The business of buying a new house in New Mexico and selling my place in California is an entirely new realm for me, and since I am built as an auto-didact – someone who is self-taught – I had a really cool time absorbing the jargon and the ‘moves in the game’ and the different people-styles that showed up during the process.
The original plan was to make an offer on a place in rural New Mexico, put maybe 50% down, get a short-term mortgage, move out of my trailer home in West Los Angeles, fix it up as needed, and use the money from sale of the trailer to pay off the house in New Mexico – no mortgage, no monthly payment of interest to the minions of the Oligarchy, the place to be all mine, with no chance it can ever be taken away.
Well, breakdowns did occur. Banks don’t lend on trailer homes, long prior stretches of unemployment lowered my credit rating, and the rotten (soon to tank) economy makes it difficult for others (potential buyers) to get a loan as well. But things did move along, although slowly, and escrow on my house in New Mexico closed May 31st.
I had meanwhile been reading the L.A. Times Sunday Real Estate Section a little deeper, and paying more attention to radio news and ads about mortgage lenders, and even got ahold of Sumichrast’s book on home buying. Phone calls & emails went to mortgage people in four states.
With this all happening around the annual tax-filing season, I also realized that I will probably not file 1040-EZ next go-round, as the interest on the mortgage (even a short-term one) and the expenses of both buying and selling a home have to be documented and later filled in in the proper boxes on federal and maybe two state tax filings. New realm, indeed.
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FREE RIDE
Pertinent diversion: There are a host of haters of the guvermint who are spewing all sorts of rants about conspiracies of every kind, about the dollar not being real, about the crooks of Zion & Bilderberg, about unworkable flat-tax schemes, and about compli-cated & illogical reasons to move to a mountaintop wilderness and dig a well and stock up with several years worth of food (cartons of surplus MREs) & other necessities.
Mostly loonies and mostly incoherent when they attempt to explain their reasoning.
Well, one of the advantages of being self-taught is deciding, for example, that what I am is an ‘intuitive economist’. The self-taught Individual can look at something and see what others do not, simply from having no preconceptions.
What I have discovered in this area is that the banking industry has a free ride.
The Oligarchy – the One Percent of the population who own 60% of everything – and the Wealthy Class – the overlapping 20% who now own 83% of everything – at least wield their pseudo-power from being owners of all that they survey!
Bankers actually own nothing, and they siphon off your tax dollars in an unchecked flood, in several ways.
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BANKING - SCAM #1
Here is how the scam works:
The Federal Reserve Bank System was created by act of Congress in 1913, run by a Board of Directors. In February of 1936, the Secretary of the Treasury and the Comptroller of the Currency were removed from that Board, so that the federal government actually has no vote on any matter. (Board members serve terms of fourteen years, often renewed;
Alan Greenspan has been Chairman of ‘the Fed’ since 1987.)
The original requirement for reserves of actual deposits (for each member bank) was 25% against the sum of their outstanding loans, an important improvement at the time. Bad deal actually, and the rate has since steadily shrunk until in 1981, the rate was dropped from 12% to 10%, where it now stands (with a rate of only 3% in some cases).
What this means is that deposits of a million dollars can provide $900,000 in loans. But, assuming that the loans are re-deposited somewhere, the next level is to reserve 10% and loan out $810,000. The cycle repeats, so that the million dollars produces TEN million dollars in loans. (Mostly I got this part from a 1965 article by Craig S. Karpel.)
Very scary, when the ephemeral underpinnings of the worldwide banking industry become clearly understood – and very dangerous. Should a crisis or crises occur at some point and cause havoc in massive ways – an unstable ‘housing bubble’ bursts, or a series of devastating hurricanes in the Gulf Coast or Atlantic Coast (one down, how many more after Katrina & Ophelia?) – then the economy will collapse beginning with the USA and reverber-ating around the world as fast as modems can spread the damage.
This is one reason why the U.S. dollar has shrunk 25% since Dubya has been at the helm.
The above is the tired, old formulaic rant that the Fed-haters have been trying to communicate, though their message has been poorly designed and absent of compelling logic. The banks say that they are fine, Chairman Greenspan issues vague sooth-statements, Dubya’s cohorts lie about every aspect of the economy, and the man on the street has no time to read about or think about such matters, what with being stuck in traffic enroute to two jobs anyway.
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TAXES – SCAM #2
A further point is almost obvious, but I have never heard others cover the subject – if someone has, it has not crossed my path.
Much of the talk about getting a mortgage to buy a house promotes the ‘free lunch’ principle, that interest on your mortgage loan is a tax deduction, so there is no actual cost to you. But wait a minute. The reduction of your taxes is not by the amount of the interest, but a subtraction that results in a reduction of the taxes that you pay. What happens is actually a repayment to you for a portion – say 20% to 30% – of the interest paid to the bank.
(The mortgage interest is posted to Schedule A and treated as an itemized deduction – that is, the amount of your interest is subtracted from your total income and no tax paid on it. The government excuses the tax, which is in effect a subsidy paid to the banks with you serving as innocent middle-man.)
And where do these mortgage interest subsidy tax dollars come from? From the workers of America, either directly or indirectly.
Fact: Sixty percent of US corporations pay no taxes. And any taxes that they do pay is covered by revenue, which comes from the buyer. And if the buyer is a wholesaler, then their tax amount comes from the retailer, and eventually from the end-user – YOU!
