Monday, September 15, 2008

The banking cartel

I really don't have time to compose a letter right now, but I suggest some readers notify the ACCC that the Australian banking industry closely resembles a cartel.

We do not have a free market in banking. No Western economy does.

In a future posting, I will examine in detail the many cartel features of the industry - e.g

  • government forcing all debts to be paid with the government backed paper currency thus choosing the medium of exchange for the entire currency.
  • banks not being required to have deposits backed fully by reserves, also known as the practice of fractional reserve banking
  • a government operated central bank which interferes with the free market in massive ways - setting interest rates, targeting inflation, stimulating economic activity.
  • governments acting as lenders of last resort, and banks never ever being allowed to fail when their reckless lending should be forcing them to collapse.
Look at how oblivious the mainstream media is to the nature of banks. They suspect cardboard companies, fuel companies and supermarket chains of forming cartels nearly every week. America is no different to Australia. But this report from Washington shows how the Banksters get a free pass from the media.

A CONSORTIUM of 10 global commercial and investment banks have announced plans to provide $US70 billion ($85 billion) to help offset a credit squeeze amid an anticipated collapse of Wall Street giant Lehman Brothers.

Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, and UBS, said in a joint statement they "initiated a series of actions to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets".

They agreed to create a "collateralised borrowing facility" of $US70 billion, with each bank contributing $US7 billion, to help ease access to credit.

Since when do competitors bail each other out in a free market ?!?

It has something to do with fractional reserve lending. Each bank expands its credit beyond its reserves and as long as other banks don't contract, the process can continue indefinitely as long as other banks participate in the same game. The central bank is established to ensure that this very outcome happens. A cartel is formed and each bank depends on the other banks to continue expanding their credit and increasing their profits.

Note the tone of the article never even hints at this question. We need to get more journalists asking the right kind of questions and to end the banksters corrupt cartel.