all citizens are improved because the Nation can afford better services.
The problem with the financial systems in place in 2012 is that the reality of the whole financial system has been overthrown in favour of both the 'borrowing system' where no real money is ever used, and the 'guaranteed gambling system' which is very profitable for the financial institutions because all the loses are now being backed and guaranteed to be put right by the Governments using the future debt of the citizens of so-called democratic Nations. This ISN'T Capitalism! This is highway robbery!
In effect the banks are competing against each other. In other words one of the banks can make money only when the other bank loses. This situation could not be sustained in the real world without the bailouts by the Governments. By bailing out the banks they are allowed to continue playing financial games. At no point are any jobs created by these banks, despite the fact that some of them have paper profits which are enormous. They are literally at the gambling table using funds supplied by the citizens. If they win it is money from someone else's pocket, and if they lose it is from the citizens' pockets.
In fact if you look at that scenario above and add another transaction where Eve ends up with the apple, then it is just the case the Adam may possibly break even and his bank will be ok, whereas Eve's bank will lose all the money and Eve will be bankrupt.
NO MATTER WHAT HAPPENS, ONE OF THE BANKS HAS TO END UP BEING RUINED.
It is only a matter of luck as to which individual and bes bank will be winners or losers.
MISCELLANEOUS ITEMS
The items below aren't necessarily totally unconnected to each other but are easier to treat separately.
Too Big To Fail - Financial Cancer
The term 'too big to fail' has been used with regard to the financial institutions in Europe and most decidedly so in the United States of America. The resultant attitude towards both the financial institutions and the citizens becomes lost behind propaganda and lies. We need to scratch at the surface a little.
Let's take an example of a person with cancer to help explain the true nature of the 'too big to fail' attitude. This individual has some cancer. It is growing. It has become a dangerous situation. There are basically two choices as to what to do.
Choice One: The doctors can do their best to use the knife and cut the cancer out as much as possible so that it cannot take over the whole body. It may entail removing a limb but once it is removed there is a very good chance for the patient to recover.
Choice Two: The doctors, persuaded by the cancer itself, that if they help the cancer to grow the patient will also feel better, decide to feed the cancer rather than kill it. They feed it and it grows, and it grows, and it grows. The more the cancer grows the more the patient's body decreases in size, being taken over by the cancer, the more difficult it will be to ever decide to remove the cancer.
Finally the stage is reached where the cancer has grown so big it doesn't require the patient to be alive for the cancer to survive. Also because it is being fed so much by the doctors it can actually discard the patient and exist totally separate from the patient - sustained by the doctors alone.
Do you think this is a stupid story?
If you are reading this in 2012 and you dare to open your eyes and look around you, you will see this happening right now - especially in the United States, but also in these so-called democracies to varying degrees.
Explanation - The Reality
This may be more specific to the USA and its financial cancer, than Ireland and the countries in Europe, but it helps to explain what is happening around the world and also why things are getting worse, not better, despite the fact that trillions which have been injected into the economies of these countries.
The financial institutions have been borrowing and borrowing and lending and lending and recklessly speculating. The only restriction and the only control in place is their GREED - and their greed is insatiable. One could define greed as the desire for more and this is the driving force of these financial institutions - the more they have the more they want.
The problem with borrowing and lending recklessly is that, as in the Adam and Eve cautionary tale above, the price of stocks, shares, property etc go up, and up, and up, to the point where the amount of borrowing is so high it is impossible to ever pay it back and the value of the 'asset' becomes so artificially high it becomes dangerously meaningless.
When the term 'too big to fail' is used it means that the financial institutions were so reckless they have gone beyond the rational point of financial existence and cannot exist on their own, in the real money world. This is the cancer.
What happened then, for a few reasons, the financial institutions persuaded the Governments that if they were let fail and go bust it would be the citizens who would lose out. In our story above, it would be the cancer telling the doctors that if they kill the cancer they will kill the patient. Also, and not part of the story above, the financial institutions are generously donating vast amount of money to the members of the Government, so if effect, the members of the Government are paid lackeys of the financial institutions. Financiers on Wall Street 'donate' very generous amounts of funds to the politicians. (The term 'donate' could and should be replaced by the term 'invest'!)
So in the USA trillions of dollars are printed, in Europe billions (trillions) are borrowed, and the financial institutions are fed and become bloated, not with real 'earned' money, but just this paper which is being printed around the clock. Now this is where the lies and deceit take over. When I wrote injected into the economies of these countries that wasn't true at all. The money was injected into the financial institutions, it never got to the general citizen - it was never meant to. As far as the financial institutions are concerned this money is for them and not the economy.
In our example above the cancer told the doctors that feeding the cancer would help the patient whereas it was only ever the case that feeding the cancer made the cancer stronger and the patient weaker because the patient didn't receive any food.
