When we want to buy a property, we normally are expected to deposit ten percent of our own money, aren't we? This then enables a bank to advance us the rest of the mortgage, doesn't it?
Why? - Ah, now we enter the mythical province of 'banking practice'.
Bank rules that govern 'fractional-reserve lending' state that a bank can lend nine times more than its reserves. How so?
Basis of problem
The origins of fractional-reserve lending lie in the deposit of gold for safe-keeping in counting-houses. Rent was charged for the service of guarding the deposit. Paper bonds were given for the value of the deposits, and these were then also used to facilitate buying and selling of other goods. The depositors did not all take out or even see their gold at any one time, so the keepers of the counting-houses would issue more paper receipts of deposits than were warranted by the gold held, and therefore charge and receive rent even though the bond did not represent any gold in reality. Dishonest? - Of course, but deception is a central credo of the acquisitive financial creatures.
This fractional-reserve lending finally institutionally established that the counting houses - now called banks - could lend out nine times the quantity of the deposits held. Why? Because they had the effrontery to say so - Today they call that 'chutzpah' and for some reason are proud of what we consider contemptible cheek. Hence, your ten percent deposit today on your house mortgage or your 'Use-It-For-Anything' loan enables the lender to invent nine times that money for your debt for you to repay.
In effect, by paying the deposit, you have created the money that they will lend you, and you will have to repay it all over the years, plus its interest, probably to the extent of twice or more the total amount, and you will in reality have to create both the deposit and this repayable 'money' by your working for it. It doesn't stop there; you will first also have to pay taxes on your 'earnings', but more of that later.
This practice of fractional reserve is really a form of 'leverage'. A lever is a bar, with which you can pry or lift greater weights or apply greater force. In financial parlance your ten percent has 'leveraged' the other ninety percent. This is common practice among financiers, who will use even such a nebulous thing as 'an offer' of funds to 'leverage' vast quantities (1).
We have seen this exercise recently enable the - for us - most disastrous financial crash for almost a century, with its even more devastating effects - for us - still to come, together with its consequently greater rewards for its financier beneficiaries.
To bring this scam about, the 'Federal Reserve' was induced by its alien masters to reduce interest to one percent and hold it there for years, with floods of money available, to such an extent that people - even the unemployed - were falsely led, literally induced, to borrow amounts that they could not possibly repay, for property they could not afford, on a market of deliberately-inflated property values.
These ruinous mortgages were then duly packaged by the banks holding them and sold wholesale to others who leveraged by putting down five percent and borrowing ninety-five percent to acquire them for profit by immediately selling them for a margin. Those who bought them did the same, put down five percent and borrowed ninety-five to immediately on-sell them for profit. These are astute people without consciences working on margins and getting out before any proverbial hits the fan.
Finally, the now-greatly-increased amounts arrived to the 'derivative' market quantities, which means we are now talking about trillions in their thousands. They duly put down three percent and borrowed ninety-seven. Allegedly (2) in the Rothschilds' Goldman Sachs, over which Paulson then nominally presided, the idea had been hatched to insure these vast quantities against possible loss in order to be able to on-sell them - yes, for profit, what else?
The amount of 'money' thus invented was more than all the money in circulation, so how could such figures be accepted? Much more money exists, of course, but that is all locked away in 'The Trusts', the mythical tax-exempt containers of ninety percent of all the money in the world, but Those In Charge of them are unwilling to let go their grip on their so-valuable and -influential tool, by which they presently so-successfully and so-profitably wag the world.
Therefore, it is said (3), a bribe of 300 million was paid to 'the evaluators' to authenticate this rotten derivatives material as AAA quality 'instruments', so that AIG would insure it. This 'AAA' material was then, for profit, of course, palmed off on most of our banks, supposedly for the banks' secure profit.
Remember, however, that the security on these now-immense sums, is still the same million or so trashy mortgages on unleverageable physical properties already well below the intentionally and illegally-inflated values at which they were appraised for their loans.