going to take it anymore.ÔÇŁ
Private litigation can thwart the culture of greed, but a real solution
to the debt crisis will no doubt take coordinated public action. As
Mike Whitney observed in Counterpunch in February 2008:
When equity bubbles collapse, everybody pays. Demand for
goods and services diminishes, unemployment soars, banks fold,
and the economy stalls. ThatÔÇ™s when governments have to step
in and provide programs and resources that keep people
working and sustain business activity. Otherwise there will be
anarchy. Middle class people are ill-suited for life under a freeway
overpass. They need a helping hand from government. Big
government. Good-bye, Reagan. Hello, F.D.R.27
The problem with FDRÔÇ™s solution was that he borrowed from banks
that created the money as it was lent, putting the taxpayers heavily in
debt for money the government could have created itself. A better
solution would be for the government to spend without borrowing,
using its own debt-free Greenback dollars.
That would be the better road to Oz, but whether the Emerald
City can be reached before the land falls into anarchy and a police
state is imposed remains to be seen. Will DorothyÔÇ™s house come
crashing down on the Witch? Will she pull the silver slippers from
the WitchÔÇ™s feet and step into their magical power? Or will she keep
running after humbug Wizards who are under the WitchÔÇ™s spell
themselves? Stay tuned . . . .
Web of Debt
Adjustable Rate Mortgage (ARM): a type of mortgage loan program in
which the interest rate and payments are adjusted as frequently as
every month. The purpose of the program is to allow mortgage interest
rates to fluctuate with market conditions.
Bankrupt: unable to pay oneÔÇ™s debts, insolvent, having liabilities in
excess of a reasonable market value of assets held.
Bear raid: the practice of targeting the stock of a particular company
for take-down by massive short selling, either for quick profits or for
Bears versus bulls: Bears think the market will go down; bulls think it
will go up.
Book value: the total assets of a company minus its liabilities such as
Bubble: an illusory inflation in price that is grossly out of proportion to
Business cycle: a predictable long-term pattern of alternating periods
of economic growth (recovery) and decline (recession).
Capitalization: market value of a companyÔÇ™s stock.
Cartel: a combination of producers of any product joined together to
control its production, sale and price, so as to obtain a monopoly and
restrict competition in that industry or commodity.
Central bank: a non-commercial bank, which may or may not be
independent of government, which has some or all of the following
functions: conduct monetary policy; oversee the stability of the
financial system; issue currency notes; act as banker to the government;
supervise financial institutions and regulate payments systems.
Chinese walls: information barriers implemented in firms to separate
and isolate persons within a firm who make investment decisions from
persons within a firm who are privy to undisclosed material
information which may influence those decisions, in order to safeguard
inside information and ensure there is no improper trading.
Compound interest: interest calculated not only on the initial principal
but on the accumulated interest of prior payment periods.
Conspiracy: an agreement between two or more persons to commit a
crime or accomplish a legal purpose through illegal action.
Counterfeit: to make a copy of, usually with the intent to defraud.
Counterparties: parties to a contract, usually having a potential
conflict of interest. Within the financial services sector, the term market
counterparty is used to refer to national banks, governments, national
monetary authorities and multinational monetary organizations such
as the World Bank Group, which act as the ultimate guarantor for loans
and indemnities. The term may also be applied to companies acting in
Currency: Money in any form when in actual use as a medium of
exchange, facilitating the transfer of goods and services.
Customs: duties on imported goods.
Deficit spending: government spending in excess of what the
government takes in as tax revenue.
Deflation: A contraction in the supply of money or credit that results
in declining prices; the opposite of inflation.
Demand deposits: bank deposits that can be withdrawn on demand at
any time without notice. Most checking and savings accounts are
Depository: a bank that holds funds deposited by others and facilitates
exchanges of those funds.
Derivative: A financial instrument whose characteristics and value
depend upon the characteristics and value of an ÔÇťunderlier,ÔÇŁ typically
a commodity, bond, equity or currency. Familiar examples of
derivatives include ÔÇťfuturesÔÇŁ and ÔÇťoptions.ÔÇŁ
Discount: The difference between the face amount of a note or
mortgage and the price at which the instrument is sold on the market.
Web of Debt
Equity: ownership interest in a corporation.
Equity market: the stock market ÔÇ“ a system through which company
shares are traded, offering investors an opportunity to participate in a
companyÔÇ™s success through an increase in its stock price.
Excise taxes: internal taxes imposed on certain non-essential consumer
Federal funds rate: the rate that banks charge each other on overnight
loans made between them.
