Jack, I'm with you, but you act as if this is something new or beyond the understanding of what is known. Take any business 101 class in college or live to be say 25 and you know that "the bank doesn't keep the money in the vault". The banking system, capitalism and socialism for that matter relies on the increase in demand or aka consumption. When you invest at a consumption level today, you need more consumption tomorrow to make money on your investment. The bank works the same way. When they give out a loan they in a REAL sense are investing in cumsuption. Yes, the banks spawn and encourage that human desire to borrow from tomorrow to comsume today. Always remember this...A dollar today is worth more than a dollar tomorrow...That is called inflation!

kpokeefe

When a bank is able to take your deposits and give you less than a percent in interest for keeping it there, then lend it back to you and others under credit at a much higher interest rate, it becomes a Ponzi scheme. Monies are created without using real money.

Madoff is in jail because the goverment does not want competition.

That's not a Ponzi scheme. You can google the term and get a complete definition. The reason the bank charges a higher rate for loans than you get on your deposits is primarily due to two factors. 1. Credit risk - while your deposits are protected by the government/FDIC (up to a certain limit that 99+% of accounts will never hit), the bank may not get the entire principal of the loan back. 2. Duration risk - you can get the money you deposit back at any time while the bank cannot get their money back early. Typically they will loan the money for a few years. If rates go up then they are stuck with the lower rate they are currently receiving on the loan they made.

Like Duh! What else is new?

Anderson-2548421

FDIC is the insurer? My guess is that they needed a bail out too?

Kaptain,

They will eventually need a bailout but for now the fees they've charged the banks over the years has covered the losses on failed banks. You touch upon an important point in both of your comments - 1. The fact that the Fed has kept rates at 0 (meaning you and I get basically 0% for our savings) has allowed banks to make money by paying 0% to you and me and receive a lot more from the loans they make (or the Treasury notes/bonds they buy). They call this a steep yield curve and a monkey running a bank could make money in this environment. This is basically a bailout of the banks at the expense of savers. This is not as highly publicized as the explicit bailouts we saw in 2008. I agree with you 100%.

kpokeefe, banks do not only give out the original deposit, they create money out of nothing and then give it out. The problem is here. The borrowed money is the money supply. But it needs to be paid back with interest. Because when we borrowed, banks created only the principal, but now they are asking for principal + interest to be paid back. Banks are money factories. They do not merely loan out deposits. They loan out multiples of that!

Bernanke has already tripled the base money supply. Throughout 20th century, FED printed 800 billion dollars. Then in a few months in 2009 FED printed more and increased the money supply to more than 2 trillion. And where is the inflation? The problem is our money supply is not just printed money. Just the savings deposits at commercial banks are more than 4 trillion:

http://research.stlouisfed.org/fred2/series/SVGCBNS

Where did the difference come from? We printed 2 trillion but bank deposits are 4 trillion. Hmmm. It was created as credit by the banks when we borrowed. It is debt money. It can deflate and that is the problem. Here is how banks created money in the form of debt, and how it deflates:

http://www.kondratieffwavecycle.com/credit-inflation/

Total bank credit is more than 9 trillion now.

http://research.stlouisfed.org/fred2/series/TOTBKCR

This has principal + interest to be paid. How is this going to be paid when base money supply is 2 trillion and velocity of money is going down? It is a bankrupt scheme and Bernanke is printing money to save the runners of this ponzi scheme.

If you look up Ponzi Scheme you will find that it describes Social Security to a "T". Your benefits are not paid with the funds that you and your employer paid in as that money has long since been squandered. Your benefit, if there is one when you retire, will be paid with current revenues not anything in your so called account.

Oldfox, I worked for one of the largest banks in the world. I'm pretty sure I know what I'm talking about. Name me one government service that isn't a ponzi scheme? Where do you think the government birthed their ideas for entitlement programs? BANKS! Even your water bill if you live in an urban environment is a ponzi scheme. Do you really think the added fees for reconditioned infrastructure is collected and placed in a LOCK-Box? Nope! Here in the city of Atlanta in the county of Fulton, I pay $450 per month to flush the toilet. At least 60% of my bill is to revamp the decaying water infrastructure. Do you think they are doing it? Hell no! They are using that money to pay other costs they are behind on. It is called financial modeling. When the market doesn't return what it was supposed to return then federal, state and local governments must pilfer off of other government programs and services collected to meet the DEMAND in other entitlements! Think of teachers, police and fireman pension programs. You will hear alot about this in the future!

peter

technically, you are correct in stating that wealth and high income are not the same thing. but you're missing the point: for the vast majority of citizens, earnings play a much bigger role in their day-to-day lives. the article is pretty clear (and accurate): chances are that you haven't seen much of a real (inflation-adjusted) increase in income over the past decade. unless you were doing pretty well to begin with, that is.

besides, how many $100M retirees or lottery winners are there, anyway? my guess is that its not enough to make much of a difference compared to the entire population. let's not confuse the issue here...

Dont worry soon the bottom 25% will vote the Republicans into office. Lets give Social Security to Wall St also. I for one dont need my $1600 a month check. Better spent on a 10k sq ft house for the wealthty than me living. And I mean LIVING!

Good luck seeing your social security the way politicians are raiding that money for other stupid stuff. I agree with the people looking to reform or abolish it. I pay $300 a month and almost $4000 a year into this crap. What kind of investment is this when that chances of seeing it are slimmer and slimmer by the year?? Give me back MY money so I can put it in my TSP account for ME and my family to use. If the government cant keep its paws off this money then do it away with it completely! FDR started this crap and LBJ raided it. Thanks Democrats!