This is the situation around the world now, in 2012. Despite the vast amounts of money injected into 'the system' nothing has improved for the citizens, in fact things have become worse. What is happening now is that the financial institutions are basically living off the trillions injected into THEIR system and the citizens are being bypassed to the point where these financial institutions do not need any citizens to exist at all - the financial institutions just trade with each other and make fortunes of pretend profits, as in the Adam and Eve nightmare. And despite the fact that the 'profits' are generated artificially the executives of these financial institutions justify enormous salary increases, bonuses and pensions, and all the time the citizens are being burdened with more and more debt. So while the financial institutions 'wealth' grows and grows, the citizens lose everything and become poorer and poorer.
The cancer has grown and grown to the point of no return. The United States of America, built on land grabbing and driven by greed, will eat itself and unfortunately may also eat a few other Nations before it succumbs to its viral demise. In Europe, and in Ireland, the existence of the financial institutions takes precedence over the existence of the citizens, as if the financial institutions created the wealth, which they have never done.
Too Big To Regulate
It is truly a strange and frightening situation when a Nation, especially the USA, reaches a stage of existence where the financial institutions have so frightened (and bought) the Government that the Government backs down and meekly allows those financial institutions to do as they please.
In the USA the financial institutions are now so protected by the Government and yet so fraudulent in their dealings that they are not punishable by law for any law-breaking activity they partake in, or at best, they will be fined mere fractions of the amounts stolen by this illegal activity.
The thought that financial institutions actually rule a so-called democracy, and run that Nation as a means of making further profit for themselves, is so frightening because the endgame can only be the inevitable total financial destruction of that Nation and possibly an almighty revolution, with the citizens against both the Government and the financial tyrants.
Rogue Trader Syndrome
I call this rogue trade syndrome for the very reason that this is what is happening in the financial world. The Governments have not controlled the financial institutions and the losses are growing and growing. So what do the Governments do? Exactly what the rogue traders did.
Rather than accepting the fact that this was a situation which was getting worse, they decided to gamble more and more in the blind hope and desperation that sometime in the future, a fairytale future, they will somehow break even and put all the reckless behaviour behind them. So instead of putting their foot on the brakes and calling a halt on all the fraud and reckless behaviour they actually press down on the financial accelerator and speed up, frantically hoping for miracles and clutching at straws as the rogue traders did.
What I, an ordinary citizen living in the back-of-beyond realise, and the Governments of these so-called democracies have failed to grasp, despite all the expensive 'expertise' and 'professional' financial advice they receive, is that this type of delirious, frantic, reckless gambling can have only one outcome - of utterly failing, and crashing the whole system. It happened before, on more than one occasion which crashed the banks in question, and it will happen again, but this time it will be the Nations which will crash.
It is natural for drowning people to clutch at straws but a Government should at least have a better planned and rationally designed reaction to something which they allowed to slowly but surely happen over the decades, that is if the wellbeing of the citizens was even the slightest consideration and concern - which it isn't.
As usual it is all down to human nature - oh not that again! (there will be a lot more of that in this chapter). Human beings, driven by greed, are so so DUMB for the very fact that greed itself is a dumb insatiable desire.
Quantitative Easing
The financial institutions love to use terminology which covers up the truth. 'Quantitative Easing' is one of those. It means printing money ad infinitum, or if you don't speak Latin - creating money out of thin air. If you are still unsure what that means, it means making pretend money.
That is how the Government of the USA, Britain and, to a lesser degree the Governments in Europe plan to correct the over-borrowing of the banks by allowing them to . . . borrow more!
To make matters worse the Governments are actually robbing the citizens of vast amounts of money in order to pay these financial institutions, and the citizens have no power to prevent it. The citizens can do nothing within the present feudal political system. Nothing at all.
Be afraid. Be very afraid.
The Value Of Money
Most foolish ordinary citizens most likely will be of the opinion that money has value. It should have, but it doesn't and that is where the trouble really started and it continues to get worse.
If I give you €1000 to use to create more wealth or to buy something which you cannot afford now, one would expect that you would pay me back more than the €1000, in other words there would also be INTEREST. In other words I gave you something with value and you repaid it with a little more than what I gave in the first place. This makes money valuable.
In the normal scheme of things there would be an amount of interest large enough to both justify me lending it to you and also to encourage me to lend to you and this level would, naturally, also be high enough so as not to encourage over borrowing. This would be a 'natural' level based on supply and demand.
What has happened over the decades is that Governments and Central banks (the FED or the ECB) have interfered with the normal variations in the interest rates and 'imposed' a near zero, or even actual zero, interest rate for loans to banks. This was done to 'tempt' people to borrow so that their spending of this borrowed money would spur on the economy and encourage growth.
To a very very limited degree this may make sense, but only if used for a very short period and thoroughly monitored, otherwise this is limitless danger. Unfortunately, they did not use this unnatural downward forcing of interest rates for just a very short period. And unfortunately, they also did not monitor the effects of blindly and stupidly interfering with the interest rate. Now - Nations in Europe, and the USA, are bankrupt and it isn't over yet by any stretch of the imagination.
