Why Banks Prolong Economic Contraction
The term “business cycle” describes the fluctuations in economic stability over long periods of time. It follows the theory that, based on past economic trends, our economy will experience prosperous growth inevitably followed by recession. During periods of growth, there is normally a credit expansion in the private sector. Rising commodity prices follow the expansion and the stock market index increases rapidly. Undoubtedly, what follows is a credit crunch as asset prices become unstable. A recession occurs when the level of credit available falls extremely low for an extended period of time.
There is no known formula to accurately predict these fluctuations but our government, which follows the macroeconomic theories of John Keynes, often responds by running our national budget at a deficit or surplus to compensate, depending on our estimated position in the cycle. Those that believe in this type of economic model, consider it a necessary process. Both President George W. Bush and Barack Obama have employed the use of Keynesian economic theory which frequently demands intervention by our central bank, the Federal Reserve.
While some economists have claimed that the recession is over, small business owners are much more skeptical. The current problem facing the 21.5 million small businesses in America right now is simple: even though our congress gave billions of taxpayer dollars to failing financial institutions, they have refused to expand credit and provide loans. One of the claims made by bankers is that the politicians attempting to regulate their ability to influence our economy are forcing them to withhold loans. If you know that small businesses are almost completely dependent on loans, that they make up almost half of our gross national product and that 21% of exports are created by small businesses—1 in 5 American jobs—then you should come to the conclusion that bailed-out banks are holding our economy hostage.
How can we expect unemployment to ever decline when the sector overwhelmingly responsible for job creation is being strangled by our own financial system? Minorities in our country are experiencing depression-era unemployment levels and all the while, the banks are continuing to profit from foreclosures and defaults on those small businesses that create 97% of all new American jobs.
Thanks to a court case won by Bloomberg News against the Fed, we now know the amount of money doled out by America’s central bank to failing financial institutions is much, much larger than the $700 billion funneled through the Troubled Asset Relief Program. In fact, the number disclosed due to the outcome of the trial is staggering: $7.77 trillion dollars. As noted in the recent Bloomberg article, the amount is “…more than half the value of everything produced in the U.S. that year.”
Corporations such as Bank of America continued to borrow large sums of money from the Fed to keep their profit machines running, simultaneously releasing official statements to investors about how healthy their businesses were; since the amounts of bail-out money being handed out to these financial institutions was kept secret, there was no one to offer proof to the contrary. Only certain banks were deemed eligible to receive TARP funds based on the health of their corporation and Bloomberg has disclosed an important fact: Morgan Stanley, for instance, received $10 billion in TARP funds, while secretly keeping their company afloat by borrowing an additional $107 billion dollars from the Federal Reserve. This is only one example of a bank that did not meet the standards of eligibility set by the TARP bill, yet received taxpayer dollars anyway due to a lack of disclosure by the Federal Reserve.
It has been suggested that legislators might have been more willing to consider a bill that would finally cap the deposit size of banks in the U.S. had this information been made available in 2008 during the beginning of the crisis. In 1994, Congress adopted legislation that deregulated the banking system, allowing mergers to take place that concentrated total deposits into just a few banks. After years of lobbying and resisting these limitations, Bank of America now holds over 12% of all deposits in the U.S. according to the FDIC.
I could list the specific illegal actions taken by various banks to gain a monopoly over our financial system for several more pages; anything from laundering money for drug cartels to bribing public officials. Actual criminal activity takes place on a yearly, if not monthly basis by at least one of the 5 largest banking institutions in our country. Those who blame the financial crisis on overzealous individuals borrowing beyond their means are simply either uninformed or under-educated. When all is said and done, the evidence is perfectly clear: the American financial system that fuels our entire economy and influences global markets is rife with corruption. Bank employees are almost encouraged to break laws for profit, as insignificant fines are almost always imposed instead of criminal charges. If the United vs. FEC decision truly means that JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley are “people”, my judgment is this: they are all psychopaths hell-bent on destroying our civilization.
Now, as I mentioned before, the fluctuations in the business cycle are thought to be unpredictable. If you want to know if that’s entirely true or not, ask yourself this: What happens when a corporation, whose only responsibility is profitability, discovers that loaning money to small businesses is less profitable than prolonging a recession by denying credit and collecting on those businesses as they fail, default and foreclose? When the banks come forward to demand that only after regulations and supervision of their activities be suspended will they feel comfortable lending again, will the representative you voted for make the right decision? If s/he received campaign contributions from the same banks demanding deregulation, I don’t think they will. That’s just something to think about as we enter another election year.
Please be aware that in solidarity with #OWS, I believe we should also declare the 5th of every month to be Bank Transfer Day. We must continue to remove our wealth from the hands of these villainous corporate bankers. If you consider yourself to be a moral person, I urge you to weigh the decision to continue using a bank that puts profit before people. And yes, every penny does counts.
Authored By: DBCOOPA