Golden shit

photo by psyhiro
The banks can be better than the “magliari” and much better than the mafia. There’s no limit to their creative finance. Or rather, the limit is the crack, the bubble, the crisis in the market. When savers lose everything, then the creativity leaves the space to the analysis by the economists who explain well in great detail, but always later. Whoever has lost everything, while they are reading, always feels the desire to meet them one evening with a sledgehammer.
The banks, especially the American ones, for years have been applying the infernal mechanism to mortgages. It works like this. The bank grants a mortgage to a person who is at risk. “Subprime” mortgages for which there’s no verification of the source of income of those asking for the mortgage. “Alt-a” mortgages given with a simple declaration. The more mortgages, the more the money for the banks. The bank gains on the interest payments on the mortgage, but the risk is high. Because whoever has taken out the mortgage might not pay it back. So the bank packages the mortgages in investment funds, a bit like transforming shit into gold.
The mortgages on sale are called CDO, Collateralised Debt Obligations. In practice what happens is that the banks sell the debts of people who are insolvent. With a treble gain: from the mortgage, from the fund and by eliminating the risk. In theory the CDO can be inserted in any fund. The unknowing buyer could discover that in the next few days. In fact, the value of the real estate market in the United States has been in free fall for months, the Americans are no longer managing to make their payments, the funds are plummeting.
It’s not known where the CDO’s have finished up. In which banks, in which countries, in which funds. If it’s your turn, it’s your turn. It’s the capitalism of debt, beautiful. The one that invents wealth and destroys the savers.

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Posted by Beppe Grillo at 10:12 PM in | Comments (4)
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Piero,thank you for the informations,ciao

Posted by: walby wal | August 8, 2007 02:59 AM

Hello Dom!!
I liked your post, very informative and detailed.
I gather from your post that you would like to know more about complementary currencies and the way they work. Well let's just say that the vast majority of them were implemented in areas where the IMF and the WORLD BANK had a detrimental effect on the national and local economies(to say the very least).
It would be impossible to list them all so I will focus on the most representative examples.
In 2001 Argentina experienced a serious economic crisis due to the IMF monetary policies. Things got so bad that banks were literally shut down. This was mainly due to the money supply contraction exercised by the IMF which made money extremely scarce. In a situation such as this one you’ll find that goods and services are still present on the market as well as the demand for it. The only thing missing is that ‘intermediary device’ or ‘measure of value’ that is commonly known as MONEY in order for the exchange to take place.
Many realized (see Silvio Gesell) that money being no longer backed by gold was just a promise to pay and a conventional form of value. ‘Credit’ is the right word to describe money today. Credit comes from the latin verb ‘credo’ which means to believe or have faith in something. Every time we accept conventional money we do so because we are sure that, that very same money will be accepted by others as the ‘accepted’ method of payment(legal tender).
This is why a complementary currency (which is completely legal) basically behaves in the same way as conventional money. There are however some salient differences. Community money is complementary and not alternative to conventional money. This means that complementary currencies have the same value of conventional money but they can’t be converted into conventional money. Community money is not speculative. This means that it does not produce interest and it has to be spent within a closed economic circle.

All these peculiar aspects of the complementary currency might look like limits and serious deficiencies at a first glance. If you think local you quickly realize that’s not the case. Community money is the perfect economic device to preserve, keep and increase the wealth of local communities.

In Argentina there are 2.5 million people using CREDITOS and are in a way or another associated with the ‘red nacional de trueque’ ( national barter association). They enjoy and experience every day the irrefutable advantages of this system.

In Switzerland the WIR economic circle is certainly one of the most impressive success stories, so much that the WIR money has become so common and widely accepted that can now be converted into swiss francs. The WIR is a very large cooperative of small to medium enterprises that are willing to settle their payments without the use of conventional money.
All credits and debts are settled with the use of book keeping entries so no ‘real’ money is issued or loaned from the banks. This is why it’s called a ‘mutual credit clearing system’. The measure of value is no longer money but credit. Credit is given to whoever has the ability to produce goods and/or services. In this way the participants to the circle are avoiding the bank as the sole issuing agency of credit. The WIR circle counts more than 82.000 enterprises with a turnover of 5 billion WIR.

