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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe Finance Industry Is Gorging Itself on Your Future—The Trend Lines Will Blow You Away
http://www.alternet.org/economy/finance-industry-gorging-itself-your-future-trend-lines-will-blow-you-awayIncreasing debt and runaway inequality are of a piece. That's because debt at compound interest rates is extremely powerful. Borrow a little today, and in time, you could be destitute. To get a feel for its power, imagine you borrowed just one nickel at 5% interest when Christ was born. You would now owe the tidy sum of $225,438,991,066,856,000,000,000,000,000,000,000,000,000more money than ever existed in the history of the world. Which is to say, those who wield the power of debt, wields enormous economic power.
In our society we've given that power to private financial corporations, and they've done a masterful job in pushing us to the brink of debt peonage. The problem extends far beyond the much ballyhooed federal government debt. The power of debt extends to nearly every aspect of modern life. Our homes, schools, roads, bridges, highways, utilities, corporations and virtually every product and good produced and sold depend on debt. By some estimates as much as 30 cents of every dollar we spend goes to cover interest payments on the debt accrued to make all that we buy. (For example of the $6.5 of private enterprise income in 2012, 36.8% went to interest payments.)
With our banking system in private hands, the simple truth is that as the debt levels accelerate, so does runaway inequality. Therefore key to controlling runaway inequality is to dramatically curtail the power of high finance.
But as a society we have done the opposite. For nearly a half century between the New Deal and the 1970s, Wall Street was tightly controlled. Taxes on the wealthy were high, worker wages were rising, and debt levels on consumers, companies and government were low. After finance was deregulated (circa 1980) private and public debt exploded, wages stalled, taxes on the rich fell and inequality soared.
Enthusiast
(50,983 posts)and recommended a whole bunch!
Live and Learn
(12,769 posts)An industry that produces nothing of real value.
Travis_0004
(5,417 posts)I think the mortgage adds value since it allows me to own a home.
Xithras
(16,191 posts)You can't afford to spend $200k on a house. Virtually nobody can. So why do we do so? Because the predatory banks have offered us "loans" that allow us to break those amounts into convenient monthly installments that we CAN afford. The banks themselves have created a situation where you cannot afford to buy a house without them.
If the banks did not offer mortgages, houses would not sell for $200,000.
When Levittown was built in 1947, you could buy a new house for $7900. Adjusted for inflation, that's less than $80,000 in modern dollars. Instead, the average price of a home sold there today is over $360,000. A major portion of the difference is directly attributable to easy credit and the price inflation that it allows. "What can I afford to save?" became "What can I afford to finance?"
It's a variation on the same theme that led to the recent real estate bubble. Credit lowers the bar for ownership and drives up prices. While some would argue that it's a good thing, the net result has been a massive transfer of wealth to the banker classes. How much interest will the bank make on that $200k loan over 30 years? Those numbers were far smaller in 1950.
dreamnightwind
(4,775 posts)We are seeing the very same phenomenom in healthcare (subsidies mask the cost) and education (student loans). These things shouldn't cost anywhere near wat they cost, and the price structure is propped up by financing shenanigans and misdirection.
Skittles
(153,174 posts)brooklynite
(94,698 posts)...it's an admirable goal, but beyond printing a poster, what did they do to advocate for it? Bottom line is, if you're planning to changing banking regulations, you have to do it through the political process. What banking reform advocates did Occupy work to get elected? (and don't say "Elizabeth Warren" unless you have evidence; -I- and my Wall Street lawyer wife worked to get Warren elected; I don't recall Occupy taking any political positions.
handmade34
(22,757 posts)I agree with you in respects... the link is primarily for additional information....
starroute
(12,977 posts)The political system is rigged to prevent radical change. This began with the writing of the US Constitution by a handful of wealthy landowners -- but it has become really toxic now with the complete dominance of money over politics. Voters are uninformed, the Democratic Party is led by people who would rather protect their own positions of dominance than rock the boat, and the country is gerrymandered up to its eyeballs.
Occupy was never a single-issue movement aimed at changing banking regulations. It's a movement about everything that's wrong, from racism to climate change to the destruction of the middle class. None of those things can be addressed within the current system, which is actively working to reinforce them problems. You can only route around the system, challenge the system, or throw your body into the gears and gum up the system.
brooklynite
(94,698 posts)starroute
(12,977 posts)It's to find alternatives.
I mean, what do most of us need banks for at this point, anyway? They're not paying diddly in interest -- mostly we pay them to hold onto our money for us. Paying bills by check is becoming obsolete. All we really need is a bookkeeping system to keep track of how many credits we have on tap and handle electronic payments and deposits.
The other things banks have traditionally done, like mortgages, have turned into a gigantic ripoff -- not to mention redlining and related abuses, such as the pressure towards gentrification.
So I'm for anything that enables us to take our business elsewhere and turn our backs on the banks.
brooklynite
(94,698 posts)...btw, who's going to develop the bookkeeping system, enforce whatever transaction agreements are required, resolve disputes...
Unknown Beatle
(2,672 posts)At least Occupy is attempting to do something about it. Informing people about changing banks to local credit unions is a step in the right direction. People canceling their big bank accounts to join credit unions is scaring the crap out of the big banks, yet they don't seem to get the hint as they continue with their bad practices.
jwirr
(39,215 posts)JDPriestly
(57,936 posts)A person like me does not need anyone to enforce my transaction agreements or resolve disputes. I perform my end of agreements and can't think of any disputes that my bank has had to resolve.
brooklynite
(94,698 posts)and if ANYTHING goes wrong, someone has to resolve disputes.