But, as the interest rates were very low, cash savings earned nothing and therefore it ended up discouraging saving - the cash saved actually lost its value day by day. Since the interest rate was so low it encouraged borrowing, as intended, but having a low interest rate made it appear as if the money was free, ie there was no price or little to pay for actually borrowing the money.
The concept of free money encouraged speculation, for it is easy to think that 'one cannot lose' because the money was free. (Though it was only actually free interest, not free money.) In other words you bought with borrowed money, you sold for a profit, and there was so little interest that the difference was all profit. What could go wrong! It seemed to be a win, win, win situation.
The problem with that is that because of the low interest rates EVERYBODY, every greedy body, wanted to borrow and borrow and so the price of investments and the levels of 'profit' kept increasing, as per the Adam and Eve train crash, and thus more and more had to be borrowed to sustain the appearance of profit. The inevitable happened, as any sane person could have predicted.
Alan Greenspan, was appointed as chairman of the Federal Reserve, in 1987. He adjusted the interest rates as explained above and gradually became to be considered as being a wizard. He could do no wrong. But he wasn't the only one.
The ECB (European Central Bank), established in 1998, also cut interest rates down to practically zero to encourage reckless borrowing. It worked! It was reckless.
The simple fact is this. if you have interest rates so low it discourages saving and encourages borrowing, and you maintain this level of interest rates for years, then you have a financial disaster. This actually ends up being as unrealistic a monetary system as the period in Russian history during Communism when the Russian currency was kept artificially low. And this is what we now have in Europe - an artificial financial system - a pretend financial system - a fairytale financial system - a financial disaster made and in the making, and continuing.
The whole financial crisis in Europe directly stems from the ECB and its incompetent Presidents. The ECB has been in existence for approximately 13 years and has shown itself to be nothing but a danger to each and every citizen in the European Union.
The criminal aspect to all this is that those careful, prudent individuals who have saved some of their earnings over the years have received NO interest on those savings worth talking about. In fact, they have lost money. The low interest rates only suit the banks - in the long run. It punishes citizens who save.
Human Nature
All this is really interesting if you realise how human nature 'works'. The problem with human beings is that when things are going in their favour they are so certain that it is all on account of their incredible talent, intellect and ability, without realising that in reality - it is merely a case of LUCK, or circumstances beyond their control.
When investments and property were increasing in value to unreal and thoroughly unsustainable levels, instead of those driving the madness stopping and admitting to themselves that it was luck and having preparations for when the luck ran out, they carried on regardless, so sure of their own ability that they actually believed that it was they who were in control of the bubble and could adjust it at will. The truth of the matter was that the luck was only ever due to the low regulations and controls, and these low levels themselves drove on the 'luck' to the situation where it was greed which was in control, or more truthfully it was greed out of control.
During the property bubble in Ireland the 'experts' were deriding any 'fool' who questioned the financial certainties of those in authority and explained, as if to a child, that all was well and nothing bad could happen, that they knew what they were doing. It was an attitude of - 'we are your betters, we know what we are doing, leave it to us - you can trust us'. These insane fools were running the show! There can only ever be one outcome to reckless mismanagement of the financial processes in a Nation - DESTRUCTION. This is another example of 'ones betters' being just as stupid and irrational as the lowly peasants - but being more dangerous because they were being trusted to know better.
Another example of how luck can be perceived as super intelligent ability and a keen mind concerns this Alan Greenspan. All those in the know believed him to be a wizard - he could do not wrong, yet he presided over a financial system in the USA which will go down in history as one of the most Nation-destroying periods in any Nation's history. To stupidly 'toy' with the Nation's finances and to trust those in the financial institutions is to play with fire, though it is the citizens who get burnt.
Another aspect to human nature, and already touched upon is that those in positions of authority, political or financial, consider their authority, or the 'assets' available for 'distribution' as actually belonging to them. This happens in the case of politicians who consider the Public Funds which they 'dispense' as being theirs to use as they like - in fact the citizens also see it this way. It also happens in financial institutions when the 'bankers' in effect consider that the banks they work for actually belong to them. When we think of bankers we rarely think of them as being employees of banks, but rather owners of banks.
Likewise the bankers consider they own the money put into their bank by savers, to use freely according to their will. Many of the bankers in Ireland ruled as if they truly owned all the money in the bank. It was their funds to use in whatever manner they wanted.
Ireland's Financial Problems
I think that one of the main differences between Ireland's troubles and, for example, the United States is that in Ireland's case the financial troubles were brought about because of reckless lending for the most part while the financial problems in the USA are increasing directly as a result of massive fraud by their financial institutions. That is not to say there was no fraud and illegal behaviour in Ireland.
Over the past few years there has been much waffle, barefaced lies, propaganda and crass stupidity with regard to the varied and tiresome explanations of the causes of the financial crises which we have experienced within the past few year or so.
