The Egyptian Tinderbox: How Banks and Investors Are Starving the Third World
Thursday 03 February 2011
by: Ellen Hodgson Brown J.D., t r u t h o u t | News Analysis
<snip>
Follow the Money
The cause of the recent jump in global food prices remains a matter of debate. Some analysts blame the Federal Reserve's "quantitative easing" program (increasing the money supply with credit created with accounting entries), which they warn is sparking hyperinflation. Too much money chasing too few goods is the classic explanation for rising prices.
The problem with that theory is that the global money supply has actually shrunk since 2006, when food prices began their dramatic rise. Virtually all money today is created on the books of banks as "credit" or "debt," and overall lending has shrunk. This has occurred in an accelerating process of deleveraging (paying down or writing off loans and not making new ones), as the subprime housing market has collapsed and bank capital requirements have been raised. Although it seems counterintuitive, the more debt there is, the more money there is in the system. As debt shrinks, the money supply shrinks in tandem.
That is why government debt today is not actually the bugaboo it is being made out to be by the deficit terrorists. The flipside of debt is credit, and businesses run on it. When credit collapses, trade collapses. When private debt shrinks, public debt must therefore step in to replace it. The "good" credit or debt is the kind used for building infrastructure and other productive capacity, increasing the Gross Domestic Product (GDP) and wages; and this is the kind governments are in a position to employ. The parasitic forms of credit or debt are the gamblers' money-making-money schemes, which add nothing to GDP.
..more at link. VERY important read, IMHO.
http://www.truth-out.org/the-egyptian-tinderbox-how-banks-and-investors-are-starving-third-world67424
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
