Remember the old-fashioned collateral--you know, what made you the guarantor of your own loan? Your assets or at least very secure employment and minimal debits used to be pre-requisites for the financial institution to approve a loan. Not anymore: the Ponzi principle is now the mantra for the financial sector by keeping the flow of funny money until the "capital" is exhausted with minimal assets to back them up.
It's not pretty if you ever drove by a huge lot where thousands of relatively new autos have been repossessed, weathering by default, sold at near-giveaway bids and indirectly jeopardizing your own investments harbored in banks or automotive stocks, the latter of which slows down the production of new cars, or worse, stimulating manufacturers to offer "employee discounts" or worse selling them at 0% interest and zero down. Nor is it pretty to see foreclosure signs in the neighborhood, the spinoff value of which drops dramatically.
Take the credit card sector of the all pervasive financial monster [or mobster] with its phony credit ratings which does not, except in abhorrently, gross exceptions, deter anyone from getting a card. Granted young people with a history or deadbeats with a poor one, are limited in consumption by what they can charge; yet there's no limit on the number of cards they can obtain. Moreover, as long as payments are made and late charges satisfied the credit line escalates. In fact, the so-called "profit"--in addition to merchant fees--stems from usurious escalation of interest to those of little means. That the debtor hasn't the means to pay in full doesn't enter the scheme.
If the argument is that the current financial sector is not run by white collar thugs, then it should clean up its act by abandoning this Ponzi scheme. By the way, that goes for the federal treasury as well.
Copyright © 2008 Richard R. Kennedy All rights reserved. Revised: Sept17, 2008.
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