fraud [frawd]
–noun
1. deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.
["fraud." Dictionary.com Unabridged (v 1.1). Random House, Inc. 22 Mar. 2009.
fiat [fee-aht, -at; fahy-uht, -at]
–noun
1. An authoritative command or order to do something; an effectual decree.
Fiat money, irredeemable paper currency, not resting on a specie basis, but deriving its purchasing power from the declaratory fiat of the government issuing it.
["fiat." Webster's Revised Unabridged Dictionary. MICRA, Inc. 22 Mar. 2009.
ponzi sceme
Scam in which gullible public is enticed with the promise of very high returns in a very short time, but is based on paying off the early 'investors' from the cash from (hopefully ever increasing number of) new 'investors.' The whole structure collapses when the cash outflow exceeds the cash inflow. The originators of the scheme, however, usually disappear with large sums a few days before the crash.
[http://www.businessdictionary.com/definition/Ponzi-scheme.html]
fractional reserve system (FRS)
Monetary policy at the basis of the modern banking system. Under FRS, banks are required to hold only a fraction (typically 12 percent) of the depositors' funds as cash reserves. The remaining 88 percent of deposited funds can be loaned out to create new deposits which in turn create new loans ... and so on, exerting a multiplier effect on the total money supply. However, in case of a bank run, this policy can cause banks to suffer huge losses and may even push them into bankruptcy.
[http://www.businessdictionary.com/definition/fractional-reserve-system-FRS.html]
Etc. Etc. Etc.
The economic problems our nations (and much of the world) face at this time have been long in coming. There is no single cause nor a simple solution. The fundamental issues at work have been seeping into our culture in such a way that practices that were once considered unethical are now considered beneficial.
The most notable shift has come from a willingness of the people to overlook fraud when it has been useful. The whole concept of fiat money is fraudulent. The paper is valuable because the government says so? This is viable economic policy? No, it’s fraud, but one we’ve all invested in because it’s a “useful” fraud. But every lie, no matter how useful and convenient, will inevitably unravel.
The Fractional Reserve System is another fraud that has become as natural as breathing to us. Putting money in a bank is really like investing in a low-yield dividend-paying stock. It once was the case that if the bank failed, your deposits (stock value) went to zero. The idea that deposits in fractional reserve banks were a safe place for savings, instead of investments with their inherent risks, was pure deception (Real estate was thought of similarly until recently).
The only reason deposits are “safe” now is because the government (i.e. the taxpayers) has taken on all the risk should the bank fail. Can you imagine what would happen to the stock market if the government guaranteed all stocks investments up to $250,000? Why not let the government take on the risk of all investments so the economy doesn’t have to suffer? You want to create a bubble? That’s how you do it.
So what is our way out? The only way out of a lie is to start telling the truth. It’s painful and sometimes even disastrous in the short term, but it’s better to confess to a lie than get caught in it. You cannot “fix” a fraud. You either keep it going just a little longer with more and more fraud, or you expose it for what it really is.