Most of the commentary has been put forward by those who, if they actually were experts, would have warned of the dangers of having a financial bubble and of reckless lending and borrowing, or by those only too eager to put the blame on outside influences which of their very nature would have been beyond internal National control thereby passing on the blame to others.
Reckless Lending - Housing
Up to the recent past the term for a mortgage on a residential property was 20 years. This was the balance between the cost of the house, and the cost of the repayments, the interest rates and the wage levels. This helped to keep a reasonable ratio between a person's income and the cost of a house. It was also the case that the maximum one could borrow on a house was approximately 80% to 90% of the cost of that property. This also limited the amount any person or couple could borrow for the purchase of their home. The price of houses was in a steady state and maintained in a safe equilibrium.
The banks then decided to lengthen the mortgage term, firstly to 25 years and then it was extended to an even more unthinkable 30 year mortgage. Now it is possible to get a term of 35 years - nearly double what it was only a few years ago. Not only that, but to further exacerbate the problem they decided to increase the value of each loan beyond the usual 90% or so of the value of the house. There were cases where the mortgage given was not merely 100% the value of the house but even more than that.
It is important to note that the interest rate was very very low - ARTIFICIALLY low.
This had consequences far beyond what may appear on the surface as being reckless lending. It actually sowed the seeds of irresponsibility and price inflation which grew to be the financial destruction of the Irish economy.
Whereas in the past mortgages were difficult to get, and even then it was a case of having some savings already put aside, so that in most cases it was a struggle just to match the price asked by the sellers of an eagerly sought after house - this kept house prices realistic, now it was the case that house buyers had more than enough money, solely and directly from the extravagant loan, to not only match the asking price, but, since there were more buyers than houses for sale because of the indiscriminate lending by the banks, to be able to more than match the asking price of the house. This automatically fuelled the house price increase.
The banks had actually lit the fire of house inflation and then had subsequently kept throwing petrol on that fire. House prices increased and increased in an irrational and insane madness of propelled inflation.
Not only that, but the very fact that the buyer now had a larger loan what would until recently (in those years) have been seen as being unacceptably high, the price of houses rose so much that what was paid for the house was ALWAYS going to be more than the actual value of the house. The bankers, through their reckless activities, created a situation whereby negative equity would be the natural and only possible outcome.
Increasing the mortgage allowed a situation whereby buyers were able to purchase houses which were actually beyond their realistically affordable living standard, taking into account the very low interest rates at the time. This was grossly irresponsible. In fact, it could very possibly, and even probably be seen as a conspiracy on behalf of the financial institutions, and property developers, to artificially increase the price of housing and to falsify the value of houses by reckless lending and reckless mortgage terms in order to create a 'critical mass' of buyers and a totally foreseeable chain reaction, as such, so that house costs spiralled way beyond rational and sensible value ranges.
In the long run houses worth €130,000 or so (maybe even less) were being fought over for €300,000 or more. It was a frenzy of un-reasoned insane spending.
Then, to make the inevitable catastrophe even worse, and which increased the mass hysteria of property buying, those greedy individuals who saw nothing but euro signs in their eyes decided to invest in property. The logic was simple. The price of houses was increasing by such a huge percentage over very short periods - compared to the interest rates - that one could easily be fooled - by their own greed - into the seemingly logical conclusion that it was sensible to borrow vast amount of money in order to invest in property to be sold later on for enormous amount of money ensuring enormous profits. Don't forget the borrowing was considered as being practically 'free'.
As more and more people borrowed more and more money to invest in property, the cost of property kept spiralling upwards and upwards and the dreams of huge profits kept spiralling upwards and upwards in the minds of the reckless greedy speculators, with the interest rates remaining unchanged. The banks were lending vast amount to individuals to invest in something which, in effect was worth at best 35% to 40% of the paying price.
This financial madness was directly, and solely caused by the purposeful reckless decision of the bankers. That does not let all those greedy speculators off the hook, but the fact of the matter is this: if the bankers had been prudent, as they should have been, none of this utter financial destruction could ever have occurred.
Then to make matters even worse, which was the case, these banks ran out of money to lend, don't forget the system discouraged saving because of the low interest rates, and as a result had to borrow more and more from foreign banks. In the end these banks had lent vast amounts of money and had borrowed vast amount of money - so much so, that it was an improbability for these banks ever to be able to repay those loans and 'balance the books'.
Reckless Lending - Commercial Property
The second of these reckless actions turns out, in financial terms, to be as destructive, and in some cases even more destructive, to the financial situation in Ireland in that the banks lent more and more money to people who were investing in property (or land) for commercial purposes especially development.
Whereas those who borrowed much more than they should have been allowed to for their the purchase of their own home are stuck where they are for the foreseeable future - except those who will lose their houses - some unfortunately have already done so, those who borrowed more than they should have been allowed to do, for investment purposes, have nothing with which to repay those loans for the fact that the property in which the loans were invested became worth less - worthless.
