Debt is as fake as the hall of cost. It's all made up. There are no assets being borrowed to return. When you "borrow," currency is simply created.
This opens up a whole Pandora's box of concepts like derivatives. Essentially, our currency is a derivative where the underlying asset is… well nothing. This reminds me of the Chinese. They're good at derivatives. Typically what they like to do is go to bank A and get a loan on actual assets they own. But wait! They then proceed to bank B further down the street and get another loan on… the same assets they just borrowed money against. The funny part is both banks believe they own the same assets. No, they have a claim against the same assets. I've heard cases where the business will go to several banks and do the same thing. Essentially, our financial system works this way. There are some assets somewhere with multiple claims against it. No one knows until the borrower can't make the interest payments and defaults on the loan. The lender tries to obtain the assets and discovers, oops, there aren't enough assets to settle the debt.
Here's something interesting… did you know that the second you put your money into a bank, that money is no longer yours? Yep, you get a claim against the money and that's all. The money really belongs to the bank. Now, the bank goes insolvent and you want your money. The government may bail you out up to $250K, the rest is simply a claim against the bank. You now have a claim against the bank and that's it.
I was floored when a young neighbor explained the 17% interest rate on their car note and almost 30% credit card rate... like it was no problem.
Damn.
Yea, i'm trying to get my son to refinance a high interest rate car loan, but he's too lazy.
Brutal. I get why young people are so angry when it comes to the economy. Worse than the Carter era I think..
(post is archived)