JDPriestly
(57,936 posts)Anything the bank does is just preliminary and not that difficult.
The security detail should be performed by companies that make our computers and manage the internet. Banks should not need to do that much security.
Banks are there to loan money and collect interest and see to it that depositors' savings are protected from mismanagement. They are not doing that job yet they dare to charge savers for the privilege of saving in their bank.
Our financial sector needs a lot of reform starting with providing better incentives to ordinary people to save and regulating all aspects of the financial sector.
I'm all for state banks. They would help keep the financial sector honest.
Agony
(2,605 posts)and received 6.5% of the vote
brooklynite
(94,698 posts)BTW, I was informed that Occupy represented the "99%". Did they not come out to vote?
Agony
(2,605 posts)I am also confident that the people who had their medical and student debt purchased and extinguished by Rolling Jubilee, rather than be pursued by your morally challenged vampire "Wall Street" friends, feel pretty good about Occupy Wall Street.
What is wrong with the public owning their own banking (and monetary) system? N. Dakota is making out quite well with a public bank.
Dont call me Shirley
(10,998 posts)delrem
(9,688 posts)If I invest, then that debt accrues to me as an investor.
That seems to be plain common sense.
If I invest $200K 20 years ago and it's worth $600K today, that's return on investment.
Congrats, I've almost kept up with inflation, maybe. After which are the taxes.
I've heard, though, that there's another system for the elite.
JDPriestly
(57,936 posts)Less than 1%. Small investors cannot make much in the markets as they are today. That is especially true for small investors who work or have children.
And the bank interest rates are laughable.
It's pretty much a matter of rich bankers taking from poor people who think they are investing.
And both parties are responsible
Octafish
(55,745 posts)Put the money and its profit to work for We the People.
Munificence
(493 posts)problem with that is that we will simply shift the criminal element from being bankers to gov employees/politicians.
dreamnightwind
(4,775 posts)from the article:
It's (sic) starts with recognizing that the root of the problem is not just the quantity of debt per se, but rather who really controls and profits by it. Private banks do not have to be masters of the economic universe. Instead, we could model our financial system after public banks, like the Bank of North Dakota. If we had 50 state banks, instead of just one, the income-distorting power of increasing debt could be curtailed, andthere would be much more money in the public treasury. In North Dakota, the state bank returned record profits nine years in a row, with $81.6 million flowing into the state coffers in 2012. It provides support for infrastructure projects. It insists that when it loans money to businesses, jobs must be created in North Dakota. It helps ease the burdens of student loans...and it doesn't gamble in financial markets.
But, there's a catch that Wall Street detests: The CEO of the Bank of North Dakota makes per year what a top Wall Street banker makes in one hour! So, if we want to really do something about runaway inequality, we will need public bankers who are more than willing to work for about $250,000 a year, instead of $50 million.
raouldukelives
(5,178 posts)Destroying our democracy, families, friends, wilderness, wildlife, environment & future. All for a few extra bucks for themselves today.
And they are literally destroying it. Not one of them can be counted as friend to democracy or to our natural world or to creating a better future.
The evidence is in and has been for some time.
The stronger the corporations become, the less democracy we have. The more money in them, the faster our future goes up in flames.
And yet, they cheer when it goes up. The money! They cheer when they subvert the will of people at home & abroad. The money! They cheer when our delicate climate gets thrown more out of balance. The money!
Inside, they really don't care. Outside they may don many images and many caricatures of empathy. Internally, they are driven by only one guiding principle, make more money.
We are where many people have labored and invested for us to be. People who probably lived and died lauded as philanthropists or visionaries when in the long run, on our small dot in the distant corner of the universe, we would have been far better off if they hadn't existed at all.
Tierra_y_Libertad
(50,414 posts)colsohlibgal
(5,275 posts)Hillary is unlikely to change our course much. Anyone who would want to is either not running like Warren or has no chance, like Bernie and O'Malley.
So Big Money will win big either way, just bigger if Hillary loses.
liberal_at_heart
(12,081 posts)Dark n Stormy Knight
(9,771 posts)abelenkpe
(9,933 posts)Another FDR and to return to the tax rates of the late forties or fifties. Anything less is inadequate BS.
DebJ
(7,699 posts)What a remarkably clear synopsis of what has happened the last 30 years.
I don't know anything about a public bank system, but this article is well worth the read just
for the historical information.
Bravo for posting this! Best article I've read on DU in a very, very long time.
JDPriestly
(57,936 posts)Quantess
(27,630 posts)jwirr
(39,215 posts)for an unpaid bill (even when it is not supposed to be able to garner Social Security) I put my money into Direct Express. Supposedly my money now comes directly from DE to me. No middle men banksters. For those who do not know DE is a program through Social Security for people who do not have a bank account.
They give you a debit card so that you can spend your money straight out of the Social Security account, no checks. One move from SSA to me. Simple. However, their account is in Comerica Bank in Texas. So I am still not free of a bank. Anyone know if Comerica is a nationalized bank?
One of the drawbacks is that I cannot deposit money into that account, which is reasonable since it is not my account. I cannot borrow from them either.
I have also been told that a Debit card is not safe.
If I have the money direct deposited to a credit union I then risk someone garnering my SSA and here I am back in another bank all be it by another name.
I would appreciate your thoughts on this plan.