Last week I posted a series on the source of the economic crisis. I gave you an unbiased look at the factors that contributed to the perfect storm of circumstances that have led us to this point. If you didn’t catch them, here they are: Part 1: Fractional Reserve Banking Part 2: Inflation and Interest…
Category Archives: Economics
Understanding the Economic Crisis: Part 4 – Fannie, Freddie, and Fairness
In 1977 President Jimmy Carter signed into law the Community Reinvestment Act – a bill that was aimed at helping lower-income communities obtain affordable housing. The nature of the bill was to evaluate banks and grade them on how well the were meeting the “credit needs of their community”. The bill stemmed from an underlying…
Understanding the Economic Crisis: Part 3 – Artificial Interest Rates
Even in a system of fractional-reserve banking, interest rates rest at a natural rate. This means that investors can accurately predict how much to borrow to produce supply for a segment of the market (such as housing… see where we are going?). Now the entire banking system is governed by the Federal Reserve. The Federal…
Understanding the Economics Crisis: Part 2 – Inflation and Interest
Returning to our discussion yesterday, remember that money was “created” by the practice of fractional-reserve banking. We concluded that this is an inherently fraudulent activity with adverse consequences in the market. So, what are those adverse consequences? For the purposes of this discussion we need to introduce some basic economic theory: supply and demand. In…
Understanding The Economic Crisis: Part 1- Fractional Reserve Banking
There is a lot of talk about the economy right now and how we got into the mess we are in. We hear a lot about “lack of oversight” and the “unfettered free market” and “corporate greed on wall street”. But when we strip away the political rhetoric and blame, what lies at the foundation…
One House at a Time
I’ve long held the view that money received from different sources has a different effect. This principle is exemplified in this case of a private organization who is giving to a community devastated by Hurricane Katrina. You will notice that the collective attitude of those receiving their homes is a sharp contrast to the attitude…