Whereas the lending to home buyers increased the price of housing along with its resultant high cost of rents thus ensuring the future financial pain for tens of thousands of Irish citizens whose original fault was merely just wishing to have a place to live, the incredible size of the loans to property developers and large companies were so vast and reckless as to be indescribable. Loans of tens of millions of euro, to 'ordinary' people filled with the dream of property development, would have been considered as being small loans. Large development and property investment companies borrowed hundreds of millions of euro.
Yet again this madness only made matters worse in that the cost of property escalated and refueled all the lending making it seem rational to lend amounts of money so vast it defies belief that it was ever allowed to happen or even ever actually took place. As the cost of property rose and rose the loans rose and rose in parallel, each one feeding off the other and creating an unnatural demand for property and thus it also fuelled the inflation of property.
This was the Adam and Eve madness except it wasn't a pretend story. It all happened, though it was a lot worse in real life.
Again this could very well have been an actual conspiracy to purposefully drive the cost of property and housing beyond reasonable and sane values. Some people made fortunes, and the bankers kept rewarding themselves more and more.
Reckless Lending - Share Investing
Like alcoholics unable to control their behaviour, these bankers were blinded by greed as the value of shares increased and increased - again directly fuelled by the irrational lending to the point that it would actually be impossible to recoup the money lent for buying these over-inflated shares for the very fact that these shares were valued at multiples of their true value. It was a financial time-bomb ticking away.
The share prices of all the financial institutions rose and rose to heights undreamed of and the effect of this was to fuel the madness even further. As share prices increased the notional wealth investors had increased. For example if an individual owned 10,000 shares at €4.60 each they would have an notional wealth of €46,000 and would be able to borrow against that 'wealth', whereas if those shares rose in value to €38.50 per share then they would have a notional wealth of €385,000 and in that case could go to the bank and demand a large loan based on their share value, despite the fact it was only national value - it wasn't real.
This also happend with regard to the value of property. As house prices increased a house bought for €40,000 around 1990 was suddenly worth, artificially, up to €350,000 and therefore the owner could borrow a vast amount of money based on a false, artificial, TEMPORARY, valuation.
In Ireland some of these bankers lent enormous amounts of money to people solely for the purpose of buying shares in that same bank thus guaranteeing the continued appearance of share value and profitability for that bank, and creating the inevitable salary increase and extra bonuses for those bankers.
Arrogance of the Bankers
The financial system had broken down so much, and reality had disappeared in a hurricane of greed that these reckless bankers considered the money they held as being something akin to a personal fund. They seemed to consider it to be similar to monopoly money - just there to be played with - the outcome being irrelevant.
They became so unquestioningly powerful, with the personal ability to lend unlimited amounts of money at a personal whim, that rather than being seen as, and considered as being, employees of the banks they acted as if they actually owned the banks and personally owned all the money they could borrow from other banks around the world.
They lent without proper checks, without proper procedures and without proper guarantees being in place. They also had their special clients who were given special preferential treatment. They acted like feudal lords, rulers of all they surveyed, building up debts that have left this Nation bankrupt.
In some cases these bankers themselves borrowed vast amounts of money for their own personal speculation and investments. In one instance one individual banker borrowed more than €85,000,000 - eighty five million euro - for his own personal investments and speculation. It is truly difficult for mere mortals like most citizens to fully imagine someone having that self perception and arrogance to the point where they would personally borrow €85,000,000 for speculation purposes.
To make matters worse these bankers were in a position to hide the vast loans that they had given themselves so that questions would not be raised as to their financial trustworthiness and financial capability and prudence.
Keep this in mind: these were all considered to be the financial wizards of Ireland. The people who knew best. The people who could do no wrong. The people who could be depended on. They were members of the feudal elite of Ireland.
There was also at least one case of two financial institutions who together attempted to cover up the financial problems of at least one of them and having secret loans disguised as customer deposits. This was a conspiracy which helped the financial institution from being found out to having been reckless in their dealings. So much for the prudent dependable banker.
A Hidden Catastrophe
One aspect of all this is the negative effect it has had on the present and future of Ireland as an international financially independent Nation in more than one aspect.
Firstly, because the value of houses rose irrationally the income required to maintain a reasonable level of living had to rise. In effect the average National wage had to be much higher then what it should have been if the cost of property had been maintained in a responsible manner.
The unfortunate negative effect of this is that our cost of living is much higher than it ever should have been or ever was required to be, had financial prudence been the guiding principle of these bankers, and politicians. As the ability of companies to move to a cheaper economy becomes easier and easier where the cost of living and cost of labour is lower, more and more jobs will leave Ireland. Ireland has become too costly to live and too costly to prosper and too costly to maintain jobs.
