Banking: Asking the Question Why?

I love the introduction line that Twelve year old Victoria Grant uses in her YouTube video on Canadian Banking, “Have you ever wondered why Canada is in debt?” It is a good provocative talk on the way that central Banks in general create money, and how that relationship between them and the Government operate in understanding how this type of debt works. It does have an anti capitalist slant to it, but like all things private and corporate, no one truly knows the nature of just how wide spread and far reaching this is. For the capitalist this is the perfect system, but for the tax payer, well, who likes paying taxes if most of the money just pays for the interests on debt created.

I have my own take on this, of course. I see it as easy come, easy go, in terms of “it is only paper.” The various forms of debt created between the Banks and the Government can and do have direct effects on everyday citizens, but the effects are only mandated based on how much capital/debt and potential/actual incomes one has.  Simply put, the more money you have, the more you borrow, and the more you spend (the debt), the more you are on the hook for owning to the overall debt to the country as a whole. If you make little income, then your contribution to the national debt is in proportion to your income. So, for the capitalist, the greater the flow of money between income and debt by an individual, or corporation, the greater the punitive measures on that income and debt are. Banks charge you interest on your debt, and Governments levy taxes against your income; however, the money taken by the government is increasingly used to pay for debt, and, services and general operation of the Government are becoming less in proportion. I believe the financial crisis that we are seeing today is the beginning of the shift the West’s downfall to the East, as Niall Ferguson (2011) in his book called “The West and the Rest: The Changing Global Balance of Power in Historical Perspective.” writes about it. I love this theory becuase it ties the Central Banking concept of the West, and the historical trajectory of how powers and nations change throughout time, and both explain why this is occurring.

Greed and Control, with laziness and corruption, are the exes of evil that I see with the West’s downfall in today’s world. Even the term, “to big to fail,” is laughable as I am witnessing the United States slip out of the Super Power Status, or at least sharing it with China for a few decades. When looking at the European Union, I see the same thing, as ratio of debt to gross national product shrinks (or becomes negative), and more countries become economic failures.

What does this mean for Canadians?

Thomasso’s Personal Take:

Obviously the Banks are going to raise interest rates on debt and credit, and bump up their service charges. Governments will have to also increase taxes across the board to pay for debt. With all the new money being printed to keep everything afloat now, I can see the resulting inflation driving costs up (food/utilities/goods), and labour rates down along with housing and other big ticket items.

Solution:

Rid yourself of debt and reduce, or eliminate your exposure to Banks whether your have savings, or use them for your general banking needs. Stay away from credit, especially lines of credit and credit cards if you cannot clear the balance at the end of the contracted term. If you have a risk of being unemployed, then do not borrow. If  your mortgage interest rate increase exceeds your normal standard of living based on your current incomes, then sell, and sell fast. If you can, save-cash, or invest in commodities that you can carry. Plan on having double digit interest rates for the next five years. Be ready to move, or migrate to more prosperous regions for employment. listen, read, watch, but most of all educate yourself on the world around you, and live within your means.

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