Post Consumerism: End of the Debt Driven Economy
The end of the post consumer economy may be in sight. For decades we have lived on credit. We have borrowed money from the Chinese to buy Chinese goods. Lately the Chinese have openly stated that they hate us for devaluing all those dollars they are holding. They have threatened to stop buying government bonds.Closer to home our banks actually lowered the number of loans they give out despite the bailouts and bonuses.
Paradoxically, the government is trying to ease credit, even though it was easy credit that got us in to this mess. At the behest of liberal legislators banks and regulators allowed and encouraged loans to people who didn't have a chance in hell of paying them back.
An examination of the the whole credit and loan system involved a practice I like to call selling zero. Through something called the fractional reserve system, when you deposit money in a bank they keep part of it and loan out part of it. If you come back to the bank and ask for your money back they would have to honor that request. In theory the bank could lend out more money than they have deposited. The additional amount they can lend out is controlled by the federal reserve bank and appears to us as money created out of thin air. Some call this a kind of Wall Street Ponzi scheme. Nonetheless, our economy has been built on it. Since the money is created out of thin air I like to call it selling zero.
There has been a practice in the loan industry of selling loans. In fact, a home owner might have found that every couple of years, or in some cases every year, the address to which his monthly payments were sent has changed because the loan was sold.
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