Ireland may be a rip off economy but it was encouraged and fuelled by those bankers and by criminally incompetent politicians and their appointees. The lives of tens of thousands, and hundreds of thousands of Irish people are going to suffer for decades until the value of houses in the distant future, through natural and realistic gradual inflation, matches the mortgage initially taken out.
Houses fought over and proudly bought a few years ago for €300,000 (which in fact were only worth €120,00 to €130,000 in realistic terms) will not be worth that kind of high price that was paid for them for decades to come - thirty or forty years from now. This is the reality.
As to what is going to happen in the future will be in the hands of the Irish citizens one way or another, and all one can say is that the ordinary citizen, just wishing to own their own home, will end up paying a high price for the utter recklessness of the bankers and the politicians.
Dispelling the Myth and the Lies
These bankers, their defenders and other spin doctors - those who have a stake in the cover-up - will say that the cause of the financial problems all stem from the collapse of the American banks. Let's make sure one thing is fully understood, without question, without doubt, and with utter certainty.
THESE EXCUSES ARE TOTALLY UNTRUE.
The collapse of the American banks was not the cause of Ireland's present financial bankruptcy.
Lies come to these bankers, financiers and politicians as a matter of course. Their lives revolve around lies. They don't know the value of truth today just as they didn't know the true value of property or shares in the past. But there is an easy, and in fact frightening way, to see where the blame lies and to see how how incorrect and misleading their excuses are.
For a moment, just as an experiment, imagine what would have been the case if those American banks had not collapsed. According to the bankers there would have been no subsequent financial destruction and collapse in Ireland. But what, in reality, would have happened?
The Irish bankers would have borrowed more, and more, and more, and more, and more, and would have lent more, and more, and more, and more, and more, and the price of houses would have increased more and more and more and more and more. Then, at some stage, in another few years, and this would have been totally inevitable and utterly unavoidable, either those American banks would have had to collapse, for there was no way that this wealth 'fabrication' could have continued indefinitely, or the 'building boom' in Ireland would have inevitably stalled and run out of steam.
The simple inevitable fact is, there was always going to be an end to the building madness. The chance of this continuing in Ireland FOREVER was plain and simply - IMPOSSIBLE! So whether the American banks actually collapsed or not Ireland's financial ruination was on the cards.
But just imagine the devastation and tragedy that would have happened if the American banks hadn't collapsed for another 10 years or so. If that had been the case then Ireland would have been so much in debt by that time that all the problems that Ireland now has, along with Greece, and Italy, and Spain together would not encompass the financial troubles Ireland would have ended up in. It would have been the end, literally the end, of Ireland as a going concern, that is, if we are not already in that unending unfillable black hole of debt.
The fact of the matter is this: we are LUCKY that the American banks collapsed when they did. We should be thoroughly thankful that they collapsed when they did. It is a great great pity they didn't collapse sooner. If they had Ireland would have been spared tens of billions of euro of debt. The thought of what may have happened in 10 years or more of this reckless financial behaviour is truly frightening. It would have been a catastrophe for all the citizens of Ireland beyond all human imagination.
Regulations - Controls - Safeguards
But one might very well ask at this point, hold on - wasn't this meant to be an organised political system - a democracy? Were there no regulations? Were there no controls? Were there no watchguards? The answer to that question is - there were, but these watchguards had been appointed by the politicians and therefore were grossly incompetent.
Both the Taoiseach, Bertie Ahern, and the Minister of Finance, Brian Cowen, in the Fianna Fáil Government, and most other wide-eyed stupid dumb politicians in the Dáil were in the whirlwind of childish financial mass hysteria. The sad fact is that the citizens of Ireland elect idiots and these idiot politicians surpassed even the usual idiot level for politicians, and these idiot politicians appoint their incompetent favourites (as already explained).
If you have dutifully read all the chapters leading up to this one you will be fully aware that this political system in Ireland and all other so-called democracies breeds incompetence. It breeds stupidity. It breeds greed. It breeds . . . . FAILURE.
In fact this also brings me back to the damned human nature I keep on about. What happens, and in this case happened, is that when things were going good and the property bubble was inflating the politicians never said to themselves, lets take into account any negative aspects to this, but rather they came to the inevitable conclusion that this bonanza was a direct result of their surefootedness, their intelligence, their leadership, their invincibility and so like the stupid 'king with no clothes' they paraded themselves around like financial and political superstars, while in fact they were overseeing the destruction of this Nation.
During this time of madness, Morgan Kelly, a professor of economics at University College Dublin, wrote some articles, and actually had difficulty getting them published, saying that the cost of houses was too high and there would be a property bust and that the banks were very insecure and would collapse. These articles received very unfavourable criticism.
After Mr Kelly published his article predicting the collapse of the Irish banks, for instance, Bertie Ahern, the Taoiseach, famously responded to a question about it on national radio by saying, "Sitting on the sidelines, cribbing and moaning is a lost opportunity. I don’t know how people who engage in that don’t commit suicide."