I can tell you that state employees, on average, make less than their private-sector counterparts. Federal employees, not sure.

I agree and let's have people prohibited from collecting multiple pensions or benefits like Sen McCain. Geez Full military disability, SS, plus another. This is killing this country with people scamming the system.

Here you @!$%#s go with this bull@!$%# again. How about a comparison of executive salaries to the average worker in the company?

If history is any indicator you are entirely correct. The pieces are starting to come together.

Good news, Democrats can own weapons also! Im going to the BIG houses with my 30:6. Only a revolution against the RICH (Republicans In CHarge) will make a difference. It might take 50 more years but it will happen. The only bad thing is will your kids in the MILITARY listen to their parents or follow the orders of their Commanders?

Huh????

Huh???? is not an intelligent response to anything. My post concerns TG Gray's anti-semitic blame on jews for his situation. For his and your information "the jews' do not own or run the banking system, contrary to those who hold such ignorant opinions.

Oh, now I get it. Thanks for sharing.

The wealth has always been held in relatively few hands. Where have you been?? 25 years ago the percentages of wealth held by various groups is close to what it is today. The top 1% have about 35% of the wealth. the next 19% have about 47% of the wealth. And the bottom 80% have about 18%. Almost 50% of taxpayers don't pay any income tax because their incomes are not high enough to pay any. How much wealth do you think they have?? But that is how it has always been, nothing new.

So... this is just OK with everybody.? No stand up? No marching in the streets? No moving toward parity? The working class made these people rich. A frog in water at a slow boil...that's what we've become? Sad. Then that's what we deserve. We can shut this down with a little common ground. Not mindless Tea Bagging. A real financial movement on the part of the masses. Think about it. I don't have the answers, but someone must. Mass labor strikes? Everyone across the country stops paying interest on a loan for a month? We are being raped by financial institutions. We changed the world in the sixties, we can still do it! I'm tired of being trickled on!

Im with you Rusty

Might be an interesting conversation. Let's continue on Newsvine and feel each other out. There has to be a peaceful, yet deliberate way to address this growing injustice.

The entire American people are waking up Rusty. We are not a stupid people. We should only do what we have to. I live in Clearwater.

Our government is fiscally irresponsible becasue we've allowed it to happen. We all have been guilty at some time in our life of buying something we didn't need or couldn't afford.

Dave Ramsey has the best take on it. Get out of debt and don't borrow again. When we become a cash society instead of a credit society the banks will have to figure out another way to make money. Starve them just like they have bled us dry. We all could learn a little fiscal constraint and start means testing benefits programs. Should I pay a fireman a pension of $100K a year at 42 years old, but a policeman get $35K under the same set of rules. We've gotten wacked out of proportion. Political pensions in general are killing us and it will get only worse. I'm beginning to wonder should a government worker get a pension and SS? Why?

You actually regard what happened in Vietnam as a good outcome? Do you know anything about the millions of people killed by the communist government after the end of the war?

Why is it people who have no talent, no ability, cannot offer any value to anyone else worth paying for, are constantly so eager to destroy the "rich"?

Instead of constantly trying to tear other people down, maybe you should focus on building yourself up.

Stop being a destroyer and blaming everyone else for your problems. You don't get a second life. Don't be a coward. Stand up man!

It's not destruction, it's reclamation. There is a positive force here, but it takes a willingness on the part of a society to right the wrongs perpetrated by an elite ruling class. Every country has a right to defend its civilian population from the excesses of the few and seemingly righteous in their deliverance of good on the benefit of those in control. As you say "Stand up man!"

I agree with you Rusty. We have to stand up sooner or later or there will be nothing left but peasants and the ruling class. Just like Vietnam. The wealthy first try fear and intimidation. Then they try violence. They are the first to commit violence because they can. If violence doesnt work then they abandon the situation just like they did in Vietnam. Today our nation is being strangled by a few but this wont last forever.

That's all great jed except people figure out pretty quickly that the game is rigged against them. What's broken is your paycheck, you aren't paid enough and nobody wants you to know that. Health costs have been freely escalating according to an unregulated market for better and better service, so naturally it cost more, a lot more. The real problem is your paycheck isn't keeping up and it hasn't been keeping up for about three decades now so you can't afford the things that have been increasing in cost in a free and unregulated market. Easy credit and government subsidized home loans made you think you could afford things. That was an illusion, you can't.

If you want less government in your life, put more money in your paycheck. If you want to be able to really afford that house, save up for a downpayment and furnish it nicely, demand more pay for the goods and services you produce, you deserve it. There was a day without credit cards. There was a day when a middle class American could save up for what they wanted in a resonable amount of time. There was a day when Americans actually saved money in a bank, imagine that! They could do those things because they were paid adeguately, and those times were considered "prosperous". This was before wages and salaries were used by industry and the government as tools to keep inflation down, at least that has been the excuse. As employees became more and more efficient aided by technology, companies made higher and higher profits, they netted more and more product for less and less cost. And a lot of that cost savings came out of your pocket. Don't you get it? You are not paid for what you produce. You are giving your life and your work away at a discount, is it any wonder that everything is so expensive, is it any wonder that you can't afford housing, healthcare, education for your children?

Even mice don't run on a treadmill without a reward, Capitalist do not give their products away, they demand a fair and reasonable price. Why should American workers do any less? We have a recession because people cannot truly afford anything.

Yes Jed, we ALL know that almost every single rich person EARNED it. There's no such thing as spoiled pig @!$%#ing rich @!$%#s who were given everything their entire lives.