Alan Greenspan, Chairman of the U.S. Federal Reserve stated publicly, during testimony before Congress 21 May 2003 {quoted in
WMail Issue #42} that: "Capital doesn't pay any taxes, only people pay taxes. What happens is, you impose taxes on organizations which then deflect them elsewhere. But at the end of the day, all taxes are paid by people."
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IT GETS WORSE: SCAM #3
Yes, it does get worse. With a million dollars in the bank – call this the Real Money amount – inflated to ten times that in loans as above, the banks are making interest, NOT on the Real Money amount, but on the Expanded Amount, which is merely Virtual Money.
Real estate mortgages run about 5% interest these days. So laying this out precisely for you, we’ll take the sum of the checking & savings accounts of a bunch of workers, which comes to a million dollars [Real Money amount] scattered among banks or savings & loans or credit unions. The institutions pay the workers a measly 2% per annum on the savings accounts and nothing on the checking accounts. And then the bank smirks and loans it out thru nine-plus levels – and the banks rake in 5% interest on TEN million dollars in loans.
Thus the true yield for your deposited Real Money amount is FIFTY PERCENT INTEREST per annum.
And the banks reluctantly pay the owners of the Real Money amount the cheapo, rip-off rate of 2% per annum – or less.
Take a deep breath, it gets still worse.
If the million dollars of Real Money is expanded into ten million dollars by loaning it out for credit card debt, then the interest can reach, let’s say, 20% interest on average – miss just one payment and you lose your ‘low’ teaser rate – which computes out to TWO-HUNDRED PERCENT INTEREST against the Real Money deposits of one million dollars.
You deposit a hundred dollars, the profit of the banks is $200, less the interest paid to you of two bucks at best.
I asked a local bank branch manager if I had this figured out correctly, and she agreed with me, quite surprised that I had seen behind the wizard’s curtain. Her exact response was "Well, um, yes, if you want to look at it that way." Equivocal, but agreement.
Take another deep breath and let this sink in.
So no wonder that the banks push additional credit cards on even the worst credit-rated among you. If you have a job, the banks give you a card and then the Culture-Structure bombards you with advertising so that you will go out and over-spend – no sense having a card and not using it – so that the banks can double their money. And you are in debt forever, and working two jobs and tossing at night from rumors of down-sizing, and the wife thinks she may be pregnant again, and the soap opera continues.
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FULL CIRCLE SCAM
People with delicate hearts may not want to read further – still worse it does get.
Taxes on your wages – and on products such as gasoline – go into local & state & federal coffers, which are stashed in banks as Real Money earning 50% to 200% interest – for the banks. And then those taxes go to cover your mortgage interest payments to the banks, which profits are then siphoned off by the Oligarchy.
The Oligarchy makes from 50% to 200% pure unearned profit on every deposited Real Money dollar, whether worker savings or government accounts. Like Scrooge McDuck, the Oligarchy’s vaults are overflowing, so the Oligarchy makes loans to the Federal Government, making another 10% in interest on the National Debt, to the tune of a TRILLION-plus in unearned interest – an amount that is double the cost of the Defense Department budget, a mere piece of which is the Iraq War debacle.
Every year.
For every dollar that you have in the bank.
For every citizen & resident of the USA, with similar rip-offs around the world.
So that is why I don’t hold with the Fed-haters. They apparently smell something is wrong, but have not located the design of the mechanism, and failing to do so gives them no useful solution.
The banking systems around the world are designed to be money-machines for the Oligarchy.
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THE WORKING MINDS SOLUTION
• Pay off your credit cards now.
• Be very careful to use your bank debit card or cash only. (On long cross-country trips, I utilize credit cards and then pay off the cards online as soon as I get home.)
• Make double payments on your car and then on your mortgage.
• Get out of the stock market. Employer equity programs are okay – ESOP, 401k, stock options – but speculative stocks are a game that you will lose.
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Ayn Rand created the heroic character
John Galt [in
"Atlas Shrugged" 1957], whose mysterious intention was revealed as 'stopping the engine of the world'.
John Galt lives! (And Hayduke lives!)
You have the ability to stop the ‘engine of the world’, and I say that it is your responsibility to do so. Take the simple actions above. Each Individual can take direct action that restores their Individual Power, by refusing to blindly hand Power to the Oligarchy.
Each and every reader has this Power, and your friends and neighbors do also. Tell them how to retrieve their lost Power.
This is the beginning of the Revolution
You will be either witness or participant.
Or casualty.
Choose.
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WMail essay #18 at
http://www.working-minds.com/WMessay18.htm is entitled "The Stock Market Casino".
WMail essay #32 at
http://www.working-minds.com/WMessay32.htm is entitled "Standing On Ayn Rand".
For info on Ayn Rand and on John Galt, go to http://www.working-minds.com/AynRand.htm.
For info on Hayduke, go to http://www.genordell.com/stores/western/EdwardAbbey.htm.
The Federal Reserve website is at http://www.federalreserve.gov/generalinfo/fract/.
See also Maison d'Être / Economics / Federal Reserve Page
[copyright 2005 by Gary Edward Nordell, all rights reserved]
For the full contents of this issue of the free 'WMail' ezine, click here.