Federal Reserve: the central bank of the United States; a system of
federal banks charged with regulating the U.S. money supply, mainly
by buying and selling U.S. securities and setting the discount interest
rate (the interest rate at which the Federal Reserve lends money to
Federal Reserve banks: The banks that carry out Federal Reserve
operations, including controlling the money supply and regulating
member banks. There are 12 District Feds, headquartered in Boston,
New York, Philadelphia, Cleveland, St. Louis, San Francisco,
Richmond, Atlanta, Chicago, Minneapolis, Kansas City, and Dallas.
Floating exchange rate: a foreign exchange rate that is not fixed by
national authorities but varies according to supply and demand.
Fiat: Latin for ÔÇťlet it be done;ÔÇŁ an arbitrary order or decree.
Fiat money: Legal tender, especially paper currency, authorized by a
government but not based on or convertible into gold or silver.
Fiscal year: The U.S. governmentÔÇ™s fiscal year begins on October 1 of
the previous calendar year and ends on September 30.
Float: The number of shares of a security that are outstanding and
available for trading by the public.
Fraud: a false representation of a matter of fact, whether by words or
by conduct, by false or misleading allegations, or by concealment of
that which should have been disclosed, which deceives and is intended
to deceive another so that he shall act upon it to his legal injury.
Free trade: trade between nations unrestricted by import duties, export
bounties, domestic production subsidies, trade quotas, or import
licenses. Critics say that in more developed nations, free trade results
in jobs being ÔÇťexportedÔÇŁ abroad, where labor costs are lower; while in
less developed nations, workers and the environment are exploited by
foreign financiers, who take labor and raw materials in exchange for
paper money the national government could have created itself.
Globalization: the tendency of businesses, technologies, or
philosophies to spread throughout the world, or the process of making
them spread throughout the world.
Gold standard: a monetary system in which currency is convertible into
fixed amounts of gold.
Gross domestic product: the value of all final goods and services
produced in a country in a year.
Hedge funds: investment companies that use high-risk techniques, such
as borrowing money and selling short, in an effort to make
extraordinary capital gains for their investors.
Hyperinflation: a period of rapid inflation that leaves a countryÔÇ™s
currency virtually worthless.
Inflation: a persistent increase in the level of consumer prices or a
persistent decline in the purchasing power of money, caused by an
increase in available currency and credit beyond the proportion of
available goods and services.
Infrastructure: the set of interconnected structural elements that
provide the framework for supporting the entire structure. In a
country, it consists of the basic facilities needed for the countryÔÇ™s
functioning, providing a public framework under which private
enterprise can operate safely and efficiently.
Investment banks help companies and governments issue securities,
help investors purchase securities, manage financial assets, trade
securities and provide financial advice. Unlike commercial banks, they
do not take deposits or make commercial loans; but the lines have
blurred with the 1999 repeal of the Glass Steagall Act, which
prohibited the same bank from taking deposits and underwriting
Web of Debt
securities. Leading investment banks include Merrill Lynch, Salomon
Smith Barney, Morgan Stanley Dean Witter and Goldman Sachs.
Legal tender: money that must legally be accepted in the payment of
Leveraging: buying with borrowed money. Leverage is the degree to
which an investor or business is using borrowed money.
Liquidity: the ability of an asset to be converted into cash quickly and
Margin: an investor who buys on margin buys with money he doesnÔÇ™t
have, borrowing a percentage of the purchase price from the broker, to
be repaid when the stock or other investment goes up. People usually
open margin accounts, not because theyÔÇ™re short of cash, but because
they can ÔÇťleverageÔÇŁ their investment by buying many times the amount
of stock they could have bought if they had paid the full price.
Margin call: a brokerÔÇ™s demand on an investor using borrowed money
to deposit additional money or securities to bring the margin account
up to a certain minimum balance. If one or more of the investorÔÇ™s
securities have decreased in value past a certain point, the broker will
call and require the investor either to deposit more money in the
account or to sell off some of the stock.
Monetize: to convert government debt from securities into currency
that can be used to purchase goods and services.
Money market: the trade in short-term, low-risk securities, such as
certificates of deposit and U.S. Treasury notes.
Money supply: the entire quantity of bills, coins, loans, credit, and other
liquid instruments in a countryÔÇ™s economy. ÔÇťLiquidÔÇŁ instruments are
those easily convertible to cash. The money supply has traditionally
been reported by the Federal Reserve in three categories ÔÇ“ M1, M2, and
M3, although it quit reporting M3 after March 2006. M1 is what we
usually think of as money ÔÇ“ coins, dollar bills, and the money in our
checking accounts. M2 is M1 plus savings accounts, money market
funds, and other individual or ÔÇťsmallÔÇŁ time deposits. M3 is M1 and M2
plus institutional and other larger time deposits (including institutional
money market funds) and eurodollars (American dollars circulating
Moral hazard: the risk that the existence of a contract will change the
behavior of the parties to it; for example, a firm insured for fire may take
fewer fire precautions. In the case of banks, it is the hazard that they