Mortgage Loans: The Greatest Scam on Earth?

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Mefiante (July 10, 2012, 17:39:06 PM):
I’m not sure whether it’s the mathematical/statistical details that are foxing you or the economic principles that are in play.

Would it help to point out that the total current value of the global derivatives market is about 20 times the world’s combined annual GDP? If you think about it, the value of that market is actually a fiction because it can only exist, if indeed it ever does, at some point in the future.

The whole system is based on the idea of deferring payment, i.e. borrowing against a promise of the future (in the form of a contractual agreement) and that these promises are tradable commodities. Fractional reserve banking practice exploits this idea combined with two assumptions, namely (1) that the economy in which it operates is stable and will grow, and (2) that there won’t be any sudden runs on the bank that might exceed its reserves. Statistical models with empirical data as inputs can then be used to estimate the required size of the reserve fraction.

In short, it’s smoke and mirrors where we only ever pay the piper tomorrow, but never today because, well, tomorrow will always be better than today, won’t it? The system “works” because everyone participates in it to some degree.

Rigil Kent (July 21, 2012, 17:36:44 PM):
For info ... just saw this doing the rounds, so can't comment yet on this initiative's value.
Mefiante (July 21, 2012, 18:21:33 PM):
Ten to one it’ll fail — on the principle of caveat emptor and because signed, legally binding agreements exist. The law makes little room for how a contract came about, only that it exists (on the assumption that the contracted parties were willing signatories), and banks are very, very, very good at pressing the point of contractual obligation without any regard for the fact that the contract was obtained in the absence of full upfront disclosure and/or via misrepresentation and/or a lack of ready/real alternatives. I think what needs to happen is that lending practices by the banks must first be tested successfully against the provisions of the Consumer Protection Act (in order to set the scene) before taking the step of testing them in common and constitutional law. In short, I think NewERA’s effort is admirable but aims too high, too soon.

Mefiante (July 24, 2012, 12:11:32 PM):
The papers have been served. The defendants will probably file a joint motion to dismiss with costs. If NewERA can successfully argue that, they’ll already have gotten further than one would have hoped, and it’ll be wait and see. The case, should there be one, could conceivably drag on for years.

Mefiante (August 04, 2012, 11:10:41 AM):
It seems the world is starting to catch on.

Banksters & their high jinks



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