There are glaring frauds in the rhetoric being used to explain to the public why they must pay for the Wall Street mess. Supposedly, the bailout is needed to keep mortgages turning, so the small people can continue to buy houses or create businesses. The banking system supposedly broke down, because banks are now afraid to loan to each other. The explanation is shameless fraud beyond belief.

Banks do not loan to banks to create mortgages. Normal banking is not broke and is not being fixed. The banks-loaning-to-banks problem is part of a pyramid scheme that has taken over Wall Street. It's a pyramid scheme which requires generating value out of thin air through debt creating mechanisms. Loaning and borrowing is how fake value is created out of thin air.

This means the bailout isn't about saving mortgages; it's about sustaining the pyramid scheme on Wall Street.

Another fraud is the claim that bad debt can be paid off to correct the problem. There is no such thing as paying off a pyramid scheme. To pay off the bad debt is to sustain the scheme, while it continues to multiply bad debt.

A pyramid scheme must continually multiply fake value, because a percent is skimmed off every time a transaction occurs. If the value were not constantly multiplied, it would deteriorate away due to the skimming. Knowing this, the players in the banking scheme constantly multiply fake value. Due to the way banking works, fake value is generated through the synthesis of debt. Excessive borrowing and lending is a scheme for generating fake value through debt creation.

Laws used to prevent such pyramid schemes from entering the banking system. But due to deregulation, Wall Street (financial institutions combined with investment companies) was converted into a pyramid scheme which replaced the traditional functions of marketing stocks and bonds as securities which had actual value. Something like 90% of Wall Street's current activities are now immersed in the pyramid scheme. The companies involved cannot go back to doing what they used to do, because no company can shrink to one tenth its size without disappearing.

Because Wall Street is now based on a pyramid scheme, paying the bad debt is not only continuing the problem, it requires endless generation of more bad debt synthesized out of thin air.

Wall Streeters assumes they can get the scheme going again, if they can get rid of the mortgage problem and "restore confidence." Confidence is required to get the wheels of borrowing and loaning going again.

The main reason why it won't work is because the problem is not that mortgages gummed up the works; it's that the pyramid scheme got so large that it imploded on itself. Mortgages were only the trigger. If it weren't mortgages, it would be the next economic problem.

Pyramid schemes automatically get larger and larger. The larger they get, the harder they are to feed. Confidence in the scheme collapsed because all pyramid schemes evolve to that point. As they get larger and larger, they must feed on larger and larger amounts of wealth, until they can no longer be fed.

 

How it Works If two kids flip a coin for a million dollars, one of them owes the other a million dollars. If they repeat it often enough, they eventually owe each other the same amount—something in the billion dollar range—and they can say they are even. That's what Wall Street did. They have about $700 trillion on the books (as derivatives) at this time. Did they "create wealth"? Some persons on Wall Street assume wealth was created doing that. But there was no increase in wealth, only an increase in debt. However, the banks did siphon off about one part per thousand from each transaction, which paid for big bonuses and operating expenses. It would have almost been irrelevant to everyone else and the general economy, except the participants sucked up all pension funds and trust funds causing them to disappear down that rat hole. It's like grinding gold into dust, mixing it with asphalt and paving the streets with it. About $5-10 trillion in pension and trust funds disappeared that way. Some pension funds were lost two or three times by reinvesting in supposedly safe, triple A rated schemes. This is the only real difference between the financial state of General Motors and that of Toyota. "Legacy" corporations lost big pension funds, which newcomers didn't have. The talk about "banks loaning to banks" and "restoring confidence" is an attempt to get the scheme going again as a method of generating revenue. It isn't the answer. It's the problem. Only con artists like gypsy scammers need confidence. Real banking has nothing to do with confidence; it's based on income, expenses, profits and contracts. Only the scams are based on confidence.