You see dear Dom the alternatives are many, they are legal and they proved to work. At the base of this peaceful monetary revolution there’s the knowledge that people should get back their right to contract. It’s a grassroots movement. Unfortunately people can’t control the Quantity of money in circulation but ( providing they organize ) they certainly can decide the Quality of it!! Ultimately we are the ones to give value to money. I will never tire to say and repeat that without US money is worth nothing!!! Money rightly belongs to the ones that give value to it. Let’s get it back then!

Dom if you would like to have a better understanding of the above mentioned issues I strongly suggest you take a look at these websites

I am looking forward to reading you next post

Take care


Posted by: Piero Sanna | August 7, 2007 12:26 PM

Hi Beppe

An Italian friend recommended your blog and I was pleased to find some in English, as sadly my Italian is not especially good!

The banks are applying the squeeze in the UK too, they are starting to battle the claims against punitive charges now that a precedent has been established by the Financial Services Authority that banks should be allowed to recoup their losses and nothing more. Now they qualify the charges saying it is to pay for the consultation fee as to whether or not they will consider a temporary extension to an individual's overdraft!

Furthermore due to the ridiculous price of property in this country people are forced more and more to borrow against dual incomes or for anything up to 6 times their salary or over 30/40/ even 50 years. This is an absolute time-bomb and the UK is really teetering on the brink of collapse in that respect as more and more homes are starting to be repossessed.

The average personal debt in this country, be it credit cards, student loans etc is £4,550 per average UK adult at the end of June 2007 not including unsecured loans (£10,200 including them). Average household debt in the UK is £8,841 (excluding mortgages) and £55,567 including mortgages.

The banks have massive personal power over individuals and plenty of political muscle to avoid legislation to curb their powers. I'd like to see a debt free society and I think it would be in the interests of the individual, but certainly not in the interests of the TNCs and MNCs. I would also be interested in how many of the 4000 communities Piero mentions are in debt en bloc to Supranational institutions like the IMF and World Bank.

Oh, and I would rather have too detailed information that I can research than to be patronised with easily digestible pap which some commentators are guilty of.

Posted by: Dom Kingsmill | August 6, 2007 07:23 PM

Here we go again. This is so typical of Grillo. Instead of providing the public with clear and exact information he prefers to whack it all in, in one go. In this way the average Joe is overloaded with information and by the end of the 'post' can't help himself/herslf but to think that he/she is either stupid or everything concerning banking and finance is just too complicated to understand.

How many of you that are not familiar with banking practices can honestly say to have understood what Grillo is talking about in this post.

As ever Grillo prefers to concentrate on the problem and completely omit the possible solution.
Even worse than that sometimes the problem isn't properly explained!!

What Grillo is trying to say in his confusing post
is that banks use your promise to pay back money (mortgages in this case) as a an active capital voice in their book keeping entries. The bank is making money from you from the very moment you sign a contract with them which makes you a debtor and the bank a creditor.

Many think that banks make money out of the interest they charge on loans and mortgages. This is just half of the story. It is true that banks make money out of the interest that they exercise on loans and mortgages but the bulk of the profit comes from a banking practice known as fractional reserve banking. The bank uses your promise to pay as if that money was already in its vault therefore your debt becomes part of the bank capital. This is known as 'monetary reflux'.

It is worthwhile to know that banks can loan out 9 times more what they actually have on deposits (fractional reserve banking) this means that banks use our debts to increase the amount of money they can loan out to people at a rate of 1/9. In an ideal world every time somebody asks for a loan or a mortgage the bank should pay the borrower instead of exercising an interest on the loan. Banks loan out money that is created out of nothing and it is therefore risk free.

I will never tire to say that the only possible answer to this problem is the correct implementation of a complementary currency combined with a mutual credit clearing system.
This can't be done globally. It has to kick start at a local level. It doesn't have to be regulated by institutions. This kind of monetary systems let the people decide what is worth what. It gives back the power and the right to contract that has been stolen from us in a subtle yet very effective way by banking institutions.
Money is a beautiful invention. Banks turned it into a weapon of mass destruction. How? they changed and manipulated money's natural function and nature. Money is just a dynamic method of payment for goods and services. It was never meant to be regulated and issued by a private monopoly.
Debt free money creates no inflation and keeps prices of goods and services stable.

This is not an impossible dream. It is a well established reality in 4000 different communities scattered around the world.

Why don't you give it a try?

Posted by: Piero Sanna | August 6, 2007 12:18 PM

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