In other words when someone, who was actually seeing and saying the obvious - that booms must be followed by busts - was made to look like an enemy of the State, as if he himself was putting down the good work of the Government, the building industry and the financial institutions, and only having negativity and pessimism as a motivation.
The simple fact is this. When you have a political system where every few years there is a change of political party, each having their own people to appoint, regardless of ability, and their own backers to reward regardless of its effect on the citizens of the Nation, then the chances of a prudent, stable, financial system existing is a JOKE. IT CANNOT HAPPEN.
Look at France
Look at Italy
Look at Greece
Look at Spain
Look at Portugal
Look at Iceland
Look at Britain
Look at Ireland
Look at the United States
And don't think that these are the only ones.
As to why no one was punished for all this destruction of the Irish Nation I have already explained. In a feudal political system those at the top are never punished. The system is set up that way. That's how it works! AND the citizens are not totally blameless in this regard.
The following truly demonstrates just how powerful the financial institutions are to the point that the financial regulators in the USA are RELAXING the rules more and more, rather than tightening them.
Example - News (7th November 2011):
US futures exchanges have relaxed rules on how much collateral speculators must hold in hope of heading off instability.
In other words these financial institutions are going to be allowed gamble even more money. It's like loaning millions and millions of dollars to Adam and Eve in the hope that their gambling will make profits and help the Nation's finances to recover.
What they are saying is financial madness. They are of the opinion that Adam and Eve were bankrupt because they didn't have enough money to keep on buying that apple. It is beyond belief that the regulators have 'lost their nerve' and have literally thrown in the towel and are allowing these financial institutions to do whatever they like, without any regulations in place.
This is, in fact, the Rogue Trader Syndrome - when things are bad, throw more caution to the wind, increase the debt, up the ante - grasp at straws!
Be afraid. Be very afraid.
Results Of The Financial Bubble In Ireland
September 2011:
Earlier this week it was revealed that more than 55,000 mortgages are in arrears of more than 90 days. This accounts for just over 7% of all private residential mortgages.
There was a total of 809 repossessions in the year to June 2011
Unemployment is increasing. The jobless rate in 2011 averaged 14.2 per cent, up from 13.7 per cent in 2010, 11.8 per cent in 2009 and 6.4 per cent in 2008.
It is reported that 70,000 people, mostly in their 20s, emigrated last year (2011) from Ireland and it is expected that 40,000 will leave this year.
Yet again, we have a situation when Irish talent and those Irish who seek work and reward for that work have no option but must leave these shores. As usual we are left with the dregs running this Nation, along with their followers and loyal supporters eager for the pickings from a dying Nation.
Double Dealing
The nature of share dealing and speculation especially in the USA and Britain has become fraudulent to the point where there is in effect no reality to it whatsoever.
The old system - the process of buying shares in a company is simply someone who has spare money gambling it by investing that money in an individual or company with the expectation that if the company grows then the value of these shares will grow giving the investor some profit. In general the term in which one held shares would be years or decades. This is a long term investment.
This makes sense. This is beneficial for both sides and the Nation as a whole. Business can grow, people can get jobs, profits can be made, and the Government gets more taxes.
The problem at present is that the nature of trading has been smashed and altered to such an extent that its purpose is the acquisition of paper wealth with no gain for any third party, as in the Adam and Eve madness.
There's 'high-frequency trading' where computers buy and sell shares without human intervention. This isn't buying shares in a company to be held for years or decades but may be traded within seconds, or even less. This is utter madness. They trade within time periods so small that no money can ever change hands so in effect there is no practical limitation on the amounts of money being 'promised'. It is actually more unreal, to the nth degree, than the Adam and Eve scenario above.
These computers analyse news items to predict the strength of companies' shares and their future prospects and it only takes one incorrect story, published either in error or with malicious intent, to bring down a company's prospects and perceived future worth to near zero. Literally, the whole stability of a lot of the world's finances is in the 'hands' of computers and their algorithms.
In some cases these companies appear to be making huge profits, but the question is - from where? Where are these profits coming from? The fact is that it is all pretend money. In a lot of cases the money invested doesn't exist - it's borrowing from the future - from future profits. Or, as in some cases, the loses are hidden for as long as possible until the point is reached where the company collapses because all the finances are gone, totally gone.
The problem is that when these banks and financial institutions crash they have debts of billions. These billions can never be repaid because they never existed, and, as in the case of some countries, especially the USA, the Government decided that the banks were too big to fail and so forced the citizens to pay all the debt and in effect - TO COVER ALL FUTURE DEBTS. This is not only unmitigated financial madness but utter treachery and betrayal of the citizens of the USA. Future generations are being enslaved by the present Government in order to aid the greedy and reckless bankers of today.
Unless this crazy greed is regulated, controlled and utterly limited, the future crash is not only inevitable but will be terrifying in its enormity, and will bring devastation to the lives of countless tens or hundreds of millions of citizens in many countries around the world.
