TheLeaderInside.com

Big Picture – What’s the Real Story?

““Finance is the art of passing currency from hand to hand until it finally disappears.”

~~~ Robert W. Sarnoff

First — to all my loyal readers — an explanation! It’s been eleven days since I last wrote an article for this blog. What happened was that on Sunday, September 14, 2008, my area of Ohio got hit by a “Perfect Storm” that took out our electric power until the 19th. There are still nearly 40,000 people without power. (For more details about the storm, please email me and I’ll send you more information.) It has taken me until this morning to get back to posting another article.

My plan as I ended the last article was to write about the collapse of global and environmental systems around the world. However, it looks like the financial collapse, or crisis, or whatever name you decide to give it, has moved into the forefront.

I’ve done some research about it over the past couple of days and have some information to pass along to you. This will be a long post, but I hope you’ll take the time to read it. It’s quite educational — and disturbing.

What is the Big Picture that has led to the financial collapse here in the USA? I learned it has to do primarily with “The Giant Pool of Money“. What does our housing crisis have to do with the turmoil on Wall Street? Why did banks make huge mortgage loans to thousands of people with little or no employment or other sources of income? Using various sources of information, I found that much can be explained by looking at the “Giant Pool of Money” and how it got too hungry for its own good.

How does the collapse of the huge Wall Street firms and Federal Housing companies tie into the family that had to lose their home to foreclosure? What made the banking system feel they could just forget all the basic rules of sound banking? I was in the banking business for over 25 years and I’m still scratching my bald head. The bankers aren’t the only ones to blame — the borrowers played a role as well. Everyone was involved in imprudent lending practices.

It all starts with the “Giant Pool of Money” I mentioned above. Most people don’t think about it but there’s this huge pool of money out there, which is basically all the money the world is saving. Insurance companies saving for a catastrophe, pension funds saving money for retirement, the central bank of England saving for whatever central banks save for — all the world’s savings. And the total in this Giant Pool is about 70 trillion dollars! All the money spent and earned in every country on earth in a year is LESS than 70 trillion.

Where did all this money come from? All sorts of poor countries got very rich selling us stuff like TVs, computers and oil. You know who they are — China, India, Abu Dhabi, Saudi Arabia, etc. They made a lot of money and banked it. China, for example, has over a trillion dollars in its central bank, and they needed places to invest it. The problem was they were running out of good places to make those investments.

So, they looked at Wall Street and found residential mortgages. Hmmm, not bad — 7 to 9 percent returns. Cool! Except, the “Giant Pool” guys don’t want to mess with the individual people and their mortgages. So, Wall Street to the rescue! They go to the bankers and ask them to bundle up a bunch of individual mortgages and sell them to Wall Street. Wall Street takes those bundles and sells shares in them (Mortgage-backed Securities) to the “Giant Pool” guys — and those guys love them!

The Giant Pool guys developed an insatiable thirst for these securities. They wanted more and more of them (I think it’s called GREED!) The Wall Street guys were running out of mortgages, so they encouraged the bankers to accept riskier loans. Bankers began to break the rules and people who had no business getting loans were now getting them. All people had to do was lie to the banker and get the loan. Bankers weren’t asking for proof — they just made the loans and sold them to Wall Street – who sold them to the Giant Pool. Loans were getting riskier and riskier, but it didn’t bother anyone because housing prices were on the rise. The asset had a higher value than the risk. Still cool!

In late 2006, strange things started to happen. Housing prices were still increasing — loans were still being made to people who shouldn’t get them — but incomes began to level off. More and more jobs were leaving the USA and going to other countries. Layoffs were on the increase. People began to default on their loans. Housing prices began to drop. More and more people were getting out from under their mortgages, either by defaulting or selling. More homes came on the market with fewer buyers to purchase them, which drove prices lower and lower.

So, in an effort to keep the “money-ball” rolling, the smaller banks started borrowing money from the bigger banks so they could keep buying loans to sell to Wall Street. However, Wall Street began to see potential trouble and stopped buying the shares in mortgages. The little bankers are now sitting on bad mortgages they can’t sell, and also huge loans of their own they can’t pay back, and some of them have to shut their doors. Everyone in this chain of greed is in the same boat. The paper they were buying and selling is of little value. The borrowing done to fill their greed is unable to be paid back. The house of cards begins to crumble.

