{"id":754,"date":"2008-10-03T14:08:46","date_gmt":"2008-10-03T19:08:46","guid":{"rendered":"http:\/\/ietransfer.wpengine.com\/?p=754"},"modified":"2017-05-02T13:57:00","modified_gmt":"2017-05-02T20:57:00","slug":"money-and-debt-new-economic-architecture-required","status":"publish","type":"post","link":"https:\/\/inspiredeconomist.com\/articles\/money-and-debt-new-economic-architecture-required\/","title":{"rendered":"Money and Debt : New Financial Architecture Required"},"content":{"rendered":"
<\/a><\/p>\n In order to lend money, banks have to borrow it from another bank. Usually, that bank has also borrowed it from another bank … and so the borrowing continues.<\/p>\n As collateral for these loans many banks put up their assets. Many of these assets are themselves funded by loans.<\/p>\n Some are even bundles of loans, grouped together to allow the income generated through the loans\u2019 repayments to be considered an asset.<\/p>\n So what you end up with if you seek debt advice in the UK<\/a> in the end is a pile of debts, each secured against another. As the pile rises the whole structure becomes shakier and shakier, making the architecture of the whole system riskier and riskier. Not what a good economist wants to hear.<\/p>\n In case you don\u2019t believe me, here are some figures for the USA in 2007:<\/p>\n So half a trillion dollars has somehow funded 13 trillion dollars worth of economic activity? Get real!<\/p>\n This is a leverage factor of around 20:1 … some banks had been leveraging their assets at up to 40:1. In the meantime, Ordinary Joe, when buying a house is only allowed a leverage factor of 3:1.<\/p>\n Man! If I could leverage my income at 40:1, I’d be buying my senator’s house! Wow .. the common man lives in a mansion. Or, more likely…..<\/p>\n …. this is utter madness!! It\u2019s like driving a car faster and faster and faster because you haven\u2019t reached the bend in the road yet. When that bend arrives, you\u2019re going too fast and there\u2019s a huge and bloody car crash. Period.<\/p>\n So let\u2019s get three things straight in our new economic architecture:<\/p>\n Do you agree with these points, or do you think they\u2019re far liberal or restrictive? Or can you think of something which needs to be added to next week\u2019s topic: competition and growth?<\/p>\n Either way, I always enjoy hearing your views and discussing them with you.<\/p>\n Don\u2019t be shy! Post a comment below or start a thread on the Green Options Discussion Forum<\/a>!<\/p>\n Related Posts:<\/strong> Picture Credit<\/strong>: “National Debt” by Digiart2001 from Flickr under Creative Commons Attribution Share Alike Licenese.<\/p>\n","protected":false},"excerpt":{"rendered":" Whenever you take out a loan the temptation is to imagine a big mountain of money in a secure vault somewhere. Your friendly bank manager, a nice affable chap, is on hand doling out credit to any soul who can jump through his hoops. This is miles, no decades, away from the truth. Here\u2019s how […]<\/p>\n","protected":false},"author":11,"featured_media":755,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center 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!important}}\n\";s:2:\"js\";s:0:\"\";s:18:\"current_block_list\";a:2:{i:0;s:14:\"core\/paragraph\";i:1;s:10:\"core\/image\";}s:8:\"uag_flag\";b:0;s:11:\"uag_version\";i:1713657651;s:6:\"gfonts\";a:0:{}s:10:\"gfonts_url\";s:0:\"\";s:12:\"gfonts_files\";a:0:{}s:14:\"uag_faq_layout\";b:0;}"],"rank_math_news_sitemap_robots":["index"],"rank_math_robots":["a:1:{i:0;s:5:\"index\";}"],"rank_math_og_content_image":["a:2:{s:5:\"check\";s:32:\"2b3eb87205fbdc84c6ffbe465e57e8df\";s:6:\"images\";a:0:{}}"],"_uag_css_file_name":["uag-css-754.css"]},"uagb_featured_image_src":{"full":["https:\/\/inspiredeconomist.com\/wp-content\/uploads\/2008\/10\/our-national-debt.jpg",240,160,false],"thumbnail":["https:\/\/inspiredeconomist.com\/wp-content\/uploads\/2008\/10\/our-national-debt-150x150.jpg",150,150,true],"medium":["https:\/\/inspiredeconomist.com\/wp-content\/uploads\/2008\/10\/our-national-debt.jpg",240,160,false],"medium_large":["https:\/\/inspiredeconomist.com\/wp-content\/uploads\/2008\/10\/our-national-debt.jpg",240,160,false],"large":["https:\/\/inspiredeconomist.com\/wp-content\/uploads\/2008\/10\/our-national-debt.jpg",240,160,false],"1536x1536":["https:\/\/inspiredeconomist.com\/wp-content\/uploads\/2008\/10\/our-national-debt.jpg",240,160,false],"2048x2048":["https:\/\/inspiredeconomist.com\/wp-content\/uploads\/2008\/10\/our-national-debt.jpg",240,160,false],"adace-sponsor":["https:\/\/inspiredeconomist.com\/wp-content\/uploads\/2008\/10\/our-national-debt.jpg",72,48,false],"adace-sponsor-2x":["https:\/\/inspiredeconomist.com\/wp-content\/uploads\/2008\/10\/our-national-debt.jpg",144,96,false]},"uagb_author_info":{"display_name":"Chris Milton","author_link":"https:\/\/inspiredeconomist.com\/author\/britesprite\/"},"uagb_comment_info":35,"uagb_excerpt":"Whenever you take out a loan the temptation is to imagine a big mountain of money in a secure vault somewhere. Your friendly bank manager, a nice affable chap, is on hand doling out credit to any soul who can jump through his hoops. This is miles, no decades, away from the truth. Here\u2019s how…","_links":{"self":[{"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/posts\/754"}],"collection":[{"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/comments?post=754"}],"version-history":[{"count":0,"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/posts\/754\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/media\/755"}],"wp:attachment":[{"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/media?parent=754"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/categories?post=754"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/tags?post=754"},{"taxonomy":"adace-sponsor","embeddable":true,"href":"https:\/\/inspiredeconomist.com\/wp-json\/wp\/v2\/adace-sponsor?post=754"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Whenever you take out a loan the temptation is to imagine a big mountain of money in a secure vault somewhere.<\/h3>\n
Your friendly bank manager, a nice affable chap, is on hand doling out credit to any soul who can jump through his hoops.<\/h3>\n
This is miles, no decades<\/em>, away from the truth. Here\u2019s how debt works today ….<\/h3>\n
America In Debt<\/h3>\n
\n
Better Rules For The Economy<\/h3>\n
\n
\n Is Your Money Safe Where It Is? What About Green Stocks?<\/a>
\n Wealth and Value : New Economic Architecture Required<\/a>
\n Lehman Brothers Collapse: New Economic Architecture Required<\/a><\/p>\n