City Newspaper Archives - 1/2008
ECONOMY: Banks and our economic woes
Published on Jan 16, 2008
The US dollars currently in use are based on debt. The money is conjured into existence by a bank and given to someone as a loan. That means that all the money in circulation must eventually be paid back to the bank.
As people continue to make mortgage payments and similar payments and banks make fewer new loans, less money is available for circulation in the economy. When there is a decrease in the amount of money in circulation, it is called a recession. Banks can easily create and have created economic depressions simply by loaning less money.
Don't be fooled. The banks win when people default on their loans. Remember, the money was essentially worthless, but when people default on their loans, banks get land, cars, houses, businesses: stuff with real value.
KENYATTA DACOSTA, ROCHESTER