All the bankers who lied to people — all the people who lied to bankers — they all end up losing. All those mortgage-backed securities are worth less than half their value — some of them are worth nothing. The “Giant Pool of Money” invested in these securities is now worth less than half of what it was originally. The other half is gone — forever. Now the guys at the “Giant Pool” won’t touch anything that isn’t 100% safe. That need for complete safety has trickled down throughout the world markets so the ability for anyone to borrow money, business, government, or individual has dried up world-wide.

Everything is just kind of crappy. And not just in housing or banking but for the economy as a whole. It’s barely growing — it might even be losing ground. There aren’t a lot of new businesses or new jobs. Unemployment keeps creeping up. We’re just sort of stuck, in neutral, for a while.

The sad note on which I end this very long post is that now our President wants us, the taxpayers of this country, the people who have already been hurt by the greed of the big banks, big governments, and big corporations, to shoulder the burden and pay for a bailout with our own tax dollars. The ultimate slap in the face. The Bush administration is trying to ram this through in only 72 hours by claiming there will be dire consequences if we don’t pass the bailout exactly as written.

Once again they’re using fear to scare Congress and the American people into submission.

That’s the “Big Picture” of our financial crisis.

I hope you’ll call your Washington people and tell them to say “NO!” — to find another way.

There’s more to come next week. Come back and help us to continue this important conversation. Invite your friends. We need many more people to be listening and sharing.
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On a softer note after this rant …

There’s something else I’d like to pass along to you. I’ve been a member of the Spiritual Cinema Circle for several years. This membership has been a wonderful pleasure. Each month I get a DVD with a full-length feature film and 3 shorter films, and they’re mine to keep and share with family and friends.

This month it stars Michael Douglas as he digs for love and buried treasure in the feature film, King of California.

Yes, from our friends at Spiritual Cinema Circle, comes King of California, a quirky, fascinating, and original movie starring Academy Award® winning actor Michael Douglas. Douglas plays Charlie, whom we meet as he is released from a mental institution, although it’s not quite clear whether he is “cured.” Waiting for Charlie at home is his teenage daughter, Miranda, played by the gifted young actress, Evan Rachel Wood. Any hopes Miranda has for a return to normalcy, however, are immediately dashed as Charlie enlists her in a hunt for Spanish treasure. The Don Quixote-like quest results in a dig beneath the local Costco. The loving, confrontational, and extremely complex father-daughter relationship between Charlie and Miranda is tested and strengthened throughout the film, culminating in a surprise ending.

Also, we have: Monsoon (Short Film): Beautifully shot in Mumbai, India, this film asks how we can honor and respect our loved ones’ wishes, even if they are contrary to our own.

And …Tocar Y Luchar (Short Film): An incredible story in a time when turning a country around seems almost impossible — here’s proof that it’s not.

Plus … Detour (Short Film): In this intriguing short film, Julia intends to leave the traffic jam of her life behind until she meets a strange character who gives her a new perspective.

Receive King of California and the 3 great short films free (plus nominal shipping fee), by visiting Spiritual Cinema Circle at this link:

Spiritual Cinema Circle Free Trial

– be sure to do this before October10.

Here are some video clips so you can get a glimpse of what’s being offered:

Enjoy the films,

I know I sure do — they’re a bright spot in every month.

“Spiritual Cinema Circle is providing a great service to those who want to evolve and be entertained at the same time.”

~~~ Deepak Chopra

Start your Free Trial Today By Clicking Here:

Spiritual Cinema Circle Free Trial

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Always remember this wonderful quote from Buddha ….

“You yourself, as much as anybody in the entire universe, deserve your love and affection.”

~~~ Buddha

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“Those who really seek the path to Enlightenment dictate terms to their mind. Then they proceed with strong determination.”

~~~ Buddha

Namaste!

I share these words for you in closing — remember these words …

“Be happy now, my dear friends. Today is all we have. Be good to one another. Take comfort in whatever spirituality you are so inclined (or not), and learn to be happy despite your circumstances. Follow your path; pursue your dreams. Work hard, love your family be generous and forgiving. Do it today, while you still have the flicker of life, for one day your own candle will dim.”

You are special — and you are loved. You are the greatest gift you can be.

Shanti … (A sanscrit word meaning, “Let there be Peace. Peace, beautiful Peace. Peace within, Peace without. Peace in this world. Peace for all beings.”)

“Peace comes from within. Do not seek it without.”

~~~ Buddha

~~~ Ron
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