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Originally Posted by forrestlayne  The Federal Reserve (the Fed) does control the money.
We need to have a "sound money" system. What we have now is not back by anything other than the confidence in the American economy. Our money is not backed by gold or anything, and now the world is begining to lose confidence in the dollar.
"The Federal Reserve, an unelected and unaccountable private organization, pumps more dollars into the economy whenever it chooses. Basic economics tells us that the more there is of a commodity, the less valuable it becomes. This is also true of money: The dollar is worth 4 cents of what it was when the Federal Reserve was created in 1913. Every day, every dollar we hold is devalued. We pay an "inflation tax" without even realizing it because we are forced by a falling dollar to pay more for goods and services"
I find fault more with the people that got them themselves into the mortage mess than the bank, the Fed or the government. Personal responsibility
Edited to add: It is not just a right-wing people that have tried to get rid of The Federal Reserve last time it was (Dem) President Kennedy June 4th, 1963 |
Banks actually control their own money, it isn't the Fed. Gold has worth because we say it has worth. The dollar has worth because we say it has worth. Being backed by gold isn't going to change a thing. You would also need to consider the cost of such an acquisition. Exactly how high are you willing to see the deficit go? All that, and it wouldn't change a thing.
The value of the dollar is dropping right now for one simple reason. The United States is not a good place for other countries to invest their wealth. We have a massive deficit which continues to increase.
The mortgage mess is far more complex than you realize. Most of the growth in our economy during the last 8 years has come from 2 sectors; defense spending and the housing market. Almost all of the growth was from the purchase of second homes. No, these weren't vacation homes but houses bought by speculators. Quite a few of these houses were bought with no down payment and banks were only too willing to extend these borrowers second mortgages on top of their 100% loans. The houses that these loans secure are worth less now than the original mortgage amount.
The subprime market has been around forever. It's riskier but produced higher profits. Some people move in and out of this market. Adjustable rate mortgages should never have been introduced into the subprime market. A particularly insidious new type of mortgage instrument, the Option ARM, was introduced. I honestly don't think that prime or subprime borrowers understood the terms of these loans. Because 74% of the borrowers chose the lowest payment option, their loans have amortized negatively.
They now owe more than they borrowed. They cannot sell their houses either because they owe far more than their houses are worth.
You would think that it would be in the bank's best interest to work with the borrowers rather than take the house back but they cannot. The bank has sold these loans and guaranteed the investors that payments will be made until such time as these loans are determined to be in default. They have to foreclose in order to have enough cash to operate. And, the investors do not want to take a lower return.
With most of the interest rate adjustments ahead of us, we are only seeing the tip of the iceberg.
Now you can blame it all on the consumers who took out these loans but the banks were stupid for making these loans.
I hope that I explained the mortgage mess well enough to you. One thing that I failed to mention is that this mess is huge. and it's heading towards the fan.