Of course the story of corruption and criminal activity by the financial institutions in the USA doesn't end here. They also put financial packages together of mortgages which were toxic and would lose money and sold them on as profitable going concerns knowing firstly, that these packages were truly toxic but also knowing that the more these so called assets became worthless the more money they themselves would make.
They were literally committing fraud on an enormous scale. In the USA in 2012 there is no law and order as regards the financial institutions. They can operate any illegal activity they want to with the knowledge that they will not pay the price for their criminal behaviour.
In some cases their activities could best be described by this example. A doctor injects a patient with poison and then takes out life insurance on the patient and also goes to the betting shop to place bets that the patient will die.
I know that this sounds crazy but the financial institutions now have speculation 'processes' (as far as I know it is by short-selling subprime mortgage-backed securities, or credit default swaps - or both!) in place so that they make money from selling toxic 'assets'. The more the other company loses the more they themselves make. It is fraud on a scale that is unimaginable to most of us. This makes Mafia organised crime look like small-time amateur activity.
In Ireland we have had plenty of examples of the banks behaving in a very questionable manner: secret loans to executives, cancelling loans to politicians, secret inter bank transfers, aiding citizens to open non-resident accounts, off-shore banking, over-charging customers in many different ways, are just some of the activity I can recall, but when bankers and politicians are in each other's pockets this should be nothing less than expected activity.
In so-called democracies the feudal elite look after each other's interests - the citizens . . . they are just the peasants.
Some Figures
July 2011
During 2010, NAMA, Ireland's National worthless Assets Management Agency, paid €30.2 billion for 11,500 loans belonging to 850 debtors. The value of the loans was €71.2 billion, with a discount overall of 58%. Three of the debtors in NAMA owe more than €2 billion each, 12 debtors owe more than €1 billion.
In other words 850 debtors had been lent €71.2 billion by the banks.
Saturday, 6 August 2011:
UCD economist Morgan Kelly has claimed that the total Irish debt will hit upwards of €240 billion by 2015. The Government has estimated that debt will only be €200 billion.
Ireland's two main banks borrowed over $11 billion in emergency funding from the US Federal Reserve, according to data compiled by the Bloomberg news agency. Allied Irish Bank borrowed $9.4 billion while Bank of Ireland borrowed $2.1 billion. The money was lent out in 2009 and 2010 as the US authorities attempted to avert a financial meltdown. The figures are contained in documents obtained under the US Freedom of Information Act. They show that the Federal Reserve provided $1.2 trillion to US and European banks over the period, amid concerns that inter-bank lending was drying up.
Economist Morgan Kelly has said, in Ireland, there were 11,000 mortgages of over €500,000 taken out between 2006 and 2009, with an estimated value of €9 billion.
Banks And Politicians
The political system is such in Ireland that the feudal elite, in particular, the bankers and the politicians, look after the best interests of each other. The Allied Irish Bank has been aided by the Irish politicians - using citizens' money, more than once. It is also the case that some politicians had their loans 're-adjusted' in a very beneficial fashion - beneficial to the politician NOT the citizens.
The political system in Ireland is rotten to the core.
The financial system in Ireland is rotten to the core.
National Wealth
By 'National Wealth' I mean the money which each citizen earns, uses and in some cases saves. This IS the wealth of the Nation, especially in Ireland which doesn't have natural resources like oil, minerals or valuable metal deposits as such.
At present the citizens go out, do a day's work (those that do work, those that have work), and if they have any money left over they leave it in the bank. At present this loses them some value of that saved money for there is no interest on those savings and as a result of inflation its buying power decreases on a day to day basis in this artificial European financial system.
To make matters worse the savings deposits are guaranteed by the Irish Government to a maximum of €100,000 per individual. In other words the Government is guaranteeing cash in the privately owned banks and yet has had very little control over how the banks use those savings (they practically own some of the banks now - though that is more a curse than a blessing).
There are many citizens who despise the banks and would much prefer to have their cash anywhere else but have little choice. For a Nation to, as it were, ignore this National wealth, and leave it up to private independent financial institutions (members of the feudal elite) is irresponsible in the extreme.
Summary
Needless to say, I could have written a lot more. This is just scraping the putrid corruption of politics and the financial institutions.
The fact that the Government in a democracy can, without the permission of the citizens, bankrupt those citizens in favour of criminal bankers would have been considered as being astonishing, and unbelievable, if this had been foretold twenty or so years ago.
No one would have believed that such an abominable, openly treacherous act would ever have been perpetrated in Ireland. Twenty years ago many foolishly believed in their betters, and had faith that these betters would look after the best interests of the citizens. Many foolish citizens still believe, and have faith in, in this pathetic feudal failed system even today.
In a feudal political system those at the top look after . . . those at the top. The stupid peasants are there to be walked on.
Lou Gogan
31